By TIOL News Service

BANGALORE, AUG 25, 2014: THE appellants are engaged in the manufacture of “Good Day”, “Marie Gold”, “Tiger Krunch”, “Vitamarie” biscuits on job work basis bearing the brand name of Britannia falling under Chapter Heading 1905 31 00 of the Tariff. In terms of the agreement, Britannia supplies the various duty paid raw materials to the appellants under cover of duty paid documents which indicate Britannia as the buyer and the appellants as the consignees. The appellant availed Cenvat credit of duty paid on inputs like sugar, various flavours, packing materials, furnace oil etc., and utilized the same for payment of duty on the final product cleared from the factory. Among the aforesaid biscuits, “Marie gold” biscuits are exempted from payment of duty since MRP of the product is below Rs. 100 per kg.

During the course of manufacture of biscuits, appellants also produced sugar syrup which they called as invert sugar. Invert sugar is a mixture of glucose and fructose obtained by hydrolyzing (breaking) sucrose (cane sugar) which is a dimer into two monomers namely glucose, (dextrose) and fructose with the help of citric acid or enzyme. It was submitted by the appellants that the invert syrup does not contain any chemical which increases shelf life and therefore it cannot be stored for longer periods and used over a period of time. It was also submitted that syrup so prepared is never cleared to outsiders and is captivity consumed by the appellants. The entire syrup is consumed on a day to day basis and nothing in left over for more than 8 hours to avoid the syrup getting fermented.

Duty demand of Rs. 3,28,16,314/- for the period from 2007-08 to 2011-12 has been confirmed with interest on the ground that sugar syrup so manufactured and used in the manufacture of exempted biscuits should suffer duty since benefit of Notification No. 67/95-CE is not available and it has also been held that sugar syrup is marketable. Penalty equal to the duty demanded has also been imposed.

Tribunal observed,

"It can be seen that the statement made by Shri Mohanan in the first part is that as soon as they stopped paying duty on the exempted biscuits, they also stopped taking CENVAT credit on the inputs. No doubt they did not maintain separate account of sugar solution which he also confirmed. Separate account is to be maintained for inputs and no doubt the inputs are sugar, glucose, citric etc. Therefore this does not need to an automatic conclusion that assessee did not maintain separate account at all. Nevertheless, when a statement like this is given and when the duty is being demanded on the ground that appellant was not eligible for the benefit of exemption Notification No. 67/1995-CE, in our opinion, it was the duty of the officer to question Shri Mohanan and verify the records and ensure that records have been maintained or not maintained and facts are brought out correctly. At this stage it would be appropriate to observe that Notification No. 67/95-CE provides that where separate records are maintained as per Rule 6 of CENVAT Credit Rules 2004 when the input is common to exempted goods and dutiable goods, benefit of Notification No.67/95 would be available to the inputs in respect of which CENVAT credit has not been taken and separate record has been maintained. Once the CENVAT Credit itself is not taken, in respect of inputs utilized for exempted goods totally, and if this fact is coming out from the records, naturally there would be no need to maintain separate records since the very fact that credit has not been availed would be sufficient instead of making further queries and confirming the facts. Straight away proceedings have been initiated against the appellants on the ground that they were liable to pay duty on sugar syrup and it has been held to be marketable because it has a shelf life without carrying out any market enquiry and without collecting any evidence about its marketability and the fact that it has not been sold, proceedings were initiated. It is strange that only selective portion of the statement convenient to the department has been extracted in the show-cause notice resulting in proceedings culminating in confirmation of demand. Even though, the learned A.R. prays and argues that the matter should be remanded, we are not inclined to do so, since the categorical submission made in a statement recorded under Section 14 of Central Excise Act 1944 before a Gazetted officer of the Revenue has not been contradicted, No investigation has been conducted, no verification has been done and instead only convenient portions have been utilized for initiating proceedings. When a portion of the statement has been used for making out a case, another portion of the statement cannot be ignored or held to be false without any evidence. In view of the above, we come to the conclusion that appellants can be said to have maintained separate records in view of the categorical submission of Shri Mohanan that they stopped taking CENVAT credit in respect of inputs used for exempted goods from 2007 itself. We consider that this contention has to be accepted. In view of the above, even though only stay application has been listed, we allow the appeal itself in view of the fact that the most important part of any investigation i.e. to ascertain facts, apply law to the facts and propose action in accordance with law has not been followed in this case."

(See 2014-TIOL-1586-CESTAT-BANG)