Rakesh Kumar, Member (T) -

1. The facts leading to filing of these appeals are, in brief, as under.

1.1 The appellants M/s. Rishi Bakers Pvt. Ltd., M/s. Ramakrishna Bakers Pvt. Ltd. and M/s. Swati Biscuit Manufacturing Co. are manufacturers of biscuits chargeable to Central Excise duty under heading 1905 of the Central Excise Tariff. Shri Prakash Chand Talreja is the Director of M/s. Rishi Bakers Pvt. Ltd., Shri Rajiv Talreja is the Director of M/s. Ramakrishna Bakers Pvt. Ltd. and Shri Om Prakash Shyamdasani is the partner of M/s. Swati Biscuit Manufacturing Co. The period of dispute in the appeal of M/s. Rishi Bakers Pvt. Ltd. is from January 2009 to June 2009. The period of dispute in the case of appeal filed by M/s. Ramakrishna Bakers Pvt. Ltd. is February 2010 to June 2010 and period of dispute in the case of M/s. Swati Biscuit Manufacturing Co. is from January 2002 to June 2009. During this period, the biscuits in packaged form with per kg retail price equivalent not exceeding Rs. 100/- were fully exempt from duty. The appellant during some period were manufacturing only the exempted biscuits and during other period exempted as well as dutiable biscuits. For manufacture of the biscuits, the appellant prepare a sugar syrup by dissolving cane sugar in water at 108 degree Celsius temperature and adding very small quantity of citric acid. This sugar syrup was being used in the manufacture of the biscuits. The Department was of the view that since biscuits of retail sale price equivalent not exceeding Rs. 100/- per kg. were fully exempt from duty, the benefit under exemption Notification No. 67/2005-C.E. would not be admissible in respect of sugar syrup. The Department was also of the view that this sugar syrup is classifiable under sub-heading 1702 90 90 and is also marketable. It is on this basis that show cause notices were issued for demand of duty in respect of clearances of the sugar syrup for captive use during the above-mentioned periods. The duty demands were confirmed by the Assistant Commissioner along with interest and penalties were also imposed on the appellant companies under Section 11AC. Beside this, penalty under Rule 26 of the Central Excise Rules, 2002 were imposed on the Directors/Partners of the above-mentioned appellant companies. On appeals being filed to Commissioner (Appeals) against the Assistant Commissioner's order, the Commissioner (Appeals) by common order-in-appeal dated 25-3-2010 and 26-3-2010 dismissed the appeals. In the appeals filed before the Commissioner (Appeals), one of the pleas of the appellants was that the sugar syrup is not classifiable under heading 1702 90 90, as per the test report of Shri Ram Institute of Industrial Research, the Fructose content of the syrup is less than 50% while for classification under sub-heading 1702 90 90 the fructose content must be at least 50%, but this plea was not accepted. The appellant filed appeals to the Tribunal against these the orders dated 26-3-2010 and 25-3-2010 of the Commissioner (Appeals). The Tribunal remanded the matter to original Adjudicating Authority for de novo adjudication. In de novo adjudication orders, the Tribunal directed the original Adjudicating Authority to go into the question of marketability of the product in dispute i.e. sugar syrup and not of the final product as had been done in first round of adjudication, when the marketability of the sugar syrup had been presumed on the basis of the marketability of the biscuits.

1.2 In de novo adjudication proceedings, the original Adjudicating Authority again confirmed the duty demands holding that the sugar syrup, in question, is marketable and also held that the goods, in question, are classifiable under sub-heading 1702 90 90.

