ORDER
G.A. Brahma Deva, Member (J)
1. This is an appeal filed by the department against the order-in-original passed by the Collector of Central Excise, Calcutta. The respondents were charged with that they had manufactured and cleared EPDM rubber tubing of unhardened vulcanised rubber falling under erstwhile TI 16A(3) of Central Excise Tariff for captive consumption without payment of duty amounting to Rs. 12,96,255.14 P. for the period March 1985 to February 1986 without observing Central Excise formalities. After considering the reply and on hearing the party, the Collector dropped the demand on the ground that EPDM unhardened vulcanised rubber tubing is a process material used in a continuous set of operation in the manufacture of synthetic hose pipe and the same was not ‘goods’ and hence not excisable.
2. Smt. JMS Sundaram, learned DR while arguing for the Revenue, submitted that erstwhile TI 16A(3) refers to piping and tubing of unhardened vulcanised rubber and since the item in question was found .tubing of unhardened vulcanised rubber, on chemical analysis, the department was justified in classifying the item and charged to duty under the aforesaid tariff item. She said that the respondents have not denied the chemical examiner’s opinion that the product in question was piping and tubing of unhardened vulcanised rubber and since the product is an identifiable product having a distinct character, name and use, the Collector was not just right in dropping the proceedings on the ground that product was not marketed as such. She argued that there is no inherent disability in marketing the product as it was used in captive consumption and it is an excisable product, capable of being bought and sold. The mere fact that it is not actually sold does not make any change in its essential character. Marketability refers to capable of being sold in the market or known in the market as goods as observed by the Supreme Court in the case of Bhor Industries 1989 (40) E.L.T. 280 and further it was held in the case of Plasmac Machine Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise 1991 (51) E.L.T. 161 that “it cannot be said that the Tie bar nuts after their manufacture did not constitute goods; their actual sale in the market was not necessary. It has not been denied that the tie bar nuts are of case metal or alloys manufactured with the aid of power and are acme thread while classifying and charging duty under erstwhile TI 52 of CET.” Similarly, the goods in question are chargeable to duty under erstwhile TI 16A(3) in view of the language of that tariff entry and as can be seen from the process of manufacturing that firstly the respondent manufacture a circular socket containing polyester spun yarn in the wrap and filament yarn in the welf. The EPDM rubber lining is inserted with the help of steam. It is therefore, evidence that EPDM rubber lining and hose pipe are manufactured separately by the distinct process and then bonded into one by a distinct process.
3. Shri Dushyant Dave, learned advocate for the respondents, submitted that there was no demand with reference to the very commodity either before 1985 or after 1986 either on the ground that these were rubber lining and not tubing or they are not goods as such to charge duty. He said that earlier reports also referred to the product in question was made up of unhardened and unvulcanised rubber except the one report relied upon by the department in the impugned order. He said that without going into the controversy whether they were of vulcanised or unvulcanised, the important point to be considered in this case is whether the department has adduced any evidence to show that product in question was capable of being sold in the market. He stated that this issue was well considered in the very respondents case as per their respective orders dated 10-3-1987 and 22-4-1987 by the concerned Collector of Central Excise (Appeals) holding that goods in question were non-excisable following the decisions of the Supreme Court. No appeal was filed by the department against the said orders and in fact the same principle was followed by the Collector in the impugned order. He strongly contended that though the same process has gone into the manufacture of the rubber lining which forms a component part of the synthetic hose pipe, it cannot be considered to be fully manufactured product, as the final product is synthetic hose pipe and EPDM rubber lining is only an intermediate item. Evidently it is not bought and sold in the market but only captively consumed and is not marketed as a different product or known in the market to be such. To become excisable goods, the goods must be bought and sold in the market or is capable of being sold or is known in the market as such. If not, the product is non-excisable. He referred to the observations made by the Supreme Court in the case of Bhor Industries Ltd. (supra) and strongly relied upon the decision of the Supreme Court in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 (SC) in support of his contention.
4. In reply, Smt. Sundaram submitted that order passed by the Collector (Appeals) dated 10-3-1987 refers to rubber lining unvulcanised and unhardened rubber and the other order dated 22-4-1987 dealt with reference to new tariff. However, since these two orders concerned for different periods, there is no bar in raising the demand for the period in question in the facts and circumstances of the case.
5. We have carefully considered the arguments advanced by both the sides and perused the records including the citations. The important point to be considered in this case is that to become excisable goods, whether the goods in question were sold in the market or capable of being sold in the market as goods. It is evident that the goods were used in captive consumption but not sold. Mere fact that it was used in captive consumption itself is not determinative of that article is capable of being sold in the market or known in the market as goods.
“In the case of Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay 1989 (40) E.L.T. 280 (SC), the Supreme Court had to deal with the liability to duty on intermediate products and it was reiterated that liability to excise duty arises only when there is manufacture of goods which is marketable or capable of being marketed. It was held that excise is a duty on goods as specified in the Schedule. The taxable event in the case of excise duties is the manufacture of goods. Under the Act, in order to be goods as specified in the Entry, it was essential that as a result of manufacture goods must come into existence. For articles to be goods, these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale is not necessary. User in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. It is therefore, necessary to find out whether these are goods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Marketability, therefore, is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff Act, 1985. In that case, the Court found that crude PVC films as produced by the appellant were not known in the market and could not be sold in the market and was not capable of being marketable. The Court further reiterated that it was the duty of the revenue ^o adduce evidence or proof that the articles in question were goods. The Tribunal went wrong it was held, in not applying the test of marketability. There being no contrary evidence found by the Tribunal in that case, it was held that in those circumstances, no excise duty should be charged.”
Further, same view has been reiterated by the Supreme Court in the case of Ambalal Sarabhai Enterprises, 1989 (45) E.L.T. 214 (SC) holding that “the duty of excise is on the manufacture of goods and for an article to be goods, these must be known in the market as such or they must be capable of being sold in the market as goods. Actual sale is not necessary. User in the captive consumption is not determinative of that the article is capable of being sold in the market or known in the market as goods. Even transient items of articles can be goods provided that they were known in the market as distinct and separate articles having separate uses, there would till become goods if they were capable of being marketed even during the said short period. Thus the goods with unstable character can be theoretically marketable if there was a market of such transient type of articles but one has to take a practical view on the basis of available evidence.”
6. Following the ratio of the aforesaid decisions and taking into consideration that Revenue has not adduced any evidence to show that it was sold or has been marketed by any one and there was no market enquiry by the Revenue in this regard, we are of the view that item in question was not dutiable under the Act. In the view, we have taken, we uphold the impugned order and accordingly the appeal filed by the department is hereby dismissed.
Sd/-
(G.A. Brahma Deva)
Dated : 10-5-1993 Member (J)
ORDER
S.K. Bhatnagar, Vice President
7. With due respects to Hon'ble Judicial Member, my views and orders in the matter are as follows :
8. I observe that on 10-5-1990, the Bench had occasion to observe as follows :
“The Bench notes with regret that inspite of an order passed in January 1989, the Department has not been able to file a copy of the Calcutta High Court’s order. We note that the Departmental Representative has addressed the Collector but without any results. We also note that according to the respondents’ letter, dated 21-2-1990, Govt. issued a Notification No. 3 (88) N.T. – C.E., dated 28-1-1988 under Section 11C of the Central Excises and Salt Act.
2. We direct that the Department should place a copy of this notification before us on the next date of hearing and it should also be stated whether with the issue of the notification, this appeal would become infructuous.
3. Having given too many chances to the Revenue to file the necessary papers, we feel that no further liberties need be given.
4. We post the appeal itself for hearing on 15th June 1990. It the Department cannot, even by that date, submit the copy of the Calcutta High Court judgment, the Bench may act on the basis of the appellate order passed by the Collector (Appeals) accepting its correctness.
Notice be issued to the respondents by way of forwarding a copy of this order. Copy to SDR also.”
9. However, till the date of hearing of this appeal, neither of the two documents have been filed by the Department.
10. I also observe that the relevant period is March 1985 to February 1986 and, therefore, the chemical test report dated 7-2-1986 is relevant and we are not concerned with the reports pertaining to the preceding period. This report describes the product as the black coloured tubing of synthetic rubber which was “unhardened and vulcanised”. I also observe that the tariffs during the relevant period, i.e. 1985-86 tariff; And the tariff Item 16A “rubber products” included 16A(3) “Piping and tubing of unhardened vulcanised rubber”. In other words, the item in question was specifically covered by a specific entry in the above tariff heading. In the circumstances, it was necessary on the part of the respondents to declare the item as in the Classification List under excisable category, even if they were of a different opinion. They could of course record their protest in the prescribed way, but it was not open to them to clear or use this item without so declaring it and without complying with the procedural provisions of Central Excise or completing the prescribed formalities,
