2014 (1) TMI 1163 - AT - Central Excise

Activity manufacture or not Mixing of masala could be treated as manufacture for captive use in the manufacture of final exempted product Waiver of pre-deposit Held that - Prima facie, mere mixing of various ready to use masalas along with some other ingredients for captive consumption, may not be held to be manufacturing activity - instead of first mixing the various masalas, masalas could have also been used directly on the final product - It is for the sake of convenience practicability and uniformity of taste that masalas are first mixed and then sprinkled - with the transfer of such interim product to the appellant s own factory located elsewhere does not reflect the marketability of the product; in as much as the admittedly said product is not being available in packed condition for a third party to buy the same Pre-deposits waived till the disposal stay granted.

Summary

Issues:

1. Whether the mixing of masalas by the appellants for their final exempted products constitutes a manufacturing activity subject to duty payment.
2. Whether the masala mixed by the appellants at an interim stage in their factory is a marketable excisable item.
3. The impact of the appellant's product classification change on the determination of manufacturing and marketability.
4. The applicability of duty burden on the masala mixed by the appellants.

Issue 1:

The appellants, engaged in manufacturing Potato Chips and Namkeens, mix various masalas before using them on the goods for taste enhancement. The Revenue contends that the mixing of masalas constitutes manufacturing for captive use in the final exempted product, thus attracting duty payment. The appellants argue that the mixed masala is not a result of "manufacture" and is not marketable, hence not excisable. The Tribunal finds that the mere mixing of masalas may not qualify as manufacturing activity, especially since the mixed product is not available in a marketable form for third-party purchase.

Issue 2:

The Revenue asserts that the appellants themselves classified the product under a particular chapter and shifted it to another chapter after an exemption withdrawal, indicating the product's marketability and manufacturing status. However, the Tribunal notes that the transfer of the interim product to the appellant's factory elsewhere does not necessarily establish marketability, as the product is not packed for sale to third parties. The Tribunal decides to further examine this issue due to its recurring nature and schedules the appeals for final disposal.

Issue 3:

A substantial demand of Rs. 23 crores is confirmed against the appellant based on the Revenue's classification change. The appellants initially claimed non-manufacture and non-marketability, challenging the duty burden. The Revenue's argument that the appellants considered the product marketable based on their classification is rejected by the Tribunal, emphasizing that such a stance does not prevent the appellants from later claiming non-manufacturing activity.

Issue 4:

The Tribunal acknowledges the practicality and convenience of mixing masalas before use for taste uniformity but leans towards the appellant's argument that this process may not amount to manufacturing. The Tribunal deems it appropriate to proceed with final disposal of the appeals, waiving the pre-deposit condition for dues, and allowing stay petitions related to penalties for further consideration.

This summary provides a detailed analysis of the judgment, addressing each issue comprehensively and highlighting the key arguments presented by both parties and the Tribunal's findings.