Customs Duty Exemption On Flavour Compound Cannot Be Denied On Alcohol Content Alone: CESTAT Bengaluru

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bengaluru, has held that a customs duty exemption claimed on imported flavour compounds cannot be denied without establishing that the goods fall within the exclusion for compound alcoholic preparations of a kind used for the manufacture of beverages.

The revenue must prove that the goods satisfy the exclusion.

A bench comprising Judicial Member P.A. Augustian and Technical Member R. Bhagya Devi refering to a 2002 notification observed, “what is excluded only those goods that are 'compound alcoholic preparations of a kind used for the manufacture of beverages, of an alcoholic strength by volume exceeding 0.5 per cent. volume, determined at 20 degrees centigrade' and unless the Revenue proves the above the benefit of the Notification cannot be denied.”

The ruling came in an appeal filed by Givuadan (India) Pvt. Ltd. over its import of 10 kgs of 'Tab Mapelein ST'. The company had claimed the customs duty exemption for the goods.

The original authority denied the exemption after relying on a previous test report which recorded the ethyl alcohol content of Tab Mapelein at 15.5% v/v. The Commissioner (Appeals) upheld the decision.

Before the tribunal, Givuadan argued that the imported goods were raw materials consisting of mixtures of odoriferous substances. It described them as tobacco-specific raw materials used in the tobacco industry and relied on a purchase order from Godfrey Phillips India Ltd.

The company also challenged the reliance on the previous test report, arguing that it had not been supplied to it.

The revenue argued that there was no conclusive proof that the goods were not used in the beverage industry. It also relied on previous test reports in Givuadan's own case to oppose the exemption.

The tribunal examined its earlier decision involving Givuadan. In that case, it had held that beverage flavours used in the manufacture of beverages and having an alcoholic strength above 0.5% were not eligible for the exemption.

The earlier decision, however, distinguished flavours that were not sold to beverage manufacturers. It found that it had not been established that those products were “of a kind used for the manufacture of beverages” and remanded the issue for a categorical finding.

The tribunal held that the earlier ruling could not, by itself, justify denying the exemption in the present case.

It observed, “reliance on the above judgment to deny the benefit without establishing the fact that the products, in the instant case, were used in the manufacture of beverages and fall under the exclusion cannot be sustained.”

The tribunal also considered the purchase order from Godfrey Phillips India Ltd., described in the order as one of the major manufacturers of tobacco products. It held that the Revenue had failed to conclusively prove that the goods were used in the manufacture of beverages, which was one of the conditions for denying the exemption.

The previous test report was also insufficient to sustain the denial. The tribunal noted that the original order relied on the report, but there was nothing on record to show that a test report had been drawn for the present consignment.

The tribunal consequently found no justification for upholding the impugned order. It set aside the order and allowed Givuadan's appeal.

For Appellant: Advocate Madan

For Revenue: P.R.V. Ramanan, Special Counsel (AR)