11. It is also significant that the respondents had not challenged the above opinion of the Chemical Examiner.
12. As regards the respondents’ contention that the item was only an intermediate product and was not liable to excise duty, I find again the reliance placed by them and the learned Collector (Appeals) in the cases cited by them namely the Supreme Court judgment in the case of D.C.M. Co. Ltd., AIR 1963 SC 791 and South Bihar Sugar Mills v. U.O.I., AIR 1968 SC 922 does not help their cause because the criteria for considering any item as goods is not in dispute nor it is disputed that marketability is an essential test. Furthermore, it cannot be said in general that no intermediate item could ever be considered excisable or taxable for the simple reason that an item which may be a final manufactured product in one industry may be a raw material or intermediate product for another industry. Moreover, marketability or otherwise is itself a question of fact to be determined in each case. However, once a product or type of product is specifically mentioned in the Tariff as such, the presumption, if any could only be that it was an excisable product unless shown otherwise and the burden in the face of a specific tariff entry would rest on the person who claims it to be non-excisable inspite of such an entry. In the instant case, the Board (CBEC) in its order, dated 9th August, 1989 has cited the Supreme Court judgment in the case of U.O.I v. Delhi Cloth and General Mills, 1977 E.L.T. 0191) and Delhi High Court judgment in the case of Caltex Oil Refinery v. U.O.I., 1979 E.L.T. (J 581) and the Department has relied on these judgments. I consider that in the Supreme Court’s judgment in the case of Union Carbide 1986 (24) E.L.T. 169 (SC) cited by the Collector (Appeals) and the respondents, the emphasis is on the “articles which are capable of being sold to a consumer” and “of the fact that to become goods an article must be something which can ordinarily come to the market to be bought and sold.” An example has also been given by the Board and the appellants about the ammunitions supplied to Defence which are not actually bought or sold but are capable of being sold.
13. At the same time, it is not clear why the Department had in the first instance referred to the Calcutta High Court judgment and the writ petition mentioned in the Note Sheet Order, dated 10-5-1990, but not produced them.
14. It is also not clear why the respondents in their turn having cited Notification No. 3/88 N.T.-CE., dated 28-1-1988 and claiming that it was a 11-C Notification, have not produced the same. It is a matter of regret and concern that these documents which would have straightaway clinched the issue long back have been withheld by the appellants as well as respondents for reasons which are beyond comprehension. Since there is nothing on record to show whether any enquiry has been made by the Department regarding marketability of the item on the one hand, and on the other hand, the appellants had not filed revised Classification List even after starting the production of unhardened vulcanised tubing specifically mentioned under the Tariff Heading 16A(3) and had not discharged the responsibility in this respect, it was incorrect on the part of the Collector to drop the proceedings.
15. This Tribunal has observed in the case of Basant Rubber Factory (Pvt.) Ltd. v. Collector of Central Excise, Bombay reported in 1983 (12) E.L.T. 408 (Tri.) that rubber tubing of unhardened vulcanised rubber was being manufactured by the appellants was being marketed. (However rubber tubing can be of different varieties and meant for different purposes or uses, no generalised inference could be drawn therefrom.) Similarly, the fact that Notification No. 197/67-C.E. granted exemption to certain types of piping and tubing was also noteworthy. These illustrations are, however significant as they do than that rubber tubing fall under Tariff Heading 1683 and those of specified types were even exempted under Notification No. 197/67 during the period these provisions were in force and both the sides could not but be aware of this position. In the Basant Rubber Factory case (supra), the Tribunal has also observed, inter alia, that “the subject rubber tubing is specifically covered by Item 16A(3) CET”. On the same analogy, I consider that the subject rubber tubing in the instant case would also be specifically covered by Item 16A(3) CET subject to the test of marketability being satisfied. I, therefore, set aside the order of the Collector and remand the matter for de novo consideration in the light of above observations and the law.
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(S.K. Bhatnagar)
Date: 3-9-1993 Vice President
DIFFERENCE OF OPINION
16. In view of the difference of opinion between the Hon'ble judicial Member and the Vice President, the matter is submitted to the Hon'ble President for reference to a third Member on the following point:
"Whether in the facts and circumstances of the case, the appeal is required to be rejected in the light of the findings of the Hon'ble Judicial Member or the order is required to be set aside and remanded in the light of observations and findings of the Vice President".
Sd/- Sd/-
(G.A. Brahmadeva) (S.K. Bhatnagar)
Date: 3-9-1993 Member (J) Vice President
ORDER
Harish Chander, President
17. I have perused the order written by Shri S.K. Bhatnagar, Vice President and Shri G.A. Brahma Deva, Member (J). The following point of difference has been referred to me :-
"Whether in the facts and circumstances of the case, the appeal is required to be rejected in the light of the findings of the Hon'ble Judicial Member or the order is required to be set aside and remanded in the light of observations and findings of the Vice President."
