PEPSICO INDIA HOLDINGS LTD. Vs. CCE

JUDGEMENT

(1.) This appeal arises from Order -in -Appeal No. 36/98 dated 9.2.98 by which the Commissioner (Appeals) has upheld the Order -in -Original No. 45/97 dated 28.4.97 passed by the Asst. Commissioner of Central Excise, by which he has held that BIB SYRUP is excisable and dutiable product and the same is classifiable under sub -heading 2107.91 despite the fact that the products concentrate and the end product BIB SYRUP fall in the same sub -heading of Central Excise Tariff and it does not effect durability of the product. He has held that the product concentrate, undergoes definite manufacturing process of addition of sugar syrup to enable it to become fit for use in dispensing aerated waters/beverages. The Commissioner (Appeals) has noted that there are several millions of items manufactured all over, and there cannot be a tariff to describe each of the items. He has noted that the limitation of the tariff as such, they may fall under the same tariff heading, but this does not mean that they are not different products as such. He has taken a view that the new product having a distinct name, character and use has emerged in the manufacture of bag -in -box syrup. He has noted that the material bag -in -box syrup is sold in the market for those who have fountain -pepsi. They fit this bag -in -box syrup on to the fountain -pepsi and mixing the same with water aerating produce pepsi which is dispensed. Therefore, he has held that a clear market exists for this product. He has noted that there is a semblance of ready -manufacture in the fountain -pepsi, which attract the buyers, much different from buying a bottle or can of already filled in pepsi. He has held that bag -in -box syrup is a distinctly marketable product despite concentrate of the item in question falling under the same tariff heading.

(2.) It is the contention of the appellants in terms of written submissions now filed during the course of arguments that they buy duty paid sugar and purify the same by mixing with water and activated carbon. The purified sugar in the form of liquid is then added to the duty paid soft drink concentrate purchased from M/s. Pepsi Foods Ltd. This mixture of sugar and concentrate is called as beverage syrup or syrup. Generally, this syrup is consumed in the manufacture of aerated water within the appellant's factory. However, some quantity is cleared on sale for use by the ultimate buyer in beverage dispenser (fountain Pepsi). The period in question is June to August 1994. They contend that department claims that the soft drink concentrate and beverage syrup are preparations for beverage. They claim that mere addition of the liquid sugar to the concentrate would not amount to manufacture. In this regard, they reply on the judgment rendered in the case of Jyothi Laboratories Ltd. v CCE, 1994 (50) ECR 36. It is their contention that the beverage syrup is nothing but an intermediary in the manufacture of aerated water whether manufactured in the factory of the appellant or made at the time of dispensing through the vending machine and the essential nature of the goods supplied remains the same namely, preparation for aerated water. It is stated that the product is not a new product with a distinct name, character and use. Hence, there is no manufacture. It is stated that the Commissioner (Appeals) has not appreciated the defence of the appellants and has taken for granted that the mixing of sugar and the concentrate has resulted in the emergence of a new product which is not correct.

(3.) It is, further, stated that what is received by the appellant is "a preparation for beverage" classified under chapter heading 2107. After addition of sugar it would still remain "a preparation for beverage", according the department. It is stated that since use remains the same there is no manufacture. If the addition of sugar at the appellant's factory only brings out the preparation for beverage, then it could not be a preparation for beverage at the time of receipt. However, the product received being a "preparation for beverage" is not at all in dispute. Therefore, it is stated that the preparation for beverage if made into preparation for beverage, it would not amount to manufacture. To hold the item to be manufacture, a "legal fiction", may be required and section note is required to be added to the section. They submit that a similar note is found in Section XVI and XVII in Note 6 wherein such a legal fiction has been introduced to deem conversion of an article incomplete or unfinished into complete or finished one as amounting to manufacture. It is stated that there is no such Note in Chapter 21. They state that Note 7 defining "manufacture" was introduced only through Finance Bill 1995 on 16.3.1995 and it came into effect only on the passing of the Finance Bill. Therefore, the Commissioner having proceeded on the presumption of manufacture is not correct in the light of Note 7 introduced by Finance Bill 1995. It is stated that there has to be a different taxable commodity and a mere fact that the item falling under the same tariff will not become dutiable. In this regard, the following rulings are relied: