Classification and assessment of sugar syrup produced in the intermediate stage in the manufacture of aerated water - Central Excise - 9/89

Classification and assessment of sugar syrup produced in the intermediate stage in the manufacture of aerated water Circular No. 9/89 Dated 25-7-1989 [From F. No. 14/10/88-CX.1] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Classification and assessment of sugar syrup produced in the intermediate stage in the manufacture of aerated water Attention is invited to the issue of payment of duty on sugar syrup produced in the intermediate stage in the manufacture of aerated waters has been raised by the trade. They have represented that local Central Excise authorities have been pressurising them for payment of duty on sugar syrup produced in the intermediate stage in the manufacture of aerated water. It is reported that sugar is taken in the Process Tank, mixed with water, activated carbon, decamol and citric acid. This is heated upto 80 Deg. C. for half an hour which is then filtered, cooled and taken in Ready Solution Tanks to which preservatives and flavours are added. This is further diluted to a pre-determined volume and sent to the bottling Hall for filling. The resultant sugar syrup is not packed at any stage nor it is transported outside for sale. Such sugar syrup cannot be stored as fermentation would take place and spoil the syrup. One view is that in this case neither any sugar syrup is produced in the intermediate stage in the manufacture of aerated water nor such sugar syrup is consumed. 2. In this connection it is stated that in the earlier tariff sugar syrup captively consumed was eligible for exemption under Notification No. 118/75. In the new Central Excise Tariff sugar syrup is classifiable under subheading 1702.30 and is chargeable to excise duty at the appropriate rate. Collectors reported that the problem was resolved temporarily with the extention of Modvat scheme to sugar syrup by amending notification No. 217/86-C.E., dated 2-4-1986 by notification No. 82/87-C.E., dated 1-3-1987. The question of charging duty on sugar syrup has arisen again with effect from 1-10-1987 in view of withdrawing the benefit of notification No. 217/86-C.E. for aerated water vide notification No. 204/87-C.E. 3. The said issue was earlier examined in F. No. 14/1/87-CX.1 and it was clarified to the Collectors that such goods were classifiable under Central Excise Tariff heading 1702.30. However, since then references have been received that such sugar syrup is not classifiable under Sub-heading 1702.30 of the C.E.T. The issue was referred to the Chief Chemist who has opined that the product under reference falls within the scope of Chapter Sub-heading 1702.30. 4. The issue was discussed in the South Zone Collectors Tariff-cum-General Conference held at Madras on 29th and 30th May, 1989. During discussion in the Conference it was pointed out that sugar in water is not the same as sugar syrup mentioned in the Tariff and such sugar in water is not capable of being marketed. The sugar syrup which comes into existence in the course of manufacture of aerated water is not bought and sold as sugar syrup. As per the judgment in the case of M/s. Dunlop and M.R.F. v. Collector of Central Excise, Madras (Order No. 26 and 27 of 1989, dated 12-1-1989) passed by CEGAT, New Delhi and the Supreme Court of India's decision, dated 31-1-1989 in the case of M/s. Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay, marketability decides the dutiability and marketability must be proved and that just because a product is mentioned in the tariff, it does not follow that it is dutiable. 5. The Conference concluded that a situation similar to the case of M/s. Bhor Industries Ltd. decided by the Supreme Court, exists in the case of sugar syrups which comes into existence in the case of manufacture of aerated waters and ayurvedic medicines. It was, noted that the sugar syrup was not marketable in the instant case as it has got very short shelf life and gets fermented if delayed and hence cannot be preserved. Thus sugar syrups which comes into existence in the instant case is not marketable. Accordingly the Conference concluded that the sugar syrups as discussed above are not liable to duty. 6. The matter was further examined and it was felt that the sugar syrup in question is an in-process combination of different materials which does not appear to have reached marketability stage as per the ratio laid down by the Supreme Court in the case cited above. 7. In view of the above the Board accepted the views of the South Zone Tariff-cum-General Conference that sugar syrup produced in the intermediate stage in manufacture of aerated water Ayurvedic medicines is not dutiable. 8. Field formations may be informed suitably to take action as above. Trade interests may also be informed.