Captive consumption exemption for sugar syrup used in aerated water manufacture displaced central excise duty demand.

Sugar syrup used captively as an intermediate product in the manufacture of aerated water was held exempt from central excise duty under Notification No. 217/86-CE, as amended by Notification No. 79/91-CE. Because the product was consumed within the manufacturing process, the exemption displaced the Revenue's duty demand, and detailed examination of classification under Heading 1702 was unnecessary. The operative legal point is that captive consumption of the intermediate product fell within the exemption framework, so no excise duty was payable on the sugar syrup.

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Issues: Whether sugar syrup used captively as an intermediate product in the manufacture of aerated water was liable to central excise duty, or was exempt under the relevant exemption notifications.

Analysis: The product was used captively in the manufacture of aerated water. The question of classification under Heading 1702 did not need detailed examination because it was not disputed that, even if the product were treated as excisable, it was covered by the exemption granted by Notification No. 217/86-CE dated 02.04.1986 as amended by Notification No. 79/91-CE dated 25.7.1991. The exemption therefore displaced the Revenue's demand for duty on the captively consumed product.

Conclusion: The sugar syrup was not liable to excise duty in view of the exemption notifications, and the appeal failed.

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