2026 (3) TMI 1368 - AT - Central Excise

Marketability test for excise: sugar syrup used in sweetmeats was not a distinct commodity and attracted no duty.

Sugar syrup (chasni) used only as a preservative in the manufacture of sweetmeats was not excisable goods because central excise liability under Section 3 ... Levy and collection of duty of excise on all excisable goods - Marketability of intermediate product - phrase ‘excisable goods’ - Excisability of sugar syrup used captively - Trade parlance identity - Manufacture of dairy based Sweetmeats (known as ‘misthans’ or ‘mithai’ etc.) - Exemption from payment of Central Excise duty under the erstwhile Notification No. 3/2006-C.E. dated 01.03.2006 and the subsequent Notification No. 12/2012-C.E. dated 17.03.2012. Marketability of intermediate product - Excisability of sugar syrup used captively - Trade parlance identity - HELD THAT:- The Tribunal held that, for levy of duty, the product must answer the description of excisable goods, and marketability in the condition in which it emerges is an essential requirement. Though sugar syrup was used in the manufacture of sweetmeats, the goods sold in the market were commercially known only as sweetmeats and not as sugar syrup. Since, in the appellant's case, sugar syrup was not capable of being bought and sold as a distinct and separate product and had no separate trade identity for buyers, it ceased to qualify as excisable goods. The Tribunal followed the principle noticed in Rishi Bakers that marketability cannot be presumed and must exist in the form in which the product emerges. [Paras 5, 6, 7] The finding that sugar syrup was excisable was held unsustainable, and the demand, interest, penalty and consequential levy founded on that basis were set aside. Final Conclusion: The Tribunal held that sugar syrup used captively as a preservative in the appellant's sweetmeats was not marketable as an independent product and therefore was not excisable. The impugned order was set aside and the appeal was allowed. Issues: Whether sugar syrup (chasni) used as a preservative in the manufacture of sweetmeats, and not sold as a distinct product, is excisable goods liable to central excise duty.Analysis: Liability under Section 3 of the Central Excise Act, 1944 arises only for excisable goods, and Section 2(d) of that Act treats goods as excisable only if they are capable of being bought and sold for consideration and are therefore marketable. On the facts, the sugar syrup was used only as an ingredient or preservative in the finished sweetmeats, which alone were known and sold in trade. The syrup did not emerge as a distinct commercially identifiable product in the condition in which it was manufactured, nor was there material to show that it was traded as such. The essential test of marketability was therefore not satisfied.Conclusion: Sugar syrup (chasni) was not excisable goods and no central excise duty could be fastened on it; the demand and consequential penalties were unsustainable.Ratio Decidendi: An intermediate product is not liable to central excise duty unless it is shown to be marketable as a distinct and identifiable commodity in the form in which it emerges from manufacture.