In a decision that will impact major beverage companies across the country, the Supreme Court has set aside the levy of excise duty on purified water supplied by Hindustan Coca-cola Beverages Pvt Ltd (HCCBL) to its vendors for use in the vending machines which dispense aerated drinks.
The decision will impact beverage companies who supply water in order to ensure that the taste and quality of the beverages remain the same throughout the country. Also, the firms will not have to bear an increased cost of inputs and the existing cost of beverages will be maintained.
While dismissing the department?s plea, a bench headed by Justice MK Sharma upheld the Central Excise and Service Tax Appellate Tribunal?s order that held that treated and purified municipal or borewell water for supply to retail vendors for producing aerated drinks was not exigible to excise duty, a stand opposed by the department.
The apex court accepted HCCL counsel Tarun Gulati?s stand that there is no manufacture as water remains water even after purification. He argued that the company was not making water marketable and mere purification does not amount to manufacture.
Challenging the Appellate Tribunal judgment that dismissed its plea, the department said that according to Chapter notes to Chapter 22 of the Central Excise Tariff Act, any exhaustive process like adding bleach solution to kill micro organisms, treatments with lime, soda ash, bleaching powder etc and filtration through sand and carbon purifier, etc, carried out on municipal or borewell water amounts to manufacture.
The department had stated that ?even labelling or relabelling of the specified goods rendering them marketable to the consumer amounts to manufacture and thus liable to duty.?
It said that HCCBL supplied treated water through canisters embossed with monogram ?coco cola? or stainless steel tankers without any marking on them to few retail outlets for producing aerated beverages dispensed through vending machines.
The present case was of a recurring nature and related to five show cause notices issued by the revenue raising an aggregate duty demand of R54.66 lakh between December 1997 and March 2006. The department had also imposed penalty of R5 lakh each on the manager (finance) and manger (indirect taxes).
While the Commissioner, on appeal by the company, held that the treated water is not excisable as the process of purification involved in the treated water had certainly not resulted in emergence of any new product and the end product continued to retain its original character.
The tribunal had upheld the Commissioner?s view by saying that ?the treated water cleared by the respondents (HCCBL) are not marketable as such? the name coco cola is only a house mark of the company.?