Excise Duty: Captive Use vs. Sale of Skimmed Milk Powder

The Tribunal held that excise duty applies only to skimmed milk powder intended for sale, not for captive use, supported by the relevant tariff entry and subsequent exemption notification. The appeal was allowed, rejecting the demand for duty on retained skimmed milk powder used for regeneration during lean season. The distinction between packaging for captive use and sale, along with industry practices, played a vital role in the Tribunal's decision.

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Issues:
1. Whether excise duty is applicable on skimmed milk powder retained for regeneration of milk during lean seasonRs.
2. Whether the benefit of exemption under Notification No. 67/95 is available to the appellants for skimmed milk powder not intended for saleRs.

Analysis:
1. The appellants, a co-operative society of milk producers, manufactured skimmed milk powder and sold milk "as such." They retained some skimmed milk powder for regeneration during lean season, not paying excise duty on it. The Revenue contended that excise duty should apply as the skimmed milk powder was captively consumed to produce an exempted product. The Tribunal noted the tariff entry specifying milk powder "intended for sale" and industry practice of preserving surplus milk as skimmed milk powder for lean season use. The Tribunal held that duty applies only to skimmed milk powder intended for sale, not for captive use, supported by a subsequent exemption notification. Consequently, the demand for duty on retained skimmed milk powder was rejected, and the appeal allowed.

2. The appellants argued that since their skimmed milk powder not intended for sale was packed in 25 kgs. packs and not covered by the relevant tariff entry, excise duty should not apply. They highlighted separate markings for captive use and sale, emphasizing the distinction. The Revenue referred to a statement from the company's Manager (Production) not distinguishing between the two types of packaging. The Tribunal considered the arguments, emphasizing the tariff entry's requirement of being "intended for sale." It noted the subsequent exemption notification for skimmed milk powder used in regeneration, indicating the Government's intent to not levy duty on such use. As a result, the Tribunal rejected the demand for duty on retained skimmed milk powder, allowing the appeal and setting aside the impugned order.

In conclusion, the Tribunal's judgment clarified that excise duty applies only to skimmed milk powder intended for sale, not for captive use, as supported by the relevant tariff entry and subsequent exemption notification. The distinction between the two types of packaging and the industry practice of preserving surplus milk as skimmed milk powder for lean season use were crucial in determining the applicability of excise duty.

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