2024 (12) TMI 1296 - AT - Central Excise

Excisability of intermediate goods - Whether sugar syrup having sugar content of 78.2% by weight emerged as an intermediary product during the course of manufacture of final product viz. Biscuits which is exempted is excisable and leviable to duty as the benefit of N/N. 67/1995 dated 16.03.1995 would not be available to inputs used in the exempted final product? - extended period of limitation. Excisability of intermediate goods - HELD THAT - In Karnataka Soaps Detergents Ltd. 2017 (10) TMI 660 - SUPREME COURT explaining the scope of marketability their Lordships observed that Marketability is thus essentially a question of fact to be decided on the facts of each case. There can be no generalisation. The fact that goods are not in fact marketed is of no relevance. So long as the goods are marketable they are goods for the purposes of Section 3 of the Act. It is also not necessary that the goods in question should be generally available in the market. The marketability of articles does not depend neither upon the number of purchasers nor is the market confined to the territorial limits of this country. Thus the original authority had sufficiently established the test of marketability. Extended period of limitation - HELD THAT - The sugar syrup manufactured by the appellant during the course of manufacture of exempted product namely biscuits is stable and marketable; hence liable to duty being an excisable goods - the issue relates to interpretation of law therefore invoking of extended period of limitation cannot be sustained and the demand be restricted to the normal period of limitation. Conclusion - Revenue s appeal is partly allowed to the extent of confirming excisability of sugar syrup manufactured at the intermediate stage of manufacture of biscuits an exempted product and the demand be limited to the normal period of limitation. No penalty is imposable on the appellant. Appeal is disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the sugar syrup, an intermediary product with a sugar content of 78.2% by weight, produced during the manufacture of biscuits, is excisable and liable to duty.
• Whether the benefit of Notification No.67/1995, which exempts certain inputs used in the manufacture of excisable goods, applies when the final product (biscuits) is exempted from duty.
• Whether the sugar syrup meets the test of marketability as defined under the Central Excise Act, 1944.
• Whether the extended period of limitation can be invoked for the demand of duty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Excisability of Sugar Syrup

• Relevant Legal Framework and Precedents: The determination of excisability hinges on whether the sugar syrup is considered 'goods' under Section 2(d) of the Central Excise Act, 1944, which requires the product to be marketable.
• Court's Interpretation and Reasoning: The court relied on precedents such as the Karnataka Soaps & Detergents Ltd. and Escorts Ltd. cases, which emphasize that marketability does not require actual sales but the capability of being sold.
• Key Evidence and Findings: The sugar syrup in question had a sugar content of 78.2% by weight, as confirmed by a chemical analysis. The court found this sufficient to establish marketability.
• Application of Law to Facts: The court concluded that the sugar syrup is stable and marketable, thus excisable, as it meets the criteria of being capable of being bought and sold.
• Treatment of Competing Arguments: The court dismissed the respondent's argument, supported by the Commissioner (Appeals), that the syrup was not marketable due to lack of evidence of actual sales.
• Conclusions: The sugar syrup is excisable as it is a marketable product.

Issue 2: Applicability of Notification No.67/1995

• Relevant Legal Framework and Precedents: Notification No.67/1995 exempts certain inputs used in the manufacture of excisable goods, but not when the final product is exempt from duty.
• Court's Interpretation and Reasoning: The court interpreted that since the final product (biscuits) is exempt from duty, the benefit of the notification does not extend to the sugar syrup.
• Conclusions: The notification does not apply, and the sugar syrup is liable to duty.

Issue 3: Marketability of Sugar Syrup

• Relevant Legal Framework and Precedents: The test of marketability is whether the product can be bought and sold, not whether it is actually sold.
• Court's Interpretation and Reasoning: The court referenced the Mysore Sugar Company Ltd. case, which established that sugar syrup with a sugar content above 65% is marketable.
• Conclusions: The sugar syrup is marketable and thus excisable.

Issue 4: Extended Period of Limitation

• Relevant Legal Framework and Precedents: The extended period of limitation applies in cases of suppression or misstatement, but not for interpretative issues.
• Court's Interpretation and Reasoning: The court found that the issue was one of legal interpretation, not suppression of facts.
• Conclusions: The demand is limited to the normal period of limitation, and no penalty is imposed.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "To satisfy the test of marketability, the product need not be bought and sold in the market. If it is capable of being bought and sold, then the test of marketability is satisfied."
• Core Principles Established: The capability of being marketed suffices for excisability; actual sales are not necessary. The benefit of exemption notifications does not apply when the final product is exempt from duty.
• Final Determinations on Each Issue: The sugar syrup is excisable, the notification does not apply, the product is marketable, and the demand is limited to the normal period of limitation without penalties.