By TIOL News Service

MUMBAI, APR 25, 2016: THE appellant manufactured sugar syrup and captively consumed the same in the manufacture of excisable goods, which were exempted from payment of duty. Sugar syrup is classifiable under SH 1702.30 and was chargeable to duty at the rate of 10% ad valorem .

A demand notice came to be issued for recovery of CE duty on the said sugar syrup.

The appellant contested the demand on the ground that the sugar syrup manufactured by them was not a marketable commodity; that the said sugar syrup does not have any shelf life.

The adjudicating authority dropped the demand on the ground that the test result of the sample drawn disclosed that the content of sugar was 33.3% by weight and, therefore, in terms of CBEC Circular No. 75/1994-CX dated 7/11/94, the goods are not marketable and therefore, not chargeable to duty.

This order was reviewed by the Revenue and upon appeal, the Commissioner (Appeals) held that the said sugar syrup has a shelf life and, therefore, is marketable. The Commissioner (Appeals) also relied on the report dated 10/11/95 of Deputy Chief Chemist in respect of sample drawn on 20/09/95. In the said report, the Deputy Chief Chemist stated that the sugar contained in the said sample was 56.7% by weight. The Commissioner (Appeals) observed that though the sample concentration was less than 65%, the sugar contained in it survived deterioration from the date of drawal i.e. 20/09/95, to the date of testing i.e. 10/11/95 and, therefore, he concluded that the said samples have shelf life and, therefore, was marketable. To reach this conclusion, he relied on the Circular No. 780/13/2004 -CX dated 12/03/2004.

Before the CESTAT, the appellant submitted that the CBEC Circular No. 226/60/96-CX dated 03/07/1996 clearly stated as follows:

According to technical literature syrups are concentrated solution of sugars such as sucrose in water or other aqueous liquids. When purified water is used in making a solution manufacturing syrups the sucrose must be selected carefully and a purified water - free foreign substance and clean vessels and containers must be used. Dilute solutions of sucrose are prone to growth of molds yeast and other microorganisms. In concentration of 65% by weight or more the solution will retard the growth of microorganisms. Thus it may have shelf life without addition of any preservative.

However, according to IS: 4935-1968 synthetic syrups may be prepared with or without addition of citric acid to sugar synthetic syrup shall be not less then 65% by weight. The only additives that shall be used in synthetic syrups are citric acid and permitted colours.

It was further submitted that in the instant case, there is no additive added and the sugar contained is less than 65%. Moreover, the Chemical Examiner's report did not state the date on which the sample was tested and, therefore, the conclusion that the sample had survived without deterioration from 20/09/95 to 10/11/95 is misplaced.

The AR relied on the Board Circular No. 780/13/2004 -CX dated 12/03/2004 wherein it has been observed that for determining the excisability of the products, the Supreme Court has laid down the test of marketability as the relevant criteria and, therefore, the said sugar syrup is marketable as such, without any reference of percentage of sugar concentration then the same is excisable.

The Bench observed -

“5. We find that the test report clearly states that the samples contained less than 65% sugar. The test report does not indicate the date on which the test was conducted or if the samples are deteriorated or not. In view of that the basic ground on which the Commissioner (Appeals) has based his order are found to be misplaced. We find that the Circular No. 780/13/2004-CX dated 12/03/2004 rightly points out that what is relevant is the test of marketability and not the sugar contents in the syrup. We find that there is no evident whatsoever of the test of marketability in the proceedings anywhere.”

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-976-CESTAT-MUM)