Captive-use skimmed milk powder not classifiable as unit-container food for sale; excise demand unsustainable.

Skimmed milk powder packed in polythene bags for captive use in regeneration of milk within the assessee's own factories was not treated as prepared or preserved food put up in unit containers ordinarily intended for sale. That factual use defeated classification under Tariff Item 1B, and the exemption notification referring to skimmed milk powder supported the same result. On that basis, the duty demand could not be sustained. The stated later tariff position did not change the outcome, since the goods were not cleared for sale to third parties but for internal manufacturing use.

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Issues: Whether skimmed milk powder packed in polythene bags of 25 Kg., 20 Kg., 15 Kg. and 10 Kg. was classifiable under Tariff Item 1B as prepared or preserved food put up in unit containers ordinarily intended for sale, and whether the duty demand could be sustained notwithstanding the exemption notifications and the manner of clearance.

Analysis: The decisive enquiry was whether the bags constituted unit containers and whether the goods were ordinarily intended for sale. The packing was for use in regeneration of milk within the assessee's own factory and in its Madras unit, and not for sale to third parties. On that footing, the reasoning adopted for Tariff Item 1B did not fit the goods. The exemption notification referring to skimmed milk powder reinforced, rather than displaced, this conclusion. The Tribunal also relied on the earlier view that milk powder used for regeneration in the assessee's own factories was not liable to duty under the relevant item, and that the subsequent tariff position did not alter the result in view of the exemption available.

Conclusion: The classification under Tariff Item 1B was rejected, the duty demand was held unsustainable, and the assessee succeeded on merits.

Final Conclusion: The appeal was allowed because the product, in the form and for the purpose in which it was cleared, was not liable to central excise duty under the basis adopted by the lower authority.

Ratio Decidendi: Goods packed for captive use in regeneration of milk, and not intended for sale, do not satisfy the statutory description of prepared or preserved food put up in unit containers ordinarily intended for sale for the relevant excise classification.

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