Sugar Syrup Used in Biscuit Production Not Marketable, Hence Not Excisable: CESTAT [Read Order]
CESTAT held that sugar syrup captively consumed in biscuit production is not marketable and thus not excisable, setting aside duty, interest, and penalty
![Sugar Syrup Used in Biscuit Production Not Marketable, Hence Not Excisable: CESTAT [Read Order]](https://images.taxscan.in/h-upload/2025/09/25/2090902-cestat-sugar-syrup-excise-duty-taxscan.webp "Sugar Syrup Used in Biscuit Production Not Marketable, Hence Not Excisable: CESTAT [Read Order]")
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that sugar syrup produced and consumed captively in the manufacture of biscuits is not marketable and hence not excisable.
Modern Bakers (Madras) Pvt. Ltd., the appellant, manufactures biscuits on job work basis. In the process of production, sugar invert syrup emerged as an intermediate product which was consumed within the factory. Biscuits were exempted from excise duty under Notification No. 3/2007-CE dated 1 March 2007.
The department issued a show cause notice demanding Rs. 4,97,455 as duty, along with interest and penalty, on the ground that sugar syrup was specified in the Central Excise Tariff and was liable to duty when captively consumed. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld it. Aggrieved, the appellant approached the tribunal.
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The appellant’s counsel argued that sugar syrup manufactured during biscuit production was not marketable. They argued that the burden of proving marketability lay on the department, but no test had been conducted to establish shelf life or market demand.
They relied on the Supreme Court ruling in F.G.P. Ltd. v. Union of India and also pointed out that in the appellant’s own earlier case in 2019, the tribunal had already held that sugar syrup was not dutiable in the absence of evidence of marketability.
The revenue counsel countered that sugar syrup was specifically mentioned in the tariff and that the appellant had paid duty on it until May 2008, also taking credit of inputs used for its manufacture. They explained that the demand was correctly raised and confirmed.
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The two-member bench comprising Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) observed that merely because sugar syrup is listed in the tariff does not establish its marketability.
The tribunal observed that excise duty applies only when goods are marketable, and the department had not discharged its burden of proof. They pointed out that earlier payment of duty by the assessee did not mean continued liability, since there can be no estoppel against statute.
The tribunal explained that as no evidence of marketability was produced, sugar syrup could not be treated as excisable goods. The demand, interest, and penalty were set aside, and the appeal was allowed with consequential relief.
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