The brief facts of the case are that the respondents are manufacturer of EPDM rubber tubing since August, 1984 and used the same in the manufacture of synthetic hose pipe falling under T.I. 22 of the Customs and Central Excise Tariff. The assessee submitted form I. No. 1/84-85, dated 19-1-1985 classifying the said product as EPDM rubber lining unvulcanised and unhardened 55% rubber rest filler and other ingredients and declared it as non-excisable. The samples of the said products were drawn and Test Memo Nos. I/Rubber product/16A/JSTI/84, dated 19-9-1984 and 1/Rubber product/Range-V/85 dated 22-1-1985 and in both the cases the chemical examiner opined that the rubber tubing is of unvulcanised rubber. Subsequently another sample of the product was drawn under Test Memo No. 1/E.P.D.M./Range-V/86, dated 20-1-1986 and sent to the Chemical Examiner, Customs House, Calcutta for test. In the test report of this sample, the chemical examiner opined that it is tubing of unhardened vulcanised rubber. According to this test result of the sample the product is classifiable under erstwhile T.I. – 16A(3) and attracts Central Excise duty at the rate of 25% ad valorem basic and special excise duty @ 5% of the basic duty, during the material time and it was evident that the respondents were manufacturing EPDM rubber tubing of unhardened vulcanised rubber after the date of submission of the Form-I No. 1/84-85 dated 19-1-1985. The Revenue has alleged that the respondents had never intimated the Central Excise Department about such manufacture and did not submit any Form-I in respect of the new product i.e. EPDM rubber tubing unhardened and vulcanised and the same were cleared without payment of duty. Accordingly, Show Cause Notice dated 19th March, 1987 was issued to the respondents asking them to show cause as to why the duty of Rs. 12,96,255.14 on 7,05,445.00 Mtrs. of EPDM Rubber tubing of unhardened vulcanised rubber, falling under erstwhile Item 16A(3) of the Central Excise Tariff manufactured and captively consumed during the period 1-3-1985 to 28-2-1986, should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises & Salt Act, 1944 and why a penalty should not be imposed on them under Rule 9(2) read with Rule 173Q of Central Excise Rules, 1944. A reply to the show cause notice was given and the respondents had replied as under :-
“(i) In the manufacture of hose pipe, in the first instance, a circular jacket is woven on circular looms. The jackets contains polyester spun yarn in the warp and filament yarn in the weft. Inside the jacket an EPDM rubber lining inserted and with the help of steam is bonded with the inner wall of the hose pipe. The whole process of manufacture is in a continuous phase.
(ii) In the test report of the sample under test memo dated 20-1-1986, the Chemical Examiner opined that it is tubing of unhardened vulcanised rubber and hence the product was said to be classifiable under TI 16A(3). Chemical Examiner has simply stated the findings of the product and is not competent to opine about the marketability of the product. In any case, he has not opined that the product is marketable. Merely, reciting the position of the product does not go to show that the product is marketable and is therefore, excisable goods.
(iii) The lining being an unprocessed material used in a continuous chain of operation, whereby synthetic hose pipe is manufactured, therefore, it could not be called an identifiable product. The lining was for use with the synthetic hose pipe only. As without it, the, hose pipe is not complete and cannot perform the function as per the buyer’s specification and rigid testing procedure. The synthetic hose pipe is the product which is known to the market. Reference is made to Section 2(d) of Central Excises & Salt Act, 1944 where the term “goods” have been pronounced in various Supreme Court judgment. Such linings are not goods within the meaning of the said term as defined in the dictionary namely, articles capable of being bought and sold in the market. The Supreme Court after referring words and phrases permanent addition Volume 18 and Webster International Dictionary, in the case reported in (AIR 1968 SC 1922). The Supreme Court observes that as the Act has not defined the words “goods”, the Legislature must be taken to have used the word in its ordinary dictionary meaning, which meaning is that to become goods, it must be something which could ordinarily come to the market to be bought and sold and be known to the market. Applying the said principle, it becomes clear that EPDM lining is neither known to the market nor is an article which is capable of being bought and sold in the market. Thus, EPDM lining is not goods and, therefore, are not excisable goods within the meaning of Section 2(d) of CE & S Act, 1944. They submitted that Section 3 of the Act provides that levy and collection of duty of excise are only on excisable goods defined in Section 2(d). In the instant case, therefore, Section 3 is clearly not attracted and there cannot, therefore, be any question of levy and recovery of duty of excise. There is no power or authority in law to levy and recovery of any duty of excise on EPDM lining.
