By TIOL News Service

NEW DELHI, JULY 04, 2017: THE Appellants are engaged in preparation of Bura, Batasha, Mishri and Makhana from duty paid sugar procured by them.

Under the purported belief that their activity does not amount to manufacture, the appellant did not pay any Central Excise duty on the clearances of these products.

SCNs came to be issued demanding CE duty by classifying Boora under CETH1701.99 and Batasha, Mishri and Makhana under 1704.90.

Aggrieved with the orders of the lower authorities, the appellants are before the CESTAT.

It is submitted that that no new or different article is emerging; there is change in physical form only; there is no change in the chemical composition of Sugar or its essential character or use. Nonetheless, if the products are held liable to CE duty, the appellants plead that they be extended the benefits of CENVAT credit, cum-duty price and limitation.

The AR reiterated the stand taken by the department.

The Bench extracted the CBEC Circular 879/17/2008-CX dated 05.12.2008 wherein it is concluded that process of making boora, batasha, mishri, makhana from sugar shall amount to manufacture under section 2(f) of CEA, 1944 and liable to duty of Central Excise; that the said items are correctly classifiable under Heading 17019100.

The Tribunal also took note of the fact that vide amending Notification No. 57/2008-CE bura, makhana, mishri, hardas or battasa (patashas) have been exempted from CE duty and their classification is shown under 17019100.

The CESTAT, therefore, held as under -

+ It is clear that process involved for conversion of sugar into subject goods is "manufacture? under section 2(f) of Central Excise Act, 1954. [Empire Industries Ltd = 2002-TIOL-27-SC-CX-LB relied upon]

+ When the process undertaken by the appellants amounts to manufacture, when the produce/goods are liable to be classified under Cental Excise Tariff Heading 17019100 and when there is no exemption Notification for such goods for the subject period, the goods are liable to duty for the period prior to 05.12.2008. But the duty is payable for such goods only for the normal period as there were interpretation issues involved during the relevant period. The appellants, therefore, cannot be charged with "suppression or misrepresentation of the facts with an intention to evade payment of duty of Central Excise?.

+ The extended period of limitation is not invokable and penalty also cannot be imposed upon the appellants.

+ However, interest is payable as per the provisions of then section 11AB of Central Excise Act, 1944. [Aarti Drugs Ltd = 2015-TIOL-1888-CESTAT-MUM refers]

The appellants were also held entitled for the benefit of CENVAT credit in respect of inputs as well as cum-duty benefits by adverting to the Explanation under section 4(1) of the CEA, 1944 and Board Circular 749/65/2003-CX dated 26.09.2003.

Observing that there was no clarity on the subject issue during the relevant period, order of confiscation/imposition of redemption fine, penalties was also dropped.

In fine, the matter was remanded to the adjudicating authority for the limited purpose of arriving at the duty liability (for the "normal period" after extending the benefits of CENVAT/cum-duty price) as well as interest.

The appeals were allowed in above terms.

(See 2017-TIOL-2253-CESTAT-DEL)