2013 (3) TMI 211 - AT - Central Excise

Tribunal exempts appellant from excise duty due to non-marketable corrugation gum

The Tribunal ruled in favor of the appellant, holding that the corrugation gum used in manufacturing exempted products was non-marketable and ... Marketability - excisability - captively used goods - burden of proof on the Department - evidentiary requirement of chemical testingMarketability - excisability - burden of proof on the Department - evidentiary requirement of chemical testing - Whether the corrugation gum manufactured by the appellant is marketable and therefore excisable, rendering the demand for duty on quantities captively used in exempt final products sustainable. - HELD THAT: - The corrugation gum was produced in the factory by mixing starch, borex and caustic soda and used captively in manufacture of corrugated boxes cleared at nil rate. The Department relied on statements of persons from other factories asserting a shelf-life of 3-4 days to contend marketability. The Tribunal held that no chemical analysis of the appellant's product was carried out to show presence of preservatives or to establish shelf-life. Mere statements about corrugation gum from other factories, without testing the product actually manufactured by the appellant, were insufficient. The burden of proving that a particular manufacturer's product is marketable rests on the Department. In absence of direct evidence or chemical test reports establishing that the appellant's corrugation gum was marketable, the Department failed to discharge that burden and could not sustain excisability.The corrugation gum made by the appellant is not shown to be marketable and therefore is not excisable; the demand confirmed by the Commissioner is set aside.Final Conclusion: The appeal is allowed; the order confirming duty (and consequential interest/penalty founded on that demand) is set aside as the Department failed to prove marketability of the corrugation gum produced by the appellant. Issues:Central excise duty on corrugation gum used in manufacturing exempted products.Analysis:The appellant, engaged in manufacturing corrugated products chargeable to central excise duty, faced a demand for duty on corrugation gum used in the production of exempted items. The department argued that the corrugation gum, being excisable, was not eligible for exemption under a specific notification. A show cause notice was issued for duty recovery, interest, and penalty. The Commissioner upheld the duty demand, interest, and penalty in the original order. The appeal challenged this decision.The appellant contended that the corrugation gum made for captive use was not marketable and hence not excisable. They highlighted the absence of chemical additives to increase shelf-life, making the product non-marketable. They argued that the burden of proving marketability rested with the department, citing relevant circulars and challenging the extended limitation period invoked. The department defended the duty demand, emphasizing the shelf-life of the gum and marketability based on statements from other entities.Upon review, the Tribunal examined whether the corrugation gum was marketable and excisable. The appellant's position that the gum was not marketable due to the lack of preservatives was upheld. The Tribunal noted the absence of chemical tests by the department to prove marketability. Relying solely on statements from other factories was deemed insufficient to establish marketability. As the burden of proof lay with the department, the Tribunal ruled in favor of the appellant, holding the gum non-marketable and non-excisable. Consequently, the duty demand against the appellant was set aside, and the appeal was allowed.In conclusion, the Tribunal's decision centered on the crucial aspect of marketability in determining the excisability of the corrugation gum. The lack of concrete evidence and chemical tests led to the dismissal of the duty demand, emphasizing the importance of meeting the burden of proof in excise matters.