Consumer can mean three things. It can mean the final consumer who eats or drinks or uses the product. It can also mean the captive consumer like a textile processing mill using yarn made by itself. It can also mean the trader who bought it from the manufacturer and sold it to another trader or final consumer. In Central Excise does the word consumer encompass all the three?
We have launched ourselves into this nicety because of some recent judicial interpretations of the expression consumer. The concept of consumer in Central Excise had not come under judicial scrutiny so far until recently in 2011, when two judgements, one by the Tribunal [Nestle India vs. CCE 2011(270)ELT575(Tri.-Delhi)] and the other by the Supreme Court [Air Liquide North India vs. CCE 2011(271)ELT321(SC)] brought the issue to the fore. In the first case it began with a reference to the Note 11 of Chapter 29 (organic chemicals) of Central Excise Tariff. The Note is reproduced below:
11. In relation to products of this Chapter [labelling or relabelling of containers or repacking] from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'manufacture'.
The expression 'consumer' occurs in this Note. The manufacturer here was buying vitamins like A, D, E, etc from the market on payment of excise duty and mixing them in a pre-determined ratio with the help of electro mechanical device to make what is called inter-mixture of vitamins. This was in turn used to make the final product, infant food. The manufacturer wanted to interpret the expression consumer as the final consumer who drink the infant food. According to him captive consumption is not final consumption by the retail purchaser. Revenue argued (and the Tribunal agreed to this) that in the case of a captive consumption like this, the factory itself which is manufacturing the final product namely, baby food is to be taken as a consumer. The Tribunal held that the word consumer in the said Note 11 of Chapter 29 of the Central Excise Tariff Act 1985 means any consumer including an industrial consumer and the said word is not related exclusively to retail consumer. Thus the Tribunal has held that both the captive consumer (the factory) and the retail or final consumer are consumers.
The judgement of the Supreme Court mentioned above related to helium gas purchased at lower price, subjected to certain treatments, attached with certificate of quality and sold at substantially higher price to final consumers. The issue was about interpreting the expression the adoption of any other treatment to render the product marketable to the consumer occurring in Note 10 of Chapter 28. The manufacturer claimed that the helium he purchased was already marketable to the consumer and therefore by selective certification, there could not be any question of rendering the product marketable to the consumer once again. The Supreme Court said that the uncertified helium was only marketable to the trader(cum manufacturer) who now by selective certification and by giving treatment has rendered it marketable to the final consumer. The Court held: Therefore, the phrase marketable to the consumer would naturally mean the marketability of the product to the person who purchases the product for his own consumption. Thus the conclusion of the Supreme Court is that the expression marketable to the trader (cum manufacturer) cannot be taken as marketable to the consumer. In other words the Supreme Court does not treat the trader (cum manufacturer) as consumer at all. This goes directly against the conclusion of the Tribunal discussed above where even a captive consumer (manufacturing factory) is a consumer. I would agree rather with the conclusion of the Tribunal that even a captive consumer is also a consumer. The conclusion is that the concept of consumer is now as much complicated as before the judgements.
According to me all the three namely the final retail consumer, the captive consumer (factory trader cum manufacturer) and the trader (trader simpliciter) are all consumers. Not to call any one of them as not consumer will severely distort the structure of exciseabiltiy in the Central Excise Law.