2001 (5) TMI 485 - AT - Central Excise

Summary

Issues Involved:
1. Duty liability on mineral water "Trupthi" prior to 16-3-1995.
2. Classification of the product under sub-heading No. 2201.90 of the Central Excise Tariff.
3. Invocation of the extended period of limitation for demanding central excise duty.
4. Determination of assessable value and quantum of duty payable.
5. Eligibility for Modvat credit.

Issue-wise Detailed Analysis:

1. Duty Liability on Mineral Water "Trupthi" Prior to 16-3-1995:
The main contention by NEPC was that the mineral water "Trupthi" was non-excisable prior to 16-3-1995, as no process of manufacture was involved. They argued that the product became excisable only after the insertion of Chapter Note 2 in Chapter 22 of the Central Excise Tariff by the Finance Bill of 1995. The Tribunal, however, noted that the process of manufacture described by NEPC involved de-mineralisation and addition of specific chemicals, which made the product excisable even before 16-3-1995.

2. Classification Under Sub-heading No. 2201.90:
The Department classified "Trupthi" under sub-heading No. 2201.90 of the Central Excise Tariff, which covers "Natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter, not flavoured." The Tribunal upheld this classification, noting that the process of adding minerals to the treated water made it fall under this sub-heading, as clarified by the Board's Circular dated 20-12-1994.

3. Invocation of Extended Period of Limitation:
The extended period of limitation was invoked in the show cause notice dated 27-11-1995 for demanding central excise duty for the period from 17-12-1994 to 15-3-1995. The Tribunal agreed with the adjudicating authority that there was suppression of facts by NEPC, justifying the invocation of the extended period. However, it restricted the demand to the period from 20-12-1994 to 15-3-1995, aligning with the issuance date of the Board's Circular.

4. Determination of Assessable Value and Quantum of Duty Payable:
NEPC argued that if excise duty was found leviable, their sale price should be considered as cum-duty price for determining the assessable value and the quantum of duty payable. The Tribunal agreed, citing the Larger Bench decision in Srichakra Tyres Ltd. v. CCE, Madras, which held that excise duty should be abated from the total sale price realization by treating it as cum-duty price.

5. Eligibility for Modvat Credit:
Although NEPC did not specifically raise the issue of Modvat credit in their grounds of appeal, the Tribunal extended the benefit of Modvat credit in the interest of justice. It directed that if NEPC could satisfy the jurisdictional Central Excise Authorities about the use of duty-paid inputs, and if such inputs were covered by the Modvat credit scheme during the relevant time, the benefit should be extended after due verification.

Separate Judgments Delivered:
The Tribunal delivered a majority order, with Member (Technical) and Member (Judicial) differing in their opinions. Member (Technical) upheld the duty liability and restricted the demand period, while Member (Judicial) allowed the appeal both on merits and on time bar. The third Member (Technical) agreed with the Member (Judicial), leading to the majority order allowing the appeal on merits with consequential benefits.

Majority Order:
The impugned order was set aside, and the appeal was allowed on merits with consequential benefits, if any.