TaxTMI 
TaxTMI 
2020 (3) TMI 255
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....0) Appeal No. E/20221/2017 (2 SCNs) SI No. Particulars Liabilities 1. Period of Dispute 04/2014 to 02/2015 2. Demand of Duty Rs. 13,70,62,322/- (Rs. 7,49,62,104 + Rs. 6,21,56,218) 3. Interest u/s 11AB Unquantified 4. Penalty u/s 25 of the CE Rules, 2002 Rs. 3.45 Crores (Rs. 1.90 Cr + Rs. 1.55 Cr) Since the issue in both the appeals is identical therefor both the appeals are taken up together for discussion and disposal. Vide the first impugned order dated 26.02.2015, the Commissioner has disposed of 12 SCNs issued periodically by the Department to the appellant and in the second impugned order dated 28.11.2016 two SCNs have been disposed of by confirming the demand along with interest and penalties. For the sake of convenience, we take the facts from Appeal No. E/21179/2015. 2. Briefly the facts of the present case are that the appellants are manufacturers of agarbathis (incense sticks) under the brand name "CYCLE BRAND AGARBATHIS". The agarbathis manufactured by the appellant are classifiable under Tariff Item No. 33074100 of the First Schedule to the Central Excise Tariff Act, 1985 and are chargeable to 'NIL' rate of duty. Agarbathis primaril....
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....ely/independently and which was capable of being marketed as such. It also appeared that the agarbathi masala manufactured by the appellant had a shelf life and was capable of being marketed as a distinct identifiable commodity. The fact of marketability of the Aromatic Compounds was evidenced from the market Survey conducted at Mysore which revealed that such agarbathis perfumes were being marketed by "The City Agarbathi Manufacturer's Co-Operative Society" themselves. It had also been confirmed by Sh. Ananthapadmanabha, Prop. Of M/s Aarabhi Agarbathi Works and Sh. V.Prakash, Partner M/s Mysore Anand Dhoop Factory, Mysore that the perfumes more or less similar to the agarbathi Masala manufactured by the appellant were available in the open market. It had also been confirmed by these two agarbathis manufacturers that even though many agarbathis manufacturers prepare their own in-house perfume mix, there were many manufacturers who sourced it from the open market as the same was readily available. It appeared from the above that the agarbathis masala manufactured by the appellant was a distinct marketable commodity which was commercially known for purposes of buying or selling. Agar....
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....and the CESTAT vide order dated 25.02.2014 remanded the matter to the Commissioner with certain directions. Further with regard to another five SCNs, the duty was confirmed by the Commissioner and appeal was filed before CESTAT and the CESTAT vide another Final Order No. 20712-20713/2014 dated 06.05.2014 remanded the cases to the Commissioner for considering the issue of CAS-4 certificate and eligibility of CENVAT credit and other issues. The Commissioner vide the impugned order disposed of all the 12 cases together. 3. Heard both the parties and perused the records. 4. Learned Counsel for the appellants submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. Learned Counsel has filed written submissions in support of their appeals which are reproduced herein below: Main Issues 1. Appellant manufactures Agarbathi by the process of mixing of Odoriferous Compound of various fragrances as per its proprietary formulae, and sprinkling the same on Raw Agarbathi. For internal purpose, it is called "Agarbathi Masala" (AM for short). Agarbathi is classifiable under TI 3307 49 00 of the CET and is charg....
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....-TIOL-1827-CESTAT-Bang. On this ground alone, the impugned orders are liable to be set aside. 2. Excisability of Agarbathi Masala not decided. - The Learned Counsel also submitted that the excisability of a commodity is dependent upon the twin-tests of "manufacture" and "marketability". In support of this proposal, reliance is placed on the ratio of CCE v TISCO Ltd, 2004 (165) ELT 386 (SC). A product can be said to have been "manufactured" only when the emerging product has distinct name, character and use, per Delhi Cloth & General Mills judgment, 1977 (1) ELT J199 SC. In the present case, the appellant has been contending that mere mixing of aromatic compounds does not amount to manufacture as no known product with distinct name, character and use emerges. Reliance is placed on the judgment of the Apex Court in CCE v. Laljee Godhoo & co, 2007 (216) ELT 514 (SC). Impugned order does not state what is the name of the product emerging in the hands of the appellant, nor how it is distinct from the ingredients which are mixed. Even the test report purportedly given on the letterhead of IIT, Chennai does not give the nomenclature of the product tested, though the test memo specifical....
