Pepsico India Holding Pre Budget Stock Exempt

The dispute arose after the Union Government introduced Additional Excise Duty (AED) at the rate of 5% on aerated waters through the Finance Act, 2014 with effect from 11.07.2014. PepsiCo India Holding Pvt. Ltd., engaged in manufacture of aerated beverages and packaged drinks, informed the Department that AED would apply only to goods manufactured after 11.07.2014 and not to goods already manufactured and lying in stock as on midnight of 10.07.2014.

The Department rejected the assessee’s position and proceeded on the basis that excise duty becomes payable upon clearance of goods. Since pre-budget stock was cleared after 11.07.2014, the Department issued show cause proceedings demanding AED of approximately Rs. 4.94 lakhs along with interest and penalty.

The adjudicating authority confirmed the demand and the Commissioner (Appeals) upheld the order. Before the Tribunal, the assessee relied heavily upon the Supreme Court’s decision in CCE v. Vazir Sultan Tobacco Co. and pointed out that identical proceedings in its own cases across multiple jurisdictions had already been dropped by departmental authorities and accepted by the Revenue.

The Tribunal accepted the assessee’s contentions and held that the controversy was no longer res integra. Following Vazir Sultan Tobacco Co. and the Allahabad Bench ruling in Varun Beverages Ltd., the Tribunal reiterated that excise duty is a levy on manufacture and not on removal.