Captively consumed sugar syrup containing 80% sugar is marketable and excisable.

The appellant manufactured Parle-brand biscuits classifiable under CTH 1905 9020 and captively used sugar syrup as an intermediate product in the manufacture of biscuits.

The biscuits were exempt from duty under Notification No. 3/2006-CE; consequently, the Department alleged that the sugar syrup was not eligible for exemption when captively consumed in the manufacture of exempt biscuits.

The sugar syrup was prepared by mixing 800 grams of sugar with 200 ml of water and a small quantity of citric acid, heating the mixture to 118°C, and cooling it for use in the biscuits.

A show-cause notice dated 29 November 2011 demanded Central Excise duty of Rs. 49,68,469, with interest and penalty.

The Additional Commissioner confirmed the demand for the relevant periods, invoked the extended limitation period, and imposed an equivalent penalty; the Commissioner (Appeals) upheld that order.

Before the Tribunal, the appellant contended that the syrup was not marketable or excisable, challenged the extended limitation and penalty, and alternatively sought Cenvat credit on sugar used in manufacturing the syrup.

Whether sugar syrup containing approximately 80% sugar, manufactured captively as an intermediate product and used in the manufacture of exempt biscuits, was marketable and therefore excisable and liable to Central Excise duty.

Whether the extended period of limitation and penalty under Section 11AC of the Central Excise Act, 1944 were legally sustainable.

Whether the appellant was entitled to Cenvat credit on the sugar used in manufacturing the sugar syrup, subject to verification of duty-paying documents.

Section 2(d) of the Central Excise Act, 1944 defines “excisable goods” as goods specified in the tariff as subject to excise duty and, after the 2008 explanation, includes an article, material, or substance capable of being bought and sold for consideration, which is deemed marketable.

Excisability requires both manufacture and marketability; actual sale or general availability in the market is unnecessary if the product is capable of being bought and sold, as held in CCE v. Karnataka Soaps & Detergents Ltd., 2017 (355) E.L.T. 161 (S.C.), and Escorts Ltd. v. CCE, 2015 (319) E.L.T. 406 (S.C.).

The Tribunal also relied on precedents holding that sugar syrup containing more than 65% sugar by weight is generally stable, marketable, and excisable, including Mysore Sugar Co. Ltd. v. Commissioner of Central Excise, 2008 (231) E.L.T. 624 (Tri.-Bang.), and CCE, Belgaum v. Vijaynagar Food Products Pvt. Ltd., 2024 (12) TMI 1296.

Under Collector of Central Excise v. Alnoori Tobacco Products, 2004 (170) E.L.T. 135 (S.C.), precedents must be applied with regard to the material facts of each case and cannot be followed mechanically.

The Tribunal further applied the provisions concerning limitation, interest, and penalty under Sections 11A, 11AA/11AB, and 11AC of the Central Excise Act, 1944, and the Cenvat Credit Rules in relation to credit on eligible inputs.

The appellant’s own written reply established that the syrup was made by using 800 grams of sugar per kilogram of syrup, yielding an 80% sugar concentration.

Applying the principle that actual sale is not necessary, the Tribunal held that such a high-concentration syrup was stable and capable of being bought and sold.

The appellant’s reliance on decisions concerning non-marketable sugar syrup was rejected because those cases involved materially different facts, including the absence of testing or proof of the requisite sugar/fructose content.

The Tribunal therefore treated the appellant’s syrup as a manufactured and marketable product, notwithstanding its captive use and production according to Parle’s specifications.

The plea against extended limitation was also rejected: although the appellant had written to the Department in 2009, its ER-1 returns disclosed only the duty-free clearance of biscuits and did not disclose the production and captive use of sugar syrup, preventing departmental verification of the alleged non-payment.

However, the Tribunal accepted the alternative claim for Cenvat credit in principle and directed the adjudicating authority to verify the duty-paying invoices and allow credit on the sugar actually used in producing the syrup.

The demand, interest, invocation of the extended limitation period, and penalty under Section 11AC were upheld.

The appeal was partly allowed by way of remand solely for verification and grant of eligible Cenvat credit on the sugar used in manufacturing the syrup, subject to production of valid duty-paying documents; the adjudicating authority was directed to complete this exercise within four months.