Whether excise duty leviable on sugar syrup used in medicament industry ?

PJ/CASE LAW/2014-15/2435

Case:- C.C.E., C. & S. T., BANGALORE-I VERSUS SMITHKLINE BEECHAM PHARMA. (I) LTD.

Citation:- 2014 (308) E.L.T. 732 (Tri. - Bang.)

Brief facts:- The respondent is engaged in the activity of manufacture of crocin syrup which contains alcohol and the same is cleared without payment of duty. The respondent manufactures sugar solution (concentrated sugar syrup according to the Revenue) for consumption of the same in the manufacture of crocin syrup. Taking a view that respondent should have paid duty on the sugar syrup cleared for captive consumption, proceedings were initiated for demanding duty for the period from 1-9-1996 to 31-3-2001.
The Commissioner in the impugned order has dropped the demand. Aggrieved by this decision, Revenue is in appeal. The duty demand was proposed on the ground that crocin syrup is manufactured and cleared without payment of duty. Hence, the sugar syrup manufactured and consumed at an intermediate stage is leviable to central excise duty.

Appellant’s contention:- The learned AR submits that in this case, the sugar syrup produced has sugar concentration of about 29% and as per the Circular No. 226/60/96-CX., dated 3-7-1996 and Circular No. 780/13/2004-CX., dated 12-3-2004 issued by the Board, field formations have been instructed that if sugar syrup contains more than 65% by weight of the sugar or it contains any preservatives and is marketable, the same has to be charged to duty. He submits that in this case there was an admission by Shri C.R. Ravi, Assistant Manager (Quality Assurance) and Shri Syed Salim, Manager (Production) that methyl paraben and propyl paraben added to sugar syrup are preservatives. In view of the clear admission by both these Managers, apparently the product becomes chargeable to Central Excise Duty in accordance with the Board’s instructions. He further submits that the item has to be held as marketable since according to the admission of these Managers, the sugar syrup manufactured by them can be kept for a week.

Respondent’s contention:- The learned counsel for the respondent relied upon the decision of the Hon’ble Supreme Court in the case of Moti Laminates Pvt. Ltd.v. CCE [1995 (76)E.L.T.241 (S.C.)]to submit that just because the product can last for a week or 15 days, it does not become dutiable and evidence has to be shown that the product is marketable. He also submits that appellant manufactures sugar solution and not sugar syrup. Sugar syrup is manufactured in confectionery industry and sugar solution is manufactured in medicaments industry. He also submits that in view of the fact there is no evidence of marketability and the product cannot be considered as sugar syrup, the appeal filed by the Revenue cannot be sustained.

Reasoning of judgment:- The Hon’ble Tribunal have considered the submissions made by both sides. As rightly submitted by the learned counsel for the respondent, just because the product can be kept for a week, it cannot be said that the same is marketable. There is no evidence of marketability produced by the Revenue either before the Commissioner or in the appeal memorandum. Further, they also find that the decision of the Hon’ble Supreme Court in the case of Moti Laminates Pvt. Ltd. (supra) is applicable to the facts of this case as regards marketability. Paragraph 11 of the decision of the Hon’ble S.C. is relevant and is reproduced as under :

“11. It cannot thus be disputed that even if the resin produced by the appellants are resols as mentioned in item 15A it could not be subjected to duty. The purpose of specifying the goods in the Schedule is twofold, one, the rate on which the duty would be charged and other that if the goods satisfy the description and are covered in the Entry then they are liable to pay excise duty. But even in respect of specified goods it could be established that it was not marketable or capable of being marketed, therefore, no duty was leviable on it. The finding on this aspect has been extracted earlier. The Assistant Collector (Excise) found that unless some retarder or stabiliser was added the unstable solution was not marketable. Even assuming that such solution could last for 15 days as found by the Tribunal that would not help the Department unless it is further found that it was a produce which was marketable or capable of being marketed. The Collector had agreed with the finding of Assistant Collector that without any further process the solution was incapable of being used for any other purpose. It further cannot be disputed that even the life for 15 days depended on maintenance of particular temperature and heat. It cannot, therefore, be said that the goods were marketable or capable of being marketed. Since the test of marketability or capable of being marketable applies even to those goods which are mentioned in the tariff item the intermediate resin produced by the appellants which are mentioned as resols under Tariff Item No. 15A were not exigible to duty. The finding of the Tribunal that once the product manufactured by the appellants answered the chemical description of the product under Tariff Item 15A it was assessable to duty whether it was marketable or not was thus not well founded.”
Further they also find that Commissioner has considered this aspect in the impugned order. Paragraphs 18, 19 & 20 of the impugned order are relevant and are reproduced below :
“C.B.E. & C. has issued a clarification in its letter dated 3-7-1996 regarding the marketability of sugar syrup based on the opinion of the Chief Chemist. The above circular holds that sugar syrup has a shelf life and remains stable only when the concentration is 65% or above. When the concentration is less than 65% the shelf life can be improved only by adding preservative. Hence, to determine the marketability of sugar syrup we have to ascertain the following facts :

1.         Concentration of the sugar syrup
2.         Whether any preservative has been added.

19. In this case the chemical analysis of the sugar syrup reveals that concentration is only 29.15%. Even though the show cause notice alleges that the preservative have been added, the party contended that only the following items, which are not preservative, have been added to the sugar solutions emerging during the manufacturing process.
Liquid Glucose
Propyl Paraben
Methyl Paraben
Lactic Acid

20. There is no evidence to show that the above items are preservatives. In this case the sugar solution with specific parameters is produced for adding to crocin. The ultimate product is Crocin Syrup. In view of the requirements of the drug control, the sugar solution has to have strict norms. From the manufacturing process it is found that the sugar solution emerges in an integrated process in the manufacture of Crocin. Moreover to be marketable a product has to be in the proper container and packing. It is not the department’s case that the sugar solution emerging in this process can be marketed and used for any other purpose. Since the sugar solution has to have strict quality norms, I cannot hold that the same can be marketed for other purposes. In other words, the sugar solution, which emerges in this process, is not a very distinct and marketable commodity. Just for the reason that the shelf life of the solution is above 15 days in itself, it does not mean that the same is marketable. Hence the demand does not sustain.”

From the above, it is seen that the Commissioner has considered the marketability aspect and also use of preservatives. They find that the Commissioner’s order is in accordance with law and principles of classification and determination of liability of goods for excise duty. Hence it requires no interference. Accordingly, appeal filed by the Revenue is rejected as devoid of merits.

Decision:- Appeal rejected.

Comment:- The analogy of the case is that Sugar syrup of about 29% concentration that is used captively in manufacture of crocin syrup is not leviable to excise duty as there is no evidence to show that product is marketable. Merely because the product can be kept for a week, it cannot be concluded that the same is marketable. Further, the decision of the Hon’ble Supreme Court in the case of Moti Laminates Pvt. Ltd. was relied upon wherein it has been held that just because the product can last for a week or 15 days, it does not become dutiable and evidence has to be shown that the product is marketable. According to circular issued by CBEC, sugar syrup has a shelf life and remains stable only when the concentration is 65% or above. When the concentration is less than 65% the shelf life can be improved only by adding preservative. In the given case sugar syrup concentration is about 29%, which is unstable and cannot be held to be marketable. Hence, as the test of marketability is not satisfied, no duty is leviable on the sugar syrup.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2014-15/2435

Post a Comment

Query