ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to the demand of duty in respect of a product which has been described as Lead Oxide and the same was being produced by the appellants for captive consumption.
2. The ld. Consultant for the appellants has pleaded that the appellants are the manufacturers of STAIONARY BATTERIES and they had planned their production for certain capacity and the Lead Oxide they were manufacturing was to suit that particular capacity. He has pleaded that the appellants are the manufacturers of the Batteries and resorted to four stages of operations which were integrated in nature and these operations were done at the following four stages :-
(i) Oxide manufacturing
(ii) Pas Mixing
(iii) Fastings and
(iv) Curing/Hydro setting.
3. He has pleaded that the Lead Oxide as it is could be manufactured by two methods namely Ball Mill process and Barton port process. He has pleaded that the appellants manufactured in their factory Lead Oxide by Barton port process. The process comprised of oxidising the molton lead under controlled conditions and this resulted in forming oxide particles which had lead oxide on the surface and the core of lead itself collected and were processed for obtaining the Lead Oxide. The Lead Oxide so produced was stored in the SILOS. He has pleaded that the type of Lead Oxide which they produced was of a variety which was usable only by them. He, however, has pleaded that since the appellants did not function to their full capacity part of the Lead Oxides was sold to Auto Battery manufacturers and the Lead Oxide which they produced was to render it usable according to the buyers specifications for the manufacture of Lead batteries. He has pleaded compared to the shelf life of lead oxide meant for automotive applications which is about 3 months the shelf life of the Lead Oxide which they manufactured and stored in SILOS is only 3 weeks. He has pleaded that the appellants had got a price list also approved in regard to Lead Oxide but that price list was got approved for the Lead Oxide to be sold to the Automotive battery manufacturers. He has pleaded that this price list was approved along with classification list. He has pleaded necessary enquiries would have been done by the departmental authorities in 1994 and therefore they could be taken to have acquired the knowledge about the manufacture of the Lead Oxide by the appellants. He has pleaded that the Lead Oxide captively consumed and in respect of which duty has been demanded was not the goods in question as the appellants alone produce the same and there is no averment from the Revenue that this Lead Oxide could be sold in the market to anybody. He has pleaded that the Trade Notice was also issued whereby the indication was that the appellants product would be classifiable under the Tariff Heading 38 instead of 28. He has pleaded in this background notwithstanding the variety of the Lead Oxide manufactured by them no duty could be demanded from the appellants. He has pleaded that in any case the demand was hit by bar of limitation as the same has been raised for the period 1-5-1992 to 28-2-1993 and the show cause notice was issued on 3-10-1994. He has pleaded that the departmental authorities came to know about the captive consumption of the appellants’ product through a visit by the Audit authorities on 18-5-1993 and the details were asked from the appellants regarding the manufacture and clearance of Lead Oxide. He has pleaded after the details were furnished the SCN was issued beyond period of 6 months and therefore the same will be hit by bar of limitation.
4. He has further pleaded that while there may not be any records as to the manufacture but when the officers of the department had been visiting the appellants’ factory they would have known about the manufacture of the lead oxide and its captive consumption and therefore enough knowledge can be attributed to the department all along and therefore the demand could not have been raised beyond the period of 6 months.
5. Heard the ld. JDR for the department. He has pleaded that the appellants themselves admitted to the four stages of manufacture in their factory. The first being that of manufacture of Lead. Oxide and he pleaded that appellants themselves admitted the surplus production of Lead Oxide which was sold and therefore question of marketability in this background is beyond doubt.
6. A plea has been taken that the Lead Oxide which is captively consumed was different from the Lead Oxide which was sold by them by reason of orientation of the structural formation. He has pleaded that the same product could have different grades and different varieties. But that is not to say that the generic description of the item would change. He has pleaded that the Lead Oxide is a stable compound. He pleaded that when the appellants themselves say that its shelf life is three weeks, it would clearly show that product in question is capable of being sold in the market and therefore for that reason the question of product being non-marketable would not arise.
7. He has pleaded so far as the change of classification was concerned, the appellants did it on the basis of a trade notice having been issued. He has pleaded whether the classification is under one or the other headings, the question of excisability of the goods would arise and once the goods are found to be excisable the appellants have failed to explain as to why they did not pay any duty. He has pleaded that there was no reason as to why the appellants would not come on record as to the quantum of the Lead Oxide used captively and why they did not pay the duty in regard to the same and why they did not file returns with the department.
8. We have considered the submissions. We observe that the appellants in their factory for the purpose of production of the Stationary Batteries, carried out 4 stage operations. The first stage being Lead Oxide manufacture. The quantum manufactured by them is Lead Oxide which goes to show that this is a chemically well defined item. The appellant’s plea is their production of the Lead Oxide involve a standard process of manufacture and the Lead Oxide for various uses could have different structural orientations. In the appellants’ case the Lead Oxide is manufactured by the Barton pot process.
9. It has been pleaded that the type of the Lead Oxide produced by the appellants is used in the manufacture of batteries which requires a long life i.e. telecommunications and other purposes. But the shelf life as has been indicated before us is about 3 weeks only. The Lead Oxide is produced and stored in SILOS and is manually taken out of the same for use in the next stage of the manufacturing i.e. paste mixing.