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....nd the sample tested by him was lost. b. Secondly, he admitted that the test was not done in IIT, but was done in a private laboratory called Sargam Laboratories. Thus, the test report is merely on IIT letter head, and has not been tested at IIT. c. Prof Damodaran has prepared and submitted test report on IIT Letterhead, based on Sargam Laboratories' report and signed it as though it is a test report of IIT, Chennai. This is unprofessional and unethical. On facts, it is not a test report of IIT Chennai. d. GC MS test adopted in the test report requires the analytical chemist to use his judgment to compare the test results with a memory bank of 5000 results stored in the instrument, and thereupon, decide the identity of the ingredient. In this case, GC MS test has been done in a private laboratory by an unknown chemist, not by the experienced and seasoned professor of IIT. Hence, the test report relied on by the Revenue is unreliable. e. Bureau of Industrial Standards has prescribed IS 326(Part 19) : 1998 for method of sampling and test for natural and synthetic perfumery materials. Even though the test report dated 28.7.2008 does not appear to have been conducted as per thi....
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....Agarbathi. The respondent has wrongly held that the circular applies only to AM used in dough process and not to the process of applying the AM on Agarbathi. Subsequent circular issued in 2014 makes it clear that if there is evidence of marketability, duty would be payable. In the present case, marketability has not been proved. Hence, denial of the benefit of circular is patently wrong. 10. Proposed classification under TI 3302 90 90 is wrong. - The Learned Counsel further submitted that it is the case of the Revenue that AM is an intermediate product, which is chargeable to duty. Whereas, the respondent has classified the product under Chapter heading No. 33.02 which applies only to raw materials of a kind used in industry. Same item cannot be both RM and intermediate products in the hands of the appellant. This error also shows that AM is not excisable and cannot be classified under the CET. 11. Value of DEP not excluded in OIO under Appeal No. E/20221/2017. - The Learned Counsel further submitted that in this appeal, it had pleaded that AM which comes into existence as a concentrate cannot be used and it has to be diluted by adding the diluent, viz., Di-Ethyl Pthalate. The ....
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....ng is given as this was an ex parte order. In Appeal No. 21179/2015, the appellant has made application for adducing additional evidence on this point based on revised CAS4 certificates, so that all the fourteen notices may be re-adjudicated on the same basis. Hence, both the appeals are required to be remanded to the original authority for de novo adjudication. 15. The Learned Counsel further submitted that in a worst-case situation of the appeal being decided against it, as an alternative defence, the appellant submits that it has the right to seek reduction of the liability in every manner permissible under law. Reduction of duty liability would also mean reduction in interest liability and re-quantification of penalty. For this reason also, in the interest of justice, both appeals are required to be remanded. 16. The Learned Counsel submitted that accordingly prays for remanding both the appeals to the Respondent for de novo adjudication with due compliance of Final Order No. 21338/2016, dated 1.12.2016, which allows right of cross examination to the appellant, in the interest of justice. 4.1. Learned Counsel for the appellants further submitted that the impugned order in ....
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....e revised CENVAT credit claim certificate after excluding (a) credit attributable to exported goods, (b) credit of duty paid on the inputs used for preparation of agarbathi masala, (c) Credit excludable on Di-ethyl phthalate. Learned Counsel also tried to distinguish the Hon'ble Apex Court decision in the case of CCE Vs Karnataka Soaps and Detergent Ltd., 2017-TIOL-389-SC-CX-FB on the ground that KSDL had actually marketed the odoriferous compound, which is on record whereas in the instant appeals, there is no such averment by the Revenue. Revenue's sole basis for supporting marketability is the letter of Agarbatti Manufacturing Co-operative Society in which the product description and classification also vary. Further, the Revenue did not draw sample of what is sold by the Co-op Society, before concluding that it is same or similar to the appellant's agarbathi masala. He further submitted that in the case of KSDL, it has been observed by the Apex Court that the KSDL sold the odoriferous compound from Mysuru to Tibetan Camp in Bylakuppe and therefore it was not a captive consumption whereas in the present appeal, the appellant consumes the agarbathi masala in the same place and doe....
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....athi Masala with dough and rolling it into Agarbathi, (b) by sprinkling on raw Agarbathi. Further, we find that in the present case, the Respondent has held that the Circular is inapplicable to the appellant's case as the Agarbathi Masala mixed by the appellant is marketable and hence excisable. Further, we find that by this subsequent Circular No. 989/13/2014-CX.3, dated 7.11.2014, the Board clarified the marketability, if any, has to be determined based on evidence. Further, we find that the impugned order in Appeal No. E/20221/2017 has been passed on ex-parte. Further, we find that when the Commissioner rejected the application seeking cross-examination of certain witnesses relied upon by the Respondent, the appellant filed appeal before this Tribunal and this Tribunal vide its Final Order No. 21138/2016 dated 01.12.2016 allowed the cross-examination of witnesses which were relied upon by the Revenue but the impugned order was passed before the Tribunal allowed the cross-examination to the appellant without affording any opportunity of hearing to the appellant. Further, we find that the points raised in the subsequent Appeal No. E/20021/2017 will have the bearing on the earlier ....