2013 (4) TMI 645 - AT - Central Excise

Supreme Court Upholds Decision on Excise Duty Exemption for Treated Water

The Supreme Court dismissed civil appeals filed by the Revenue against a Tribunal's decision, affirming that 'treated water' brought to vending outlets ... Manufacture - Marketability - Chargeability of duty on treated water whether it was marketable for the very purpose or not. - Held that - the department's case in this batch of appeals is no better than what was noted by this Bench in the earlier case of the main assessee Hyderabad vs. Hindustan Coca-Cola Beverages (P) Ltd [2009 (6) TMI 509 - CESTAT, BANGALORE]. There is always a distinction between packaged water and treated water. Packaged water has minerals added to it. The treated water cleared by the respondents are not marketable as such. We also find force in the contention that the name 'cococola' is only a house mark of the company. It cannot be said that the treated water is marketed under the brand name of cococola in the light of the Hon'ble Supreme Court's decision in the case of Crane Betel Nut Powder Works v. CCE cited (2007 (3) TMI 6 - SUPREME COURT OF INDIA). The processes undertaken for treatment of water did not result in the emergence of new product. Therefore, we are constrained to follow our own earlier decision affirmed by the apex court. Accordingly, the demands of duty and the connected penalties are set aside and these appeals are allowed. Issues:- Duty demands on 'treated water' and associated penalties.Analysis:1. The appeals were against duty demands on 'treated water' brought from the factory to vending outlets, converted to aerated water, and marketed. The key issue was whether 'treated water' was chargeable to excise duty. The Bench considered a similar case involving the same assessee and held that marketability of 'treated water' was not proven by the Revenue. The Revenue failed to establish marketability due to lack of sales evidence and profit motive, as the water was supplied only to vending outlets for making beverages.2. The Tribunal emphasized the importance of proving marketability for levying excise duty. The processes like filtration and purification did not change the nature of water, and the treated water was not sold with a profit motive. The absence of sales to consumers and the lack of evidence of market enquiry led to the conclusion that the product was not marketable. The Tribunal rejected the Revenue's argument based on Note 2 to Chapter 22 and upheld the decision that the treated water was not liable for duty.3. The civil appeals filed by the department against the Tribunal's order were dismissed by the Supreme Court, affirming the Tribunal's decision. The Revenue's attempt to distinguish the present case from the cited case failed as no evidence of marketability was presented. The Bench found the department's case weak and upheld its earlier decision, setting aside the duty demands and penalties. The appeals were allowed based on the lack of evidence establishing marketability of the treated water, in line with the previous judgment and the Supreme Court's dismissal of civil appeals.