Tarun Agarwala, J. - (1.) THE appellant is a Public Limited Company, engaged in the manufacture of aerated water falling under subheading No. 2201.20 and 2202.00 of the First Schedule to the Central Excise Tariff Act, 1985. In transpires that on 1 -3 -2000 the Central Excise Officer visited the factory of the appellant and, upon investigation, on the basis of the production format/register maintained by the appellant, found that the maintenance of the production format was not disclosed by the appellant as required under Rule 173G(5) of the Central Excise Rules, 1944 (hereinafter referred to as the "Rules") and that the appellant was draining out the aerated water without entering it first in the R.G. -1 register and were not maintaining any record relating to draining out of the aerated water. The officers also found that the aerated water so drained out was not on account of being unfit for human consumption, but on account of the fact that it was not in conformity with the specifications provided under the Prevention of Food Adulteration Act and Weights and Measures Act, 1976.
(2.) ACCORDINGLY , a demand -cum -show cause notice for the period August, 1995 to May, 2000 was issued alleging that the appellant had disposed of 18958 crates and 5 bottles of manufactured aerated water without accounting it in R.G. 1 register and without payment of the Central Excise Duty and that the appellant had also disposed of 615 creates and 11 bottles of aerated water taken as samples required for laboratory test, without accounting it in the R.G. 1 register and without payment of Central Excise Duty and consequently, directed the appellant to show cause as to why duty amounting to Rs. 6,59,137/ - along with interest and penalty should not be imposed. The appellant denied the demand and contended that they are not liable to pay any duty, inasmuch as, the aerated water was drained out prior to the stage of entering the finished goods in R.G. -1 register as certain bottles were found to be defective on account of contamination, under/over filling of the bottles or it was badly crowned bottles. The appellant submitted that under and over filling of the bottles makes it unusable under the Weights and Measures Act as well as under the Prevention of Food Adulteration Act and, therefore, not marketable and consequently, the same was not required to be entered in R.G. 1 register.
(3.) THE appellant further contended that the aerated water, which was drained out were not marketable and did not qualify as finished goods for the purpose of levying duty. The appellant submitted that the goods which have been manufactured and which are marketable can only be subjected to excise duty and since the bottles, which were under filled or over filled or the bottles had badly crowned caps were not marketable, consequently, no excise duty was payable far less any penalty.;