1.3 On appeals have filed to Commissioner (Appeals) against these orders, the Commissioner (Appeals) by a common order-in-appeal dated 30th August, 2012 dismissed the appeals. Against this order of the Commissioner (Appeals) these appeals have been filed along with stay application. The Tribunal vide stay order dated 5th March, 2013 directed each of the appellant company - M/s. Rishi Bakers Pvt. Ltd., M/s. Ramakrishna Bakers Pvt. Ltd. and M/s. Swati Biscuit Manufacturing Co. to deposit an amount of Rs. 1,00,000/- within a period of four weeks for compliance with the provision of Section 35F and subject to this pre-deposit being made, the requirement of pre-deposit of balance amount of duty demand confirmed, interest and penalty by the appellant companies and the requirement of pre-deposit of penalty by the Directors/Partner of the appellant company/firm would stand waived and its recovery stayed during the pendency of the appeals. The appellant, thereafter, complied with this stay order.

1.4 Subsequently, the Tribunal vide stay order dated 4th February, 2014 extended the stay order against which the Department filed appeal before Hon'ble Allahabad High Court. Hon'ble Allahabad High Court vide order dated 25-9-2014, while not interfering with the Tribunal's order extending the stay, directed the Tribunal to decide these matters within a period of six months from the date of the order. Accordingly, these appeals have been taken up for final hearing.

2. Heard both the sides.

3. Shri M.H. Patil, Advocate, the learned Counsel for the appellant, pleaded that in the impugned order the Commissioner (Appeals) has wrongly given a finding that the appellant have not disputed that the product, in question, is invert sugar syrup and is classifiable under heading 1702 90 90, that not only in the appeals before the Tribunal, but also in the appeals filed before the Commissioner (Appeals), the question of classification of the goods, in question, under the sub-heading 1702 90 90 has been disputed by pleading that the fructose content of the sugar syrup is less than 50% and in this regard reliance has been placed on the test report of Shri Ram Institute of Industrial Research, that no finding has been given by the Commissioner (Appeals) on this plea, that Department has also never got the sample of the sugar syrup tested for fructose content without which the Department could not presume that the fructose content is less than 50%, that even in respect of the question of marketability, the Commissioner (Appeals) has wrongly affirmed the original Adjudicating Authority's orders which had relied upon the sale of invert sugar syrup by Dhampur Speciality Sugars Ltd. to M/s. Britannia Industries, M/s. J.B. Mangaram Food Industries and M/s. ITC Ltd. which is wrong, as the Tribunal in the remand order had directed original Adjudicating Authority to ascertain the marketability of the sugar syrup being prepared by the appellant and the marketability of the sugar syrup, in question, cannot be presumed on the basis of marketability of the invert sugar syrup being manufactured and sold by others, that when the sugar syrup is not marketable, there is no question of its excisability, even if it is presumed that it is classifiable under heading 1702 90 90, that in any case, the sugar syrup being manufactured is fully exempt from duty under Notification No. 67/95-C.E., as in terms of proviso to the exemption notification, this exemption is applicable when the manufacturer also manufactures dutiable and exempted final product and in respect of exempted final product, the obligation under Rule 6 of the Cenvat Credit Rules, 2001 has been discharged, that in this case the appellants have not taken Cenvat credit in respect of the inputs used in the manufacture of exempted biscuits and hence in respect of the sugar syrup, the exemption under this notification would be available and that in view of the above submissions, the impugned orders are not sustainable. Shri Patil also pleaded that since the dispute in this case pertains to interpretation, the penalty on the appellant company as well as on Director was not called for, as earlier, the appellant were paying duty in respect of captive clearance of sugar syrup till June 2008 and thereafter, after intimating the Department, they stopped the payment of duty of the sugar syrup.

