CESTAT Nullifies Excise Duty Demand on PepsiCo Scrap-Veg-Refuse for Exempted Goods
The excise duty demand against Pepsico Scrap-Veg-Refuse for the production of exempted goods has been quashed by the Chandigarh
CESTAT Nullifies Excise Duty Demand on PepsiCo Scrap-Veg-Refuse for Exempted Goods
The excise duty demand against Pepsico Scrap-Veg-Refuse for the production of exempted goods has been quashed by the Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT).
The observation made by the bench, comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), highlights that waste pairing and scrap generated during the production of exempted goods were not liable for excise.
The appellant is involved in the production of potato chips, Kurkure, Namkeens, and similar products. Following intelligence suggesting potential evasion of central excise duty concerning 'potato starch' categorized under Tariff Item No. 11083100 through clandestine manufacturing and clearance under the guise of scrap-veg-refuse without proper duty payment, thorough investigations were conducted. Subsequently, show cause notices were issued, and after due process, the adjudicating authority upheld the demand and imposed penalties.
Discontent with this decision, the appellants lodged appeals with the Commissioner (Appeals), who dismissed their appeals.
The appellant argued that the orders under scrutiny lack legal merit and should be invalidated due to a purported failure to properly grasp the facts, relevant legal principles, and binding judicial precedents. They contend that the product in question, namely "scrap-veg-refuse," does not meet the criteria for classification as a manufactured item under the Central Excise Act.
Additionally, it is asserted that the genesis of this product stems from the recycling process of wastewater, which was not undertaken with the explicit purpose of manufacturing "scrap-veg-refuse." Instead, the primary objective of this process was solely to reuse the water content present in the wastewater.
The appellant contended that they have accurately classified the 'scrap-veg-refuse' under Chapter Heading 23080000 as vegetable waste. They argued that this classification aligns with the explanatory notes to Chapter 23.08, which specify that the chapter encompasses various vegetable-related items, including waste, residues, and by-products intended for animal feeding, it encompasses materials generated from the industrial processing of vegetable material with the aim of extracting certain constituents. Therefore, their classification of 'scrap-veg-refuse' as vegetable waste is consistent with the guidelines.
The CESTAT determined that the inclusion of certain starch elements in the residue or scrap does not automatically exclude it from being classified as waste or residue. They emphasized that the department must present adequate evidence to demonstrate that the product does not qualify as residue or waste.
The CESTAT granted the appeal and annulled the order imposing excise duty on scrap vegetables.