1987 (11) TMI 182 - AT - Central Excise

Starch hydrolysate materially different from glucose syrup and being unstable cannot be marketed

Summary

Issues Involved:
1. Marketability of starch hydrolysate.
2. Classification of starch hydrolysate under Central Excise Tariff.
3. Burden of proof regarding marketability and classification.
4. Reliance on evidence and expert testimony.

Issue-Wise Detailed Analysis:

1. Marketability of Starch Hydrolysate:
The primary contention from the appellants is that starch hydrolysate is not marketable due to its highly unstable nature, which causes it to ferment and lose its character within a couple of days. This instability prevents it from being stored or marketed, thus not qualifying as "goods" under excise law. The Supreme Court's precedent in South Bihar Sugar Mills Ltd. and Union Carbide India Ltd. established that excise duty is applicable only to products that are marketable or marketed. The Department failed to provide evidence that starch hydrolysate was ever marketed, as admitted by their witness, Shri R.C. Shukia, who did not conduct any market enquiry.

2. Classification of Starch Hydrolysate under Central Excise Tariff:
The Department classified starch hydrolysate as glucose under Item IE CET, which includes glucose in any form, including liquid glucose. However, the appellants argued that starch hydrolysate is not glucose. The affidavits from experts Dr. Parekh and Shri Khandor, along with a comparative chart, demonstrated that starch hydrolysate differs significantly from commercial liquid glucose. The Collector's reliance on text extracts equating starch hydrolysate with glucose syrup was deemed incorrect. The technical differences highlighted include the percentage of dissolved solids, reducing sugars, total dextrose, and the presence of dextrins, among others.

3. Burden of Proof Regarding Marketability and Classification:
The burden of proof lies with the Department to establish that starch hydrolysate is marketable and known in the market as a form of glucose. The Department's failure to provide such evidence means they did not discharge their burden. The Collector's conclusion that the product is known in the food industry as glucose syrup was not supported by the evidence, as the comparative chart and expert affidavits showed significant differences between starch hydrolysate and glucose syrup.

4. Reliance on Evidence and Expert Testimony:
The appellants provided positive evidence through affidavits and expert testimony that starch hydrolysate is not marketable. The Department's evidence, including the Chief Chemist's report and passages from Kirk Othmer's "Encyclopaedia of Chemical Technology," did not convincingly establish that starch hydrolysate is glucose in a marketable form. The Collector misinterpreted the Chief Chemist's report, which stated the sample consisted of 71.1% reducing sugars expressed as dextrose, not 71.1% dextrose by weight.

Conclusion:
The Tribunal concluded that starch hydrolysate is not a marketable commodity and hence not subject to excise duty. The appeal was allowed, and the order of the Collector was set aside. The decision was based on the lack of evidence from the Department to prove marketability and the incorrect classification of starch hydrolysate as glucose. The comparative analysis and expert testimonies provided by the appellants played a crucial role in this determination.