Contaminated bottles are not excisable goods

In a recent high court case the appellant was engaged in the manufacture of aerated water. During the manufacturing process, some of the aerated water was disposed of before the finished goods were entered in the RG1 Excise Register, as they were found to be defective due to contamination, under/over filling and badly crowned caps.

The Central Excise Department claimed that duty was owed on the defective bottles, as they amounted to finished goods, which should be entered in the Excise Register.

The high court held that products which are manufactured but ultimately unmarketable do not incur excise duty. The court thus held that the bottles that did not pass the marketability test due to their defective nature need not be entered in the Excise Register and did not incur excise duty.(1)

Sale of cement is an institutional sale

The Tax Tribunal recently considered whether the sale of goods to builders/developers qualifies as an institutional sale.

As per the Legal Metrology (Packaged Commodity) Rules 2011, the requirement to set a maximum retail price does not apply to sales made to 'institutional consumers', defined as all service industry consumer (eg, transport services, airways, railways, hotels, hospitals or any other service institutions) that buy packaged commodities directly from the manufacturer for use in the applicable service industry.

The tribunal held that since the type of consumer specified in the definition (eg, airways, hotels and hospitals) forms no particular class, the principle of eiusdem generis ('of the same kind') does not apply to the expression 'any other service institution'. Thus, all service institutions qualify as institutional consumers. Therefore, the tribunal held that sale of cement to builders/developers which provide construction services is an institutional sale.(2)

For further information on this topic please contact Ranjeet Mahtani or Gopal Mundhra at Economic Laws Practice by telephone (+91 22 6636 7000), fax (+91 22 6636 7172) or email (ranjeetmahtani@elp-in.com or gopalmundhra@elp-in.com).

Endnotes

(1) M/s Amrit Bottlers Private Ltd v CCE, 2014, TIOL-1436-HC-ALL-CX.

(2) M/s Heidelberg Cement (India) Ltd v CCE, 2014, TIOL-1433-CESTAT-MUM.

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