2002 (3) TMI 47 - SC - Central Excise

Whether the respondents were engaged in the manufacturing/propagation of yeast leviable to central excise duty? Held that - In the appeals before the CEGAT there was no dispute that yeast itself is exigible to duty but what was contended before the Tribunal was limited to the so-called product of yeast obtained by propagating the same by mixing it with molasses and water for manufacture of potable alcohol. Hence in our view the finding given by the CEGAT that the goods in question were having a very short self-life; there was no evidence to prove that such goods were either marketed or were marketable cannot be held to be in any way illegal or erroneous because it has not been proved that such intermediate product is marketed or marketable. Appeal dismissed.

Summary

Issues:
1. Challenge to order by Customs, Excise and Gold (Control) Appellate Tribunal regarding central excise duty on yeast.
2. Determination of excisability of yeast propagated by respondents.
3. Interpretation of Tariff Heading 21.02 of the Central Excise Tariff Act.
4. Dispute over whether yeast propagation amounts to manufacturing.
5. Marketability of the intermediate product obtained from yeast propagation.
6. Burden of proof on the Department regarding marketability of goods.

Analysis:
1. The Commissioner of Central Excise challenged the order of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) regarding the central excise duty on yeast, questioning whether the respondents were involved in manufacturing yeast subject to excise duty.

2. The main issue was whether the yeast propagated by the respondents, with a self-life of 6-8 hours, was excisable to customs duty under Heading 21.02 of the Central Excise Tariff Act. The Tribunal dismissed the appeals by the Revenue, emphasizing the marketability aspect of the product in question.

3. The Tribunal's decision hinged on the interpretation of Tariff Heading 21.02, which covers "Yeasts (active or inactive); other single-cell micro-organisms, dead." The Tribunal analyzed the process adopted by the respondents in detail to determine the excisability of the intermediate product obtained from yeast propagation.

4. The respondents contended that they were not manufacturing yeast but were purchasing yeast from the market and propagating it for the production of potable liquor. The Tribunal scrutinized the process, noting that the liquid mixture obtained from yeast propagation was not marketable in itself, leading to the conclusion that it did not amount to the manufacturing of yeast.

5. Central to the dispute was the marketability of the intermediate product resulting from yeast propagation. The Tribunal highlighted that the burden of proof regarding marketability lies with the Department, citing precedents like Union of India v. Delhi Cloth and General Mills Co. Ltd. and Collector of Central Excise, Baroda v. M/s. Ambalal Sarabhai Enterprises (P) Ltd.

6. Ultimately, the Supreme Court upheld the Tribunal's decision, emphasizing that the intermediate product must satisfy the test of marketability to be subjected to duty. The Court dismissed the appeals, affirming that the Tribunal's findings were not illegal or erroneous, given the lack of evidence regarding the marketability of the product.