10. It is in this back ground therefore the question has to be decided whether the Lead Oxide could taken to be marketable. We observe that the Lead Oxide manufactured by the appellant is for a specific use for a characteristics or structure which answers to the description of the Lead Oxide when a particular crystal structure formation after manufacture is capable of being stored in the SILOS which, according the ld. Consultant, could be kept over with a shelf life of about 3 weeks. That the appellants are not selling the goods, would not be of any consequences so long as it could be shown that the goods have a shelf life. This is capable of a particular end use and is known as distinct commodity technically. The Lead Oxide as set out under HAWLEY’s CONDENSED CHEMICAL DICTIONARY is described as under :-
Lead oxide, red. (red lead; minium; lead tetroxide). CAS: 1314-41-6. Pb3O4.
Properties : Bright red powder, partly soluble in acids, insoluble in water, d reported variously 8.32-9.16, decomposes between 500 and 530C. An oxidizing agent, may react with reducing agents.
Derivation: By carefully heating litharge in a furnace in a current of air.
Grade: Technical, 95%, 97%, 98%.
Hazard: Toxic as dust, TLV (as Pb); 0.15 mg/m3 of air.
Use : Storage batteries, glass, pottery and enameling, varnish, purification of alcohol, packing pipe joints, metal-protective paints, fluxes and, ceramic glazes.
lead oxide, yellow. See litharge.
There is nothing to show that the Lead Oxide is an unstable compound and has a short shelf life. The usage of the Lead Oxide is shown among others for storage batteries. The other type of Lead Oxide which also goes by the name LITHARAGE and its ases as described in the above Chemical Dictionary which is reproduced below :-
Litharge. (lead oxide, yellow; plumbous oxide; lead monoxide). CAS : 1317-36-8. PbO. An oxide of lead made by controlled heating of metallic lead.
Properties : Yellow crystals, d 9.53, mp 888C, insoluble in water, soluble in acids and alkalies, a strong base, commercial grades are yellow to reddish, depending on treatment and purity. See also massicot.
Derivation : By oxidizing metallic lead in air. Various forms of lead and various temperatures from 500-1000C are used.
Grade: CP, fused, powdered.
Hazard: Toxic by ingestion and inhalation. TLV (as Pb): 0.15 mg/m of air.
Use : Storage batteries, ceramic cements and fluxes, pottery and glazes, glass, chromium pigments, oil refining, varnishes, paints, enamels; assay of precious metal ores, manufacture of red lead, cement (with glycerol), acid-resisting compositions, match-head compositions, other lead compounds, rubber accelerator.
11. It is seen that this lead oxide also is used for storage batteries. Again, there is nothing here to say that this in any way unstable compound. In the McGraw-Hill Dictionary of Scientific & Tech. terms the Lead Oxide Red is described under the heading LEAD TETROXIDE & LEAD DIOXIDE which are reproduced as under :-
lead dioxide [INORG CHEM] PbO2 lead tetroxide [INORG CHEM]
Poisonous brown crystals that Pb3O A poisonous, bright-red
decompose when heated; insoluble in powder, soluble in excess
water and alcohol, soluble in glacial glacial acetic acid and dilute
acetic acid; used as an oxidizing agent, in hydrochloric acid; used in
electrodes, batteries, matches, and medicine, in cement for special
explosives, as a textile mordant, in dye applications, in manufacture of
manufacture, and as an analytical colorless glass, and in ship
reagent. Also known as anhydrous plum- paint. Also known as lead or-
bic acid; brown lead oxide; lead peroxide. thoplumbate; lead oxide red;
red lead.
12. There is no indication anywhere to say other than that except on heating it decomposes that it is unstable in any way. Going by the above, we are of the view that the product as manufactured by the appellants is a stable compound and therefore it could be held to be the goods irrespective of the fact whether the appellants sold the goods in the market or used themselves and it has a distinct character and use and just because the use is for the captive consumption of the goods would not make any difference so far as the Excise Levy is concerned.
13. As to the limitation, we observe that the appellants themselves had filed the price list in 1991 which price list was filed much prior to the relevant period for the demand and they had filed the price list in anticipation of their being able to sell the goods which according to the ld. Consultant did not materialise. What emerges from this is that the appellants had a fair idea that the goods could be sold and therefore they came forward to file the price list. Even if the product that they were to manufacture was slightly different from what that were used, in our view, would not make any difference as both the products continue to be considered as Lead Oxide for their end use in the batteries although for two kinds of batteries. It is not understandable as to why the appellants did not come on record as to the clearances of the Lead Oxide for captive consumption and why they did not pay the duty in regard to the same. If they had any doubt, they should have sought clarification from the department, more so, when they had earlier filed price list with the department in respect of Lead Oxide manufactured by them. The appellants’ plea that they were under the impression that these goods were non-marketable does not explain their conduct. The appellants had taken out a licence for the manufacture of excisable goods and in the price list or classification list in the column for “other non-excisable goods”, they should have indicated as to the variety of the Lead Oxide which they thought was not excisable. There is no reason why that they have also not done so. The only conclusion that can be drawn is that the appellants held back the information in regard to production and clearances of the Lead Oxide for captive consumption with an intention to evade payment of duty.
14. We, in the circumstances, hold that the duty has been rightly demanded from the appellants and we uphold the ld. lower authority’s order in this regard.
15. We observe that the appellants have also held to be liable to penalty. In view of facts and circumstances and taking into consideration the pleas made by the appellants, we observe the ends of justice will be met if the penalty imposed on the appellants is reduced to Rs. 1,00,000/- (Rupees One Lac only). Ordered accordingly.
16. The appeal is decided in the above terms.