1986 (9) TMI 252 - AT - Central Excise

Summary

Issues:
1. Allegation of evasion of central excise duty by repacking skimmed milk powder.
2. Interpretation of exemption notification for duty on skimmed milk powder.
3. Proper classification of skimmed milk powder packed in different containers.
4. Determination of duty payment based on the packaging and sale method.
5. Application of exemption notification on the sale of skimmed milk powder.

Analysis:
1. The case involved an allegation of evasion of central excise duty by M/s. Foremost Dairies Ltd. for repacking skimmed milk powder without entering quantities in their RG-1 register, leading to a demand for duty amounting to Rs. 32,15,300.80 and a penalty of Rs. 10,000 imposed by the Collector of Central Excise, Meerut. The appellants contended that the repacked powder was entitled to duty exemption under Notification No. 33 of 83CE dated 1-3-1983, which exempted certain prepared foods from excise duty subject to specific conditions.

2. The classification of skimmed milk powder in different packet sizes was crucial in determining the duty liability. The appellants argued that the skimmed milk powder packed in 500 grams, 100 grams, and 1-kilogram packets was exempt from duty under the mentioned notification. They emphasized that the smaller packets were intended for sale and fell within the exemption criteria specified in the notification. The Department, however, contended that duty was payable when the powder was received in polythene bags, regardless of subsequent repacking into smaller packets.

3. The proper classification and interpretation of the packaging method were extensively debated. The Collector relied on the classification list filed by the appellants, which mentioned different types of packaging for the skimmed milk powder. However, the appellants clarified that the powder received in loose polythene bags was for testing purposes and subsequent packing into smaller unit containers for sale. The Collector's conclusion that the smaller unit packings lost their identity when repacked into larger bags was challenged by the appellants.

4. The determination of duty payment based on the packaging method and sale process was a significant issue. The Collector observed that the smaller unit packings were repacked into larger bags, leading to a conclusion that the larger packing was intended for sale, not the smaller unit packings. The appellants argued that the smaller unit containers were always intended for sale, even when packed into larger containers, and duty was paid on all removals of skimmed milk powder in larger packings.

5. The application of the exemption notification on the sale of skimmed milk powder was a focal point in the judgment. The appellants asserted that the benefit under the notification should apply when the powder was packed in containers containing not more than 1 kilogram for sale. The Tribunal found the appellants' arguments regarding the packaging and sale method to be correct and set aside the Collector's order, allowing the appeal and granting the benefit of the exemption notification to the appellants.