Pepsico India Holdings Pvt Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)
Material Facts
The appeals were filed by M/s Pepsico India Holdings Pvt. Ltd. and M/s Max Builders against various Orders-in-Appeal confirming central excise duty under Section 11A of the Central Excise Act, 1944, penalty on Pepsico under Rule 25 of the Central Excise Rules, 2002, and penalty on Max Builders under Rule 26.
The Department alleged that Pepsico clandestinely manufactured and cleared potato starch classifiable under Tariff Item 11083100 under the guise of “scrap-veg-refuse” without payment of duty and without declaring the clearances in ER-1 returns.
According to the appellant, during manufacture of potato chips, potatoes are washed after slicing, resulting in potato peels, vegetative matter, refuse and dirt mixing with water. To recycle wastewater and reduce the load on the effluent treatment plant, a centrifuge unit was installed to separate reusable water from the vegetable residue. The separated residue was cleared as “scrap-veg-refuse”.
Procedural History
Following investigation, show cause notices were issued and the adjudicating authority confirmed the duty demands and imposed penalties.
The Commissioner (Appeals) rejected the appeals filed by the appellants.
The appellants challenged those orders before CESTAT Chandigarh.
Legal Issues
- Whether “scrap-veg-refuse” was classifiable as vegetable waste under Chapter Heading 23080000 or as potato starch under Chapter Heading 1108.
- Whether the impugned product was a manufactured product liable to excise duty.
- Whether the product was entitled to exemption under Notification No. 89/1995-CE dated 18.05.1995 and Notification No. 27/2011-CE dated 24.03.2011.
- Whether interest and penalties were sustainable.
Relevant Statutory Provisions
- Section 3(1) of the Central Excise Act, 1944.
- Section 11A of the Central Excise Act, 1944.
- Rule 25 of the Central Excise Rules, 2002.
- Rule 26 of the Central Excise Rules, 2002.
- Notification No. 89/1995-CE dated 18.05.1995.
- Notification No. 27/2011-CE dated 24.03.2011.
Appellants’ Submissions
