COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE versus MIS KARNATAKA SOAPS & DETERGENTS LTD.

Citation: [2017] 10 S.C.R. 148 · Decided: 12-10-2017 · Supreme Court of India · Bench: MADAN B. LOKUR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2017) 10 S.C.R. 148 
A 
COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, 
B 
c 
D 
BANGALORE 
v. 
MIS KARNATAKA SOAPS & DETERGENTS LTD. 
(Civil Appeal Nos. 4822-4825 of2015) 
OCTOBER 12, 2017 
[MADAN B. LOKUR, S. ABDUL NAZEER AND 
DEEPAK GUPTA, JJ.] 
Central Excise Tariff Act, 1985 - Chapter Sub-Heading 
3302.90 of First Schedule - Exemption of excise duty on perfiunery 
compound - Odoriferous compound prepared by the respondent 
was applied to agarbathis to complete the process of manufacture 
of agarbathis - The Central Board of Excise and Customs issued a 
circular in 1999 which clarified that the odor(ferous substance, not 
capable of being bought and sold in the market in the normal course 
of trade, was not excisable - Before that, respondent was paying 
excise duty with respect to these odoriferous compounds and paid 
till March 2001 - Consequently, show cause notices issued to 
respondent to pay excise duty for period 2001-2002 to 2006-2007-
E Additional Commissioner of Ce/ltral Excise passed orders holding 
that the Board~· circular was not applicable to the respondents and 
hence was liable to pay excise duty - Orders confirmed by the 
Appellate authority - However, CESTAT set aside the said orders -
Held: Respondent manufactures perfumery compound in its 
F 
Bangalore unit and then tramports it to Mysore where it is finally 
applied to raw agarbathis to complete the manufacturing process 
of agarbathi - In this process of manufacturing, the perfumery 
compound is capable of being sold in the open market - Appellant 
fwd even sold some part of the compound to Mis. 'THC' - Evidently, 
clarification given by the circular is applicable to the product which 
G comes into existence, at intermediate stage in the form of pastel 
dough in a continuous process of manufacture and not to the 
manufacture of odoriferous perfume, which is in liquid form and 
has got shelf life and capable of being stored/transported/sold -
Circular cannot be equated with that of an exemption notification 
but is required to be read within the limited scope of its context in 
H 
148 
CCE & SERVICE TAX, BANGALORE v. M/S KARNATAKA 
149 
SOAPS & DETERGENTS LTD. 
which it was issued - Circular clarifying certain doubts cannot give 
A 
effect of an exemption notification - Therefore, it cannot be said 
that agarbathi compound manufactured by the respondent is covered 
under the aforesaid circular - Central Excise Act, 1944. 
Central Excise Tariff Act, 1985 - Chapter Sub-Heading 
3302. 90 of First Schedule - Whether actual marketing of the 
B 
pe1fumery compound manufactured by the respondent is necessary 
for the levy of excise duty - Held: Marketability is a question of 
fact to be decided on the facts of each case - There can be no 
generalization - The fact that goods are not in fact marketed is of 
no relevance - It is also not necessary that the goods in question c 
should be generally available in the market - The marketability or 
articles does not depend neither upon the number of purchasers 
nor is the market confined to the territorial limits of this country -
In instant case; the perfumery compound prepared by the 
respondent has got a shelf life and is capable of being stored/ 
transported/sold and bought by agarbathi industries - Respondent D 
had even sold certain quantity of the compound to Mis. 'THC' -
Therefore, the compound in question is a excisable product falling 
under Chapter Sub-heading 3302.90. 
Allowing the appeals, the Court 
HELD: 1. The circular in question is issued in the context 
of dispute with regard to dutiability/excisability of mixture, viz. 
aromatic chemicals (perfumes) which is also classifiable as 
odoriferous compound, under Central Excise Tariff and comes 
into existence during the co.urse of manufacture of agarbathis, in 
a continuous process, as an intermediate product. The circular 
clarifies that odoriferous substances are not marketable because 
these products are not sold by manufacturers in order to protect 
their trade secret. The circular by way of illustration also stated 
that the whole process of manufacturing agarbathi, that is 
preparation of the odoriferous compounds and their mixing with 
E 
F 
the dough or agarbathi is normally carried out in a continuous G 
manner since the whole process is continuous. These odoriferous 
substances do not remain with the manufacturer to be sold in the 
market. [Para 8] [154-G-H; 155-A] 
1.2 The Central Excise Chapter Heading No. 3302.90 
covers all ty

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