2013 (4) TMI 591 - AT - Central Excise

Notification No. 67/95 - Appellants paid excise duty on skimmed milk powder cleared for sale. They did not pay excise duty on skimmed milk powder which was retained and later converted into milk in their own factory - Held that - Notification was issued on 19-7-1998 specifically exempting skimmed milk powder used in the regeneration of milk and this notification clearly brings out the intent of the Government that duty was not to be calculated on such use. We take note of the fact that the tariff entry clearly uses the expression intended for sale - It is also a well-known practice in this industry that milk in surplus is preserved as skimmed milk powder for use during the lean season - Therefore it is very clear that the Government had intention only for levying duty on skimmed milk powder intended for sale and this is reinforced by the exemption notification issued subsequently - Therefore we do not find any reason for confirming demand of duty on skimmed milk powder which the appellant did not intend to sell and was stored for use in the lean season - The appeal is allowed setting aside the impugned order.

Summary

Issues:
1. Whether excise duty is applicable on skimmed milk powder retained for regeneration of milk during lean season?
2. Whether the benefit of exemption under Notification No. 67/95 is available to the appellants for skimmed milk powder not intended for sale?

Analysis:
1. The appellants, a co-operative society of milk producers, manufactured skimmed milk powder and sold milk "as such." They retained some skimmed milk powder for regeneration during lean season, not paying excise duty on it. The Revenue contended that excise duty should apply as the skimmed milk powder was captively consumed to produce an exempted product. The Tribunal noted the tariff entry specifying milk powder "intended for sale" and industry practice of preserving surplus milk as skimmed milk powder for lean season use. The Tribunal held that duty applies only to skimmed milk powder intended for sale, not for captive use, supported by a subsequent exemption notification. Consequently, the demand for duty on retained skimmed milk powder was rejected, and the appeal allowed.

2. The appellants argued that since their skimmed milk powder not intended for sale was packed in 25 kgs. packs and not covered by the relevant tariff entry, excise duty should not apply. They highlighted separate markings for captive use and sale, emphasizing the distinction. The Revenue referred to a statement from the company's Manager (Production) not distinguishing between the two types of packaging. The Tribunal considered the arguments, emphasizing the tariff entry's requirement of being "intended for sale." It noted the subsequent exemption notification for skimmed milk powder used in regeneration, indicating the Government's intent to not levy duty on such use. As a result, the Tribunal rejected the demand for duty on retained skimmed milk powder, allowing the appeal and setting aside the impugned order.

In conclusion, the Tribunal's judgment clarified that excise duty applies only to skimmed milk powder intended for sale, not for captive use, as supported by the relevant tariff entry and subsequent exemption notification. The distinction between the two types of packaging and the industry practice of preserving surplus milk as skimmed milk powder for lean season use were crucial in determining the applicability of excise duty.