Sugar Syrup With 80% Sugar Used To Make Exempt Biscuits Is Excisable: CESTAT Ahmedabad

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad on 31 August held that sugar syrup containing 80% sugar by weight is marketable and liable to excise duty.

A Bench comprising Judicial Member Somesh Arora and Technical Member Satendra Vikram Singh partly allowed the appeal filed by ETC Agro Processing (India) Pvt. Ltd. against a demand of around Rs.49.68 lakh, while remanding the matter for verification and grant of eligible CENVAT credit on sugar used to manufacture the syrup.

“In this case, we find that the product 'sugar syrup' manufactured by the appellant as per their own admission, contains sugar content of 80% by weight. Hence, issue is no more res-integra in the light of above decisions. Therefore, following above decisions, we hold that sugar syrup manufactured by the appellant is both marketable and hence, excisable goods.”

ETC Agro Processing manufactured Parle brand biscuits during the relevant period, when the biscuits were exempt from excise duty. The company also manufactured sugar syrup within its factory and used it to make the biscuits.

The Excise Department demanded around Rs.49.68 lakh as excise duty on the syrup, along with interest and penalty. The Department's case was that the syrup manufactured and consumed within the factory for making exempted biscuits was liable to excise duty. The adjudicating authority confirmed the demand and imposed an equivalent penalty.

The company challenged the demand, contending that the syrup was prepared according to its specifications exclusively for making Parle biscuits and was not capable of being sold in the market. It therefore argued that the syrup was not “excisable goods”. It also submitted that the Department had neither tested the syrup nor produced material to establish its shelf life or marketability.

The Tribunal noted that the company had stated that 800 grams of sugar was mixed with 200 ml of water per kilogram, along with a small quantity of citric acid, and heated up to 118°C to prepare the syrup. The syrup thus contained around 80% sugar by weight.

Referring to earlier decisions, the Bench held that actual sale of a product is not necessary to establish marketability. The relevant question is whether the product is capable of being bought and sold. It noted that earlier decisions had held sugar syrup containing more than 65% sugar by weight to be marketable and excisable.

It also rejected the company's challenge to the extended limitation period. It noted that although the company had informed the Department that sugar syrup was an ingredient used in manufacturing biscuits, its excise returns did not disclose the production and captive consumption of the syrup without payment of duty. The Department therefore could not have verified whether the syrup was being manufactured within the factory and consumed without payment of excise duty.

However, the Tribunal accepted the company's alternative plea for CENVAT credit on the sugar used to manufacture the syrup. It directed the adjudicating authority to verify the duty-paying documents and allow the credit if the documents were found proper.

Accordingly, the CESTAT partly allowed the appeal by way of remand and limited the remand to verification and grant of eligible CENVAT credit.

For Appellant: Mrs. Rinki Arora with Shri Mayur Jain, Advocates

For the Revenue: R.R. Kurup, Superintendent (Authorised Representative)