(iv) The Chemical Report in question itself does not show that a new product with a distinct name, identity or use has emerged. While it is true that some process has gone into the manufacture of the rubber lining which forms a component part of the synthetic hose pipe, it cannot be considered to be fully manufactured product, as the final product is synthetic hose pipe and EPDM rubber lining is only an intermediate item. Evidently, it is not bought and sold in the market, but only captively used and is not marketed as a different product or known in the market to be such. The Supreme Court in the case of Union Carbide 1986 (24) E.L.T. 169 is quite germane in this connection. It is therefore clear it could be brought under the excise net only if the same bought and sold in the market or is capable of being sold or is known in the market as such. If not, the product is non-excisable.
(v) They have submitted the Form-I for intended manufacture of EPDM rubber lining in Jan., ’85, but it was only in March, ’85 they had actually started manufacturing EPDM rubber lining. Hence, they have not suppressed the material fact any time.
(vi) They enclosed to their reply an order-in-appeal No. 81/Cal-H/87 dated 22-4-1987 and order No. 57/Cal-II/87 dated 10-3-1987 upholding their contention that their product is non-excisable.
(vii) They desired personal hearing.”
The adjudicating authority viz. Collector had discharged the Show Cause Notice. The Revenue authorities being not satisfied with the same had filed a review application with the Central Board of Excise and Customs and in turn the same has been treated as an appeal and the following points were referred :-
“(a) whether after taking into consideration the facts stated above the said order of the Collector is legally correct and proper order; and
(b) whether, by an order passed under Section 35C of the Act the Tribunal should set aside the order and confirm the demand in full or pass such other order as it may deem fit.”
18. Smt. J.M.S. Sundaram, the learned SDR has appeared on behalf of the appellant. She reiterated the facts. She pleaded that the product in dispute is EPDM Rubber Tubing. The Revenue has assessed the same under erstwhile T.I. 16A(3). She argued that the respondents have claimed that the goods under dispute are not excisable as they are not marketable. She argued that Member (Judicial) in his order has stated that there is no evidence of marketing and as such, dismiss the Revenue’s appeal whereas Vice-President has remanded the matter. The description is EPDM Rubber tubing unhardened and vulcanised falling under T.I. 16A(3). She referred to the method of manufacture. She referred to Collector’s order dated 12th August, 1988 and Board’s order dated 9th August, 1989 which was received by the Collector on 21st August, 1989 and Revenue has filed a review application on 3rd October, 1989 and hence, within limitation. She laid special reference to ground of appeal No. (d). She pleaded that it is an intermediary product and would be dutiable if it is obtained by one process and is used for being completed into other product by a separate distinct process whereas in this case, the respondents’ own admission is that first they manufacture a circular jacket containing polyster spun yarn in the warp and filament yarn in the weft. The EPDM rubber lining is inserted with the help of steam. It is, therefore, evident that EPDM rubber lining and hose pipe are manufactured separately by two distinct process and then bonded into one by a distinct process. She referred to Chemical Examiner’s report dated 7-2-1986 and pleaded that the period in dispute is March, 1985 to February, 1986. She pleaded that the respondents did not file any classification list. She referred to Member (Judicial)’s order wherein it is stated that Revenue has not adduced any evidence whereas Vice-President has held that the item is exactly the same and the marketing is a question of fact and it cannot be said that the intermediate product is not marketable. In support of her arguments, she referred to a decision in the case of Basant Rubber v. CCE, Bombay, reported in 1983 (12) E.L.T. 408 (Tri.). She referred to HSN 40.09 and international trade nomenclature. She also referred to a decision of the Tribunal in the case of Singareni Collieries Co. Ltd. v. Collector of Central Excise, reported in 1988 (37) E.L.T. 361 (Tribunal) and referred to Para Nos. 10 & 11. She argued that the respondents have not agitated anywhere that it is incapable of being marketed. There is no materials on record what are the other products. She pleaded that the order passed by the Vice-President is correct and the matter should be remanded. She referred to Para Nos. 8,13 & 14 of the order passed by the Vice-President. Shri Jitender Singh, the learned Advocate has appeared on behalf of the respondents. He has relied on the order passed by Member (Judicial). He argued that Member (Judicial) in his order has observed that for becoming the goods excisable, the important point to be considered is whether the goods in question were sold in the market or capable of being sold in the market as goods and it is an admitted