2018 (2) TMI 919 - AT - Central Excise

SSI exemption - calculation of aggregate value - Revenue held a view that since the appellants were engaged in preparing variety of food items using meat, vegetables, pulses etc. and these items being exempted from payment of Central excise duty, while calculating the aggregate value of clearances for SSI exemption under No/N. 8/2003 dated 01/03/2003, the gross value of all products is to be considered - Held that - What is needed is to see whether a new, commercially identifiable product emerged after processes undertaken on the raw materials which are distinct from the finished product. there is no hesitation to hold that the finished products, in the present case are different types of food preparations and are new marketable products and are liable to excise duty subject to due classification as available in the Central Excise Tariff. A summary conclusion that the various food preparations made and sold by the appellants in their kitchen/restaurants are generally covered by the Chapters 16 to 20 will not meet the legal requirement of applying the provisions of Notification 8/2003. The gross turnover to arrive at the exemption limit for the base year has to be reckoned considering value of each one of the manufactured and cleared items which are subjected to excise levy. The matter has to go back to the Original Authority for a clear finding - appeal allowed by way of remand.

Summary

Issues:
Dispute over non-payment of Central excise duty on food items sold by a hotel and restaurant during 2003-2006. Appellants contest liability based on the nature of goods and marketability. Challenge on limitation and penalty imposition. Interpretation of excisability of food preparations under specific tariff headings.

Detailed Analysis:

1. Central Excise Duty Liability:
The dispute revolved around the Central excise duty liability on pastry, cakes, biscuits, cookies, and chocolates sold by the appellant hotel and restaurant during 2003-2006. The Revenue argued that the appellants' gross turnover exceeded the exemption limit due to a mix of dutiable and exempted goods, necessitating the payment of excise duty and imposing penalties. The lower authorities confirmed a duty liability of ?6,41,711 along with an equal penalty.

2. Nature of Goods and Marketability:
The appellant's counsel argued that the food prepared in the hotel kitchen should not be considered excisable goods as they lack marketability and do not undergo a process that satisfies the concept of "manufacture" under Central Excise law. The contention was that the items prepared, like cooked food, were not similar to preserved and packed food items with considerable shelf life, and were not intended for open market sale. The focus was on the specific orders and limited marketability of the food items prepared.

3. Limitation and Penalty Imposition:
The appellant contested the demand on grounds of limitation and the imposition of penalties, citing precedents in their favor to support their case.

4. Excisability of Food Preparations:
The Authorized Representative argued that the food items prepared in the appellant's kitchen underwent a process of manufacture, resulting in distinct, marketable products. The contention was that the prepared food items were identifiable, known in the market, and had specific names and uses. The AR emphasized the distinction between raw ingredients and the final prepared food products, citing the Apex court's test in a relevant case.

5. Tribunal's Decision and Remand:
After considering both sides, the Tribunal held that the various food preparations made and sold by the appellant were liable to be considered excisable products. However, the Tribunal noted that the lower authorities failed to identify the specific tariff headings under which these food preparations would fall. Therefore, the matter was remanded back to the Original Authority for a clear finding on the classification of the food preparations and the quantification of turnover to determine excise duty liability accurately.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the need for a detailed examination of the tariff classification of the food preparations before determining the excise duty liability.