4. Shri R.K. Grover, the learned DR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that the appellants have not disputed the classification of the sugar syrup under heading 1702 90 90 and that since similar goods were being sold by M/s. Dhampur Speciality Sugars Ltd. to M/s. Britannia Industries, M/s. J.B. Mangaram Food Industries and M/s. ITC Ltd., the goods, in question, have to be treated as marketable. Shri Grover cited the judgments of Nicholas Piramal India Ltd. v. CCE, Mumbai reported in 2010 (260) E.L.T. 338 (S.C.), wherein it was held that shelf-life of product is not a relevant factor to test marketability unless it is shown that product has absolutely no shelf-life or shelf-life is such that it is not capable of being bought or sold during that shelf-life and also in the case of Gujarat Narmada Valley Fert. Co. Ltd. v. CCE & Cus. reported in 2005 (184) E.L.T. 128 (S.C.), wherein it was held that actual sale is not necessary but articles must be capable of being sold in market or known in market as goods and in this regard the Apex Court had relied upon its earlier judgment in the case of Bhor Industries Ltd. v. CCE, Bombay reported in 1989 (40) E.L.T. 280 (S.C.) and Medley Pharmaceuticals Ltd. v. CCE & Cus, Daman reported in 2011 (263) E.L.T. 641 (S.C.). He therefore pleaded that the sale of invert sugar syrup by Dhampur Speciality Sugars Ltd. to M/s. Britannia Industries, M/s. J.B. Mangaram Food Industries and M/s. ITC Ltd. shows that this sugar syrup, in question, is marketable.

5. In rejoinder Shri M.H. Patil cited the judgment of the Apex Court in the case of Bata India Ltd. v. CCE, New Delhi reported in 2010 (252) E.L.T. 492 (S.C.) and pointed out to para 18 of the judgment wherein it has been held that test of marketability is that the product which is made liable to duty, must be marketable in the condition in which it emerges. He pleaded that in this case no evidence has been produced to prove that the sugar syrup as made by the appellants is marketable in the condition in which it emerges and that merely on the basis that the "invert sugar syrup" made by Dhampur Speciality Sugars Ltd. is marketable, it cannot be presumed the sugar syrup made by the appellant is marketable.

6. We have considered the submissions from both the sides and perused the records.

7. The dispute in the present case is as to whether sugar syrup made by the appellant for captive use in the manufacture of exempted biscuits is chargeable to Central Excise duty under sub-heading 1702 90 90 of the Central Excise Tariff. The Department's contention is that since the sugar syrup is used in the manufacture of the exempted biscuits, the benefit of Notification No. 67/95-C.E. would not be available. In this regard, the contention of the appellant is that in terms of the proviso to Notification No. 67/95-C.E., the full duty exemption to intermediate products being used for captive consumption is available if a manufacturer discharges the obligation under Rule 6 of the Cenvat Credit Rules. We do not accept this plea, as in terms of proviso to Notification No. 67/95-C.E., the full duty exemption to intermediate product is available under this notification, even if the manufacturer has manufactured, in addition to exempted final product, a dutiable final product also by using common Cenvat credit availed inputs and in respect of exempted final product, he has discharged the obligation prescribed under Rule 6 of the Cenvat Credit Rules. In this case, it is now known as to whether the appellant throughout during the period of dispute, were manufacturing only exempted final product or along with the exempted final product were also manufacturing dutiable final product. The proviso to notification is applicable only in a situation where by using common Cenvat credit availed inputs, a manufacturer manufactures dutiable as well as exempted final product>and in respect of the exempted final product, the obligation under Rule 6 of the Cenvat Credit Rules has been discharged. Shri Patil in this regard has cited the judgment of the Tribunal in the case of Sakthi Sugars Ltd. v. CCE, Salem reported in 2008 (230) E.L.T. 676 (Tri.-Chennai). We have gone through this judgment. In our view ratio of this judgment is not applicable to the facts of this case.

