2018 (12) TMI 1172 - AT - Central Excise

CENVAT Credit - duty paid on inputs - captively consumed sugar syrup - intermediate goods - Held that - The contention of the appellant that sugar syrup produced by them does not meet these requirements, owing to less than adequate fructose content, is backed by a test report which is not controverted by the lower authorities - The finding of sugar syrup having shelf-life and, thereby, becoming excisable is not founded on a proper appreciation of the impugned product. In the absence of any test report to contradict the fructose content in the sugar syrup produced by the appellant, it is not sufficient reasons found to consider the impugned goods to be excisable within the meaning of section 2(d) of Central Excise Act, 1944 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of duty liability under section 11A of Central Excise Act, 1944 along with applicable interest under section 11AB; Applicability of duty on 'sugar syrup' used in biscuit production; Interpretation of 'excisable goods' under section 2(d) of Central Excise Act, 1944; Marketability and duty liability of 'sugar syrup'.

Analysis:

The appeal by M/s Venugopal Foods Pvt Ltd challenges the duty liability confirmation of ?11,23,083 for the period from July 2008 to February 2009 under section 11A of Central Excise Act, 1944, along with interest under section 11AB. The issue revolves around the production of 'biscuits' using 'sugar syrup' as an essential ingredient, where the central excise authorities considered the 'sugar syrup' liable to duty despite the final product being duty-exempt. The appellant had stopped discharging duty liability on the 'sugar syrup' post-June 2008, arguing that it is not a marketable commodity and hence not dutiable.

The appellant contends that the 'sugar syrup' does not meet the criteria of 'excisable goods' as per section 2(d) of Central Excise Act, 1944, especially post the amendment in May 2008. They rely on precedents to support their argument and challenge the classification of 'sugar syrup' as an excisable good. The lower authorities, however, considered 'sugar syrup' as marketable based on the presence of citric acid and a sugar concentration of over 65%, making it liable to duty.

The Tribunal notes the necessity of 'sugar syrup' in biscuit production and the process of hydrolysis converting 'table sugar' into 'invert sugar,' which is deemed marketable and excisable. The appellant's argument regarding inadequate fructose content in their 'sugar syrup' is supported by a test report. The Tribunal criticizes the lower authorities for not considering the stability and marketability of 'invert sugar' compared to generic 'sugar syrup,' emphasizing the unique role of 'sugar syrup' in biscuit manufacturing.

Considering precedents and the lack of evidence contradicting the fructose content in the 'sugar syrup' produced by the appellant, the Tribunal rules in favor of the appellant, setting aside the duty liability and allowing the appeal. The judgment highlights the specific characteristics and purpose of the 'sugar syrup' in biscuit production, distinguishing it from other products and emphasizing the importance of a comprehensive analysis in determining duty liability.

This detailed analysis showcases the legal intricacies involved in the judgment, focusing on the interpretation of excisable goods, marketability criteria, and the unique circumstances surrounding the production of 'sugar syrup' in the context of central excise regulations.