2009 (6) TMI 270 - AT - Central Excise

Allegation that the assessees were manufacturing sugar syrup at the intermediate stage and were consuming the same captively without payment of duty in the manufacture of exempted final product. Ground plan approved by department showing location of machinery for manufacture of sugar syrup and acknowledged modvat declaration showing it as inputs - it can be concluded that the department was having full knowledge about the preparation of Sugar Syrup by the appellant at the intermediate stage and no charge of suppression can be alleged against the appellants. - it cannot be said that the assessees had suppressed anything from the department so as to make the extended period of limitation available to the department. - In the cross-objection filed by respondents, no relief is sought for as the impugned order is entirely in their favour. The cross-objection is, therefore, to be treated as comments on and reply to the Revenue s appeal and is, accordingly, dismissed.

Summary

Issues:
Classification of fruit pulp beverages under CET Sub-heading 2202.90, duty exemption, manufacturing sugar syrup captively without duty payment, time-barred demand, reliance on testing methods, suppression of facts, applicability of extended period of limitation.

Classification and Duty Exemption:
The assessees were manufacturing fruit pulp beverages under the brand name "Frooti, Pingo" falling under CET Sub-heading 2202.90. They were initially liable to pay duty until exempted by Notification No. 87/91. A show-cause notice was issued for not paying duty on sugar syrup consumed captively in the manufacturing process. The Commissioner (Appeals) accepted the assessees' contention that sugar syrup was not a stable product and did not have a shelf life beyond 72 hours, thus exempting them from duty payment.

Time-Barred Demand and Suppression of Facts:
The dispute centered on whether the demand for duty from Dec '94 to July '96 was time-barred. The Commissioner (Appeals) found that the department had full knowledge of the sugar syrup production, as evidenced by submitted documents and approvals, ruling out suppression of facts. Citing a precedent case, the Tribunal upheld the finding that the extended period of limitation could not be invoked, making the demand time-barred.

Reliance on Testing Methods:
Arguments were made regarding the stability of the product based on the solid soluble content of sugar. While the testing method showed a content slightly above 67%, a different testing method suggested the content would be below 65%, rendering the product unstable. The Tribunal, however, focused the decision on the time-bar issue, not delving into the product's marketability.

Cross-Objection and Dismissal:
In the cross-objection filed by the respondents, no relief was sought as the impugned order favored them entirely. The cross-objection was treated as a response to the Revenue's appeal and was dismissed accordingly, upholding the impugned order based on the time-bar issue alone.

This judgment by the Appellate Tribunal CESTAT, CHENNAI, addressed various issues including classification, duty exemption, time-barred demand, suppression of facts, and reliance on testing methods. The decision favored the assessees, ruling that the demand for duty was time-barred due to the department's prior knowledge of the sugar syrup production, thus exempting them from payment. The Tribunal's focus on the time-bar issue led to the rejection of the Revenue's appeal, with the cross-objection filed by the respondents being dismissed as it did not seek any relief.