TaxTMI 
TaxTMI 
2020 (2) TMI 686
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....sp;2007 5,42,60,959/- 2 32/PI/RTGN/Commr/08 dt. 2-5-2008 April 2007 to Sept. 2007 6,17,78,188/- Total 11,60,39,147/- 2.1 The respondent herein is manufacturer of excisable goods viz. cocoa preparations, sugar confectionary falling under Chapter heading 17 & 18 of the First Schedule to the Central Excise Tariff Act, 1985. 2.3 During the visit by the Anti Evasion staff of Pune-I Commissionerate, it was observed that the respondent was manufacturing excisable goods viz. Milk Crumb classifiable under heading 18062000 and chargeable to Central Excise duty @ 16% ad valorem. They have been clearing these goods since October 2006 without payment of duty in contravention of the provisions of Rules 4, 6 & 8 of the Central Excise Rules, 2002. 2.4 After completion of investigation wherein statements of various functionaries of the respondent were recorded, a show cause notice dated 06.07.2007 was issued for demanding duty amounting to Rs. 5,42,60,959/- for the period October 2006 to March 2007. Subsequently, another show cause notice dated 2.05.2008 demanding duty amounting to Rs. 6,17,78,188/- for the period April 2007 to September 2007 w....
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....a consideration and such goods shall be deemed to be marketable. The explanation being clarificatory in nature would be retrospective and even if it is not assumed so yet, the dimension of entire case gets changed and now needs to have fresh look after 10.05.2008, which is the enacted date of the said insertion. (iv) So far period prior to 10.05.2008 is concerned; the goods are specified in the First schedule to CETA, 1985 interalia satisfying the test of Sec.2 (d) without the said explanation. However, as per settled law mere entry in tariff is not enough and the test is that the goods should be marketable, and therefore, to prove the marketability, the SCN has led the evidence in the form of web information in respect of M/s International Customs Product, as per - which Milk Crumbs products are offered for sale. The assessee has not disputed the marketability of Milk Crumb, as per the said evidence but has contended that firstly the goods should be similar to their products and secondly, the goods should be marketable in India, in as much as, CE laws apply in India, hence marketability abroad won't apply. (v) The Commissioner has erred in admitting the said ....
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....ecific heading No. 1806 for the goods, the facts get distinguished to prove that Milk crumb are excisable goods as per Sec.2 (d) as now those are specified in the First Schedule, This point is also not disputed. (ix) Secondly, in the said case department had not adduced any evidence about marketability of the goods, which present SCN has adduced. This is not negated, except on the point that goods are not sold in India, which has no relevance. (x) The Commissioner's further finding that definition of 'sale' under Section 2 (h) does not apply to 'job work', is not only out of relevance but also out of misconstrued facts for following reasons: (a) For payment of duty, essential test is removal of goods, whether or not removal constitutes 'sale' and latter part has relevance for valuation only. (b) As per facts of the case assessee does not remove milk crumb under any procedure say Cenvat procedure or that under Notification No. 214/86 or that under Notification No. 83194 read with 84/94. (c) The assessee has authorized the job workers to manufacture Chocolate on its behalf by supplying raw materials, inclu....
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....le goods' at that time when Hindustan Cocoa Products Ltd. was under consideration, has undergone the change. Section 2(d) of the Central Excise Act, 1944 defines excisable goods as follows- "(d) "excisable goods" means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt; Explanation: For the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable." • The impugned goods are in powder form and are being taken to market for being marketed. This fact is evident from the respondent themselves transferring the goods to their sister units at Thane and Baddi and the job worker at Phaltan for manufacture of chocolates. • Further evidence is in the form of web material in respect of M/s. International Customs Products as per which milk crumb products are offered for sale. • Hon'ble Supreme Court has in the case of A.P. State Electricity Board [1994 (70) ELT 3 (SC)] held that marketability is a question of....
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....o pass the current through the sheets." 3.3 Arguing for the respondent, learned Senior Counsel sought to support the order of the Commissioner and submitted that:- • The decision of Hindustan Cocoa Products Ltd. held that these goods, milk crumb, is non-excisable and cannot be classified under tariff item 68 and for holding so they relied upon the decision of Bombay High Court. • Hon'ble Supreme Court in their own case [2006 (200) ELT 353 (SC)] has held as follows:- "15. It may be noted that in the present case the intermediate products (milk crumbs, refined milk chocolate and four other intermediate products) are captively consumed in the Respondent's own factory. These intermediate products are not sold nor are marketable. Hence there can be no question of including the expenses of the factory which produces the final product namely the chocolate e.g. advertising, insurance and another expenses in their valuation as was sought to be added by the Commissioner (Appeals) and the Assistant Commissioner." • Similar view in respect of intermediate products has been expressed by the Hon'ble Supreme Court in the case of Union Carbi....
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....al filed by Revenue, during the course of arguments and the written submissions filed by both the sides. 4.2 There seems to be no dispute about various propositions of the law for determining excisability/dutiability of the goods. One of the tests that has to be conclusively established, is that the product is marketable. It has also been held in various decisions that marketability essentially does not mean "being marketed". In the case of Hindustan Zinc [2004 (166) ELT 145 (SC)], the Hon'ble Supreme Court has specifically laid down that actual purchase or sale is not necessary for determining the marketability of any goods. What needs to be shown is that the product is capable of being taken to the market to be sold and the market recognizes the said product as such. 4.3 In the case of A.P. State Electricity Board referred to by the Special Counsel, Hon'ble Supreme Court has specifically stated that marketability is a question of fact and needs to be determined in the facts of each case independently. 4.4 We also find that the Hon'ble Supreme Court has in respondent's own case (Cadbury India Ltd [2006 (200) ELT 353 (SC)]) in the decision referred to by the learned Senior....
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.... Court at Bombay, the marketability of the impugned milk crumb had been examined. The Hon'ble Court in this connection observed : "It is now well settled that a tariff item has to be understood in the manner in which it is understood by people in the trade. It is, therefore, necessary to see whether milk crumb is understood in the trade as `chocolate'. The petitioners have relied upon the affidavit filed by P.K. Irani of Great Western Stores to show that milk crumb is not marketable in India at all, much less as chocolate. In the order of 30^th October, 1975, however, the respondents have said that crumb is sold as a commercial article in coarse powder form in western countries. In the first place, there is nothing on record in support of this conclusion arrived at by the respondents. There is no material on record to show that crumb is sold in the market in western countries. Similarly there is nothing which would indicate that crumb is sold as chocolate in western countries. In the present case there is absolutely no material on record which would suggest that milk crumb is marketed in western countries as chocolates or that it is understood in common parl....
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....ge milk is condensed to 25- 30 per cent residual moisture. Thereafter sugar is added and the product is recondensed to 14-18 per cent moisture. Cocoa mass is added to this moisture and it is followed by vacuum stove drying until the moisture has been eliminated. The product at this stage comes out of the final vacuum stove in the form of a hard brown slab or cake; sometimes also in the form of a crumbled rope of hard material. As far as the petitioners' factory is concerned, this product comes out in the form of hard lumps. This is known as milk crumb or chocolate crumb. Thereafter it has to be crushed, mixed with cocoa butter, refined and couched in order to produce milk chocolates which are marketed as such to the consumers." 4. About this product the respondents have had a running battle with the Excise Department. In January, 1972 the Department sought to classify the product under Tariff Item No. 1A - confectionery. In July, 1973 the Collector held that crumbs were not excisable. In their order in review dated 30-10-1975 the Government of India held that crumb was "basically chocolate" and ordered its classification under Tariff Item No. 1A. The Bombay High Court in t....
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....L.T. 262]. 19. Applying the above tests to the facts of this case, we find that sada kimam was bought by the assessee as a raw material which was then blended with saffron, perfumes, menthol etc. to form a compound which was then packed in "balties" and cleared to the above three licensed units at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP), where Tulsi Zafrani Zarda was manufactured. That, the assessee used to buy a similar compound (Lucknowi kimam) from the market from time to time and used in the manufacture of their final product. That, the compound (kimam) prepared by the assessee at 96, Okhla Industrial Estate, Phase-III, New Delhi and at E-1, Maharani Bagh, New Delhi, in the highly concentrated form, was cleared therefrom and taken to the above three licensed factories where it was diluted and used in the manufacture of Tulsi Zafrani Zarda. In their reply to the show cause notice, the assessee admitted that the said "compound" was not capable of being used for any purpose, other than for manufacture of branded chewing tobacco (underline supplied by us). This statement of the assessee in reply to the show cause notice establishes that....
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....ce as such. As per the information available on the website of "International Custom Products Inc", "Milk Products ICP offer a complete line of milk powder replacers, skim milk preparations, dairy creams, yogurt powders, sour creams, ice cream blends and various milk crumb products which are mainly used as an ingredient by manufacturers of dairy, bakery and confectionery products." When Shri P Manivannan working as legal Counsel for appellant was confronted with the said material he stated "Presently I am not in a position to offer my comments. I will revert back to you within next five days." Subsequently he has vide his letter dated 24.04.2007 stated "We understand that the product mentioned in the ICP brochure is not the Milk Crumb, they deal in various Milk Crumb Products. It is submitted that it is clear that ICP does not sell Milk Crumb as such, but only makes products out of Milk Crumb that is why it is stated in their brochure as "Various Milk Crumb Products". Therefore it is clear that the product dealt by ICP is not an equivalent Milk crumb produced by us." In our view from the statement of Shri Manivannan it is quite evident that there is no dispute in respect of t....
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....ely chocolate but is in respect of "milk crumbs" only. The abstract to the said document reads as follows: "Milk crumb for use in milk chocolate manufacture is prepared by forming a mixture containing milk, sugar and optionally cocoa, drying the mixture under reduced pressure to form milk crumb product and compressing the crumb product under pressure of at least 100 kg/cm2 to crystallize amorphous sugar present in the crumb" 4.9 We do not find any merits in the submissions of the respondent that this product is proprietary product and hence cannot be considered as marketable in view of the decision in the case of Sonic Electrotherm and Board of Trustees referred above. In the case of Sonic Electrotherm, the Hon'ble Supreme Court has specifically observed that "The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant." The real test which the Apex Court has laid down here is not....
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.... be manufactured, i.e., come into existence, but also should be articles or products that are known to the market and must be capable of being brought and sold. Some emphasis has to be laid on the use of the word capable as actual sale of the product or article is not essential and required. This has been settled in a number of authorities of this Court and no longer res integra. There cannot be any doubt that intermediate products, even if captively consumed and not actually sold, may be liable to levy of excise duty if they satisfy the test of both manufacture and marketability. The aforesaid legal principle has been laid down by this Court in the judgments in Hindustan Zinc Ltd. v. Commissioner of Central Excise, Jaipur, reported in 2005 (181) E.L.T. 170 (S.C.), Union of India v. Delhi Cloth & General Mills Co. Ltd., reported in 1997 (92) E.L.T. 315 (S.C.), Cadila Laboratories Pvt. Ltd. v. Commissioner, reported in 2003 (152) E.L.T. 262 (S.C.). In the decision in Hindustan Zinc Ltd. (supra), decided by three Judge Bench of this Court, it was also held, by this Court that marketability of a product is essentially a question of fact. 11. Therefore, the question of marketa....
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....s of the product. The samples produced before us were in the form of brownish packet in small plastics bags. While looking at these samples, we are convinced that these are capable of being taken to market for the purpose of being bought and sold. The size of packing in which this goods can be taken is irrelevant for determining the marketability till the time it can be shown that they are capable of being taken to the market. In view of this also, we find that the test laid down by the Apex Court in various decisions referred to by the respondent is also satisfied. 4.15 The Commissioner has in his order, in para 32, observed as follows:- "32. I find that CESTAT decision in the case of Hindustan Cocoa Products Ltd. covers the entire aspect of marketability very comprehensively and no fresh evidence has been adduced by the department to change this position. The fact that Hindustan Cocoa Products Ltd. manufactured milk crumbs in the shape of lumps and at present the product was being manufactured in powder form does not help, as the product remains the same even though the shape may differ. It can, therefore, be concluded that milk crumbs are not excisable products and n....