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 for making beverages was not chargeable to excise duty. The Revenue failed to prove marketability of the product due to lack of sales evidence and profit motive, leading to the rejection of duty demands and penalties. The Court upheld the Tribunal's ruling, emphasizing the importance of establishing marketability for levying excise duty and finding the Revenue's case weak in the absence of evidence supporting the chargeability of duty on the treated water.

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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.

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