Prima facie non-marketable sugar syrup and exemption notifications supported stay of duty and penalty recovery pending appeal.

Sugar syrup used in the manufacture of aerated water and fruit pulp based beverage was treated as prima facie non-marketable, given its short shelf life and low solid content, supporting a view against excisability. The order also held that exemption notifications prima facie applied to the disputed input: Notification No. 217/86-CE and Notification No. 67/95 for sugar syrup used in aerated water, and Notification No. 10/96-C.E. for sugar syrup used in fruit pulp based beverage under Chapter heading 22.02. The later notification was available only from its effective date, so the benefit applied partly for the overlapping period. On that basis, recovery of duty and penalty was stayed pending appeal.

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Issues: (i) whether sugar syrup used in the manufacture of aerated water and fruit pulp based beverage was prima facie liable to duty and whether the applicants had made out a case for waiver of pre-deposit; (ii) whether the benefit of the relevant exemption notifications was prima facie available for the disputed period.

Issue (i): whether sugar syrup used in the manufacture of aerated water and fruit pulp based beverage was prima facie liable to duty and whether the applicants had made out a case for waiver of pre-deposit.

Analysis: The order records a prima facie view that sugar syrup used for manufacture of aerated water could be covered by the exemption available to inputs used in the manufacture of dutiable final products. It further notes that the sugar syrup had a very short shelf life and a low solid content, and that these features supported the contention that it was not marketable. On that basis, the order treats the demand as raising a strong prima facie case against excisability.

Conclusion: The applicants made out a strong prima facie case for waiver of pre-deposit on merits.

Issue (ii): whether the benefit of the relevant exemption notifications was prima facie available for the disputed period.

Analysis: The order holds that Notification No. 217/86-CE and Notification No. 67/95 prima facie applied to sugar syrup used in the manufacture of aerated water, and that Notification No. 10/96-C.E. prima facie applied to sugar syrup used in the manufacture of fruit pulp based beverage falling under Chapter heading 22.02. It also notes that the later notification could operate only from its effective date, so the benefit was only partly available for the notice period that overlapped the commencement date.

Conclusion: The exemption benefit was prima facie available for the relevant periods, including partly for the period after 23-7-1996.

Final Conclusion: Recovery of the duty and penalty was stayed pending the appeal because the applicants established a strong prima facie case on excisability and exemption.

Ratio Decidendi: Where the disputed product is shown prima facie to be non-marketable and exemption notifications appear applicable to the input used in manufacture of the specified final product, waiver of pre-deposit and stay of recovery may be granted pending appeal.

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