8. Next comes the question of classification. The Department has classified the product, in question, under sub-heading 1702 90 90. Sub-heading 1702 90 90 comes under the 6 digit sub-heading 1702 90 which covers "other sugars including invert sugar and sugar syrup blends containing in the dry stage 50% by weight of fructose". The goods, in question, are sought to be classified under 1702 90 90 as "sugar syrup blends containing in dry stage, 50% by weight of fructose". In our view for classification as "sugar syrup blend" in this sub-heading the product must contain 50% by weight of fructose sugar in dry state. In these cases, the appellant's plea from the very beginning has been that the fructose sugar content is less than 50% and in this regard they have produced the test report of Shriram Institute of Industrial Research. It is seen that the Commissioner (Appeals) has not given any finding on this plea. Not only this, there is no evidence to show that before seeking classification of the goods, in question, under sub-heading 1702 90 90, the samples drawn from the goods had been got tested by the CRCL to confirm as to whether the fructose content of the goods, in question, in dry stage is 50% by weight. Just because the appellant during period till June 2008 were paying duty on the goods by classifying the same under sub-heading 1702 90 90, it cannot be presumed that they had accepted that the goods, in question, conform to the description of sugar syrup blends of sub-heading 1702 90 for which the sugar syrup in dry stage must contain 50% by weight of fructose. The Apex Court in the case of Metlex (I) Pvt. Ltd. v. CCE, New Delhi reported in 2004 (165) E.L.T. 129 (S.C.) has held that filing of classification list mistakenly does not mean that party has to pay duty, if in law, he is not bound to pay duty. Same view has been taken by the Apex Court in its judgment in the case of Bonanzo Engg. & Chemical P. Ltd. v. CCE reported in 2012 (277) E.L.T. 145 (S.C.). In view of this, we hold that the classification of the goods under sub-heading 1702 90 90 is not sustainable, as absolutely no evidence has been produced by the Department to show that the fructose content of the goods, in question, in dry state was 50%.

9. Even if it is assumed that the goods, in question, are covered by sub-heading 1702 90 90, for attracting Central Excise duty the goods must be proved to be marketable. The Tribunal had remanded this matter to Commissioner (Appeals) for examining the question of marketability of the goods, in question. In this regard it is settled law that the marketability of a product has to be established in the condition in which it emerges. In this regard the Apex Court in the case of Bata India Ltd. v. CCE, New Delhi (supra) has held that the test of marketability is whether product is marketable in condition in which it emerges. In this regard the marketability of the goods produced by a particular manufacturer cannot be presumed on the basis of the marketability of the similar goods in different condition being produced by another manufacturer, unless it shown that the two products are identical. In these cases, the Commissioner (Appeals) has held that the goods, in question, to be marketable only on the basis that the "invert sugar syrup" being manufactured by M/s. Dhampur Speciality Sugars Ltd. is being sold to M/s. Britannia Industries, M/s. J.B. Mangaram Food Industries and M/s. ITC Ltd. In our view this basis of holding that the goods, in question, are marketable is absolutely wrong, as it has been presumed that the sugar syrup being made by the appellants is identical to the "invert sugar syrup" being made by M/s. Dhampur Speciality Sugars Ltd. for which there is no basis. Chemically, invert sugar is obtained by Hydrolysis of cane sugar (sucrose, a disaccharide with specific rotation of + 66.5) and the same is a mixture of glucose (with specific rotation of +52.7) and fructose (with specific rotation of - 92), with net specific rotation of - 19.7. The process of hydrolysis of cane sugar (which is dextrorotatory i.e. with rotation of + 66.5) is also called inversion, as the mixture of glucose and fructose formed by this process is levorotatory with sp. Rotation of - 19.7 and for this reason the mixture of glucose and fructose formed by hydrolysis of cane sugar is called invert sugar. The invert sugar has longer shelf life. Whether a sugar syrup is ordinary cane sugar syrup or is invert sugar syrup has to be ascertained by chemical test which has not been done. It is, therefore, totally wrong to presume a given sugar syrup as invert sugar syrup without test. The judgments of the Apex Court in the cases of Narmada Valley Fert. Co. Ltd. v. CCE & Cus. (supra), Nicholaas Piramal India Ltd. v. CCE, Mumbai (supra) and Medley Pharmaceuticals Ltd. v. CCE & Cus, Daman (supra) cited by the learned DR are not applicable to the facts of this case.

10. In view of the above discussion, we hold that neither there is any evidence to prove that the goods, in question, are classifiable under 1702 90 90 nor there is any evidence to prove that the goods, in question, in form in which they come into existence in the appellant's factories, are marketable. We, therefore, hold that the impugned order is not sustainable. The same is set aside. The appeals are allowed with consequential relief.