Water treated for impurities so as to make it potable does not involve transformation of water into a different commercial product known to the market, the litmus test applied for determining whether a product is liable to excise duty or not, held the Customs, Excise and Service tax appellate tribunal South Zonal Bench, Bangalore.

In VBC Industries and Hindustan Coca-Cola Beverages Pvt Ltd. v. Commissioner of Customs & Central Excise (Appeals) Visakhapatnam, the issue revolved around demands of duty on ‘treated water’ brought from the appellants’ factories to their own vending outlets where the water was converted to aerated water through addition of syrup and the finished product was marketed.

The process of filtration, purification, labelling etc to be sure are deemed to be manufacture in terms of the relevant chapter notes but the Tribunal was not swayed by this. Instead, what weighed with it was the fact that the water thus treated was not for sale in the market but for own consumption at various other locations.

The Tribunal quoted with approval another tribunal judgment on similar facts where it had drawn a careful distinction between packaged/mineral water and treated water.

The former involved value addition in the form of minerals being added, thus resulting in a different commercial product known to the market as mineral water whereas there was evidently no market for treated water with water remaining water, post processing.

(The author is a New Delhi-based chartered accountant)

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