CESTAT Hyderabad Holds Peanut Butter Similar to Margarine; Denies Excise Duty Exemption
Pranav B Prem
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that peanut butter is similar to margarine in terms of origin, usage, fat composition and overall characteristics, and therefore cannot claim excise duty exemption. The decision came in an appeal filed by M/s Agro Tech Foods Ltd., which was importing peanut butter, re-packing and re-labelling it, and clearing it on payment of central excise duty.
The Tribunal comprising Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) examined whether peanut butter could be considered a “similar edible preparation” to margarine. This finding was crucial because margarine is excluded from the scope of the exemption under Notification No. 03/2006-CE, and any product similar to margarine would also stand excluded.
The assessee had availed Cenvat credit of ₹1,35,98,208 on the Countervailing Duty (CVD) paid at the time of import during the period February 2009 to March 2012, utilising the same for payment of duty on the re-packed peanut butter and for settlement of Special Additional Duty (SAD). The Department contended that peanut butter was unconditionally exempt under the notification and that the assessee had wrongly taken and utilised credit despite clearing exempted goods. It also alleged irregular availment of ₹4,51,157 in credit on inputs that were either not used in manufacture or written off.
The Adjudicating Authority confirmed the total Cenvat demand of ₹1,35,98,208 and ₹4,51,157 along with interest, and imposed equal penalty under Rule 15 read with Section 11AC. The assessee argued that peanut butter should not be treated as exempt because it was similar to margarine and therefore fell outside the scope of the exemption. They contended that both products were edible preparations with comparable characteristics, including fat content and usage patterns, and relied on judicial precedents explaining that the term “similar” must be construed broadly. They further submitted that the entire situation was revenue-neutral because duty was paid at the time of clearance, and that the Department could not take contradictory positions at the time of import and clearance.
The Tribunal observed that the Commissioner (Appeals) had already held in the assessee’s own case for a subsequent period that peanut butter and margarine were similar edible preparations, and that this view had not been challenged by the Department. Taking note of this unchallenged finding and independently evaluating the properties and end-use of both products, the Bench agreed that peanut butter is similar to margarine. While margarine can be used both as a table spread and for baking, peanut butter is used primarily as a spread in sandwiches. Nevertheless, both products are edible preparations directly fit for human consumption and share essential similarities. Therefore, peanut butter could not be treated as exempt from excise duty.
On this basis, the Tribunal set aside the demand of ₹1,35,98,208 and the corresponding penalty, holding that the larger portion of the demand was unsustainable. However, it upheld the demand of ₹4,51,157 in respect of Cenvat credit wrongly availed on inputs written off or not used, along with the penalty imposed on that component.
Consequently, the appeal was partly allowed, with the main excise demand and penalty being quashed and only the smaller Cenvat credit demand sustained.
Appearance
Counsel for Appellant/ Assessee: Narendra Dave
Counsel for Respondent/ Department: A. Rangadham
Cause Title: M/s Agro Tech Foods Ltd. v. Commissioner of Central Tax Rangareddy - GST
Case No: Excise Appeal No. 27780 of 2013
Coram: Angad Prasad (Judicial Member), A.K. Jyotishi (Technical Member)
