TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 686
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....ril 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 was issued. Both the notices have been issued within the normal period of demand. 2.4 Bo....
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.... 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 plea. The assessee manufactures Milk Crumbs and that literature relied also refer to Milk Crumbs only; there is no room to hold t....
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....ified 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, including Milk Crumbs, may be free of cost, for conversion. The job worker is manufacturer within the meaning of Section 2(f) read with Notification No. 36/2001 CE(NT). Thus, it is transacti....
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....ecified 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 fact and needs to be decided on the facts of each case. So long as the goods are marketable, they attract levy of excise duty. * Similar view has been taken in the case of Indian Cable Co. Ltd. [1994 (74) ELT 22 (SC)]. As per this decision, marketability only means saleabl....
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....g 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 Carbide [1986 (24) ELT 169 (SC)]. * Since the milk crumb as cleared by them is in crude form and required further processing, it cannot be said to be marketable in the form in which it is cleared, as held by the Hon'ble Supreme Court in Cadila Laboratories [2003 (152) ELT 262 (SC)]. * Since the product is a proprietary product and cannot be used by any other manufactu....
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....industan 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 Counsel, stated in para 15 that the intermediate goods are not sold nor are marketable. However, in the said decision, Hon'ble Supreme Court has upheld the order of tribunal holding milk crumbs to be excisable. The dispute before the Hon'ble Supreme Court in the said case was inclusion of certain expenses incurred in the factory producing final products in the value milk crumbs cleared by the respondent on payment of duty by determining the value a....
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.... not marketable in India at all, much less as chocolate. In the order of 30th 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 parlance in western countries as chocolates. Even assuming that to be so, such common parlance in western countries is not relevant for the purpose of construing a tariff item in our country. There is no material on record which would show that milk crumb is either understood in common trade parlance in our country as chocolates or that it is marketed as chocolates. That milk crumb falls within the tariff item 1A. Thus, in the case of Colgate Palmolive (India) Ltd. v. Union of India and other....
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....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 their order referred to above held that crumbs were not excisable under Tariff Item No. 1A. On 22- 4-1985 the Assistant Collector classified it under the Residuary Item T.I. 68 but extended the benefit of Notification No. 118 of 1975 which exempted any dutiable goods when captively consumed in the manufacture of further dutiable goods. Against this order the Collector (Appeals) passed the impugned order. Significantly after the change over to the new Tariff, the respondents continued to file classification showing crumbs....
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....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 the said compound (kimam) was not edible, it was not capable of consumption as such, however, it was used as preparation in the manufacture of Tulsi Zafrani Zarda which was a branded chewing tobacco manufactured in the licensed factories of the assessee at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). Further, from time to time, the assessee herein bought from the market a similar compound (Lucknowi kimam) and used it in the manufacture of the final product which indicated that on blending of sada kimam with ....
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....ents. 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 the commercial understanding of the product as "milk crumb". The actual test of marketability as laid down is availability of the goods in market and their trade understanding as determinative factor for determining marketability of the goods. The actual fact of these goods being bought and sold by the respondent in the market is immaterial for determination of the marketability of this product. 4.8 Relying on the decision of Hon'ble Gujarat High Court in case of Lupin Limited respondents have argued that reliance placed by the revenue on the Un....
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....nsidered 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 different from the test laid down in the decisions referred to by the learned Special Counsel. If the product is identifiable as a distinct product in the market, it is to be treated as a marketable product. In our view, the goods viz. milk crumb satisfies this requirement. The test of "product formulation" and associated secrecy has been specifically rejected by the Hon'ble Apex Court in case of Dharampal Satyapal referred above. 4.10 Certain other judgments relied upon by the respondent with regard to holding that the product is not marketable just because the ....
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....ility. 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 marketability, being a question of fact, has to be determined in the facts of each case and cannot be strait-jacketed into pigeon holes. The orders passed by the Commissioner as also the Tribunal clearly demonstrate that the product in question is commercially known and is capable of being marketed. The facts that the appellants have chosen not to sell the product in question does not mean that the same is not capable of being marketed. The matter can be looked from another angle. There is also no dispute that the said product in question is used in the manufacture of the animal feed supp....
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....r 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 no duty can be levied on such products in respect of the assessee. I also find that the entire exercise is also revenue neutral as even if duty was paid, the same would have been taken as credit by the other unit of the assessee. This would also mean that the assessee are not entitled to Cenvat Credit on the inputs used in the manufacture of milk crumbs during the period and the same would have to be reversed/paid in terms of the Cenvat Rules, 2002/4." The finding recorded by the Commissioner in respect of revenue neutrality which cannot be justified for the reason that credit of duty paid in res....