The Mumbai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed the Central Excise duty demand on intermediate goods i.e. aromatic compounds used for manufacturing Agarbatties.
The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that chemical composition of aromatic compound was not mentioned in those invoices and also the composition of such intermediate product used by the appellants was also not considered by the Department, in order to conclude that the self-same aromatic compounds used by the appellants for the intended purpose, is marketable.
The appellants/assessees are engaged in the manufacture of Agarbatties, falling under Tariff Item 3707 41 00 of the First Schedule to the Central Excise Tariff Act, 1985. The said goods manufactured by the appellants are chargeable to ‘NIL’ rate of duty. For manufacture of Agarbatties, the appellants used aromatic compounds captively within the factory.
Since the final product i.e. Agarbatties manufactured by the appellants attract ‘NIL’ rate of duty, the Department had contended that aromatic compounds consumed captively within the factory for manufacture of Agarbatties are liable for payment of Central Excise duty and the benefit provided under Notification No. 67/95-C.E. dated 01.03.1995 shall not be available to such intermediate product i.e. aromatic compounds.
A show-cause notice was issued by the department, which culminated into the Order- in-Original in which the Principal Commissioner of Central Excise, Mumbai-II has confirmed the Central Excise duty demand of Rs.2,07,70,973/- alongwith interest and also imposed equal amount of penalty on the appellants under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002.
The appellant contended that the aromatic compounds procured by the appellants were exclusively used within the factory for manufacture of Agarbatties and since those compounds were not removed outside the factory or sold by the appellants to any other person, there is no question of payment of Central Excise duty on such intermediate product.
The department contended that since the intermediate product i.e. aromatic compound has ready market and is capable of being bought and sold, the case of the appellants falls within the purview of CBEC’s Circular No. 989/13/2014 dated 07.11.2014, and the same will be excisable, irrespective of whether such compound is actually marketed or not.
The tribunal while allowing the appeal held that the Department’s stand in demanding the Central Excise duty on such intermediate goods i.e. aromatic compound cannot be sustained, inasmuch as it cannot be said that use of aromatic compounds by the appellants captively, are capable of being marketed.
Case Details
Case Title: M/s. Shrinivas Sugandhalaya Versus Commissioner of Central Excise, Mumbai – II
Case No.: Excise Appeal No. 86378 Of 2015
Date: 17.03.2025
Counsel For Appellant: Gajendra Jain
Counsel For Respondent: Hemant Kumar Tantia
Read More: Service Tax Payable On Construction Services Provided To RIICO And RSAMB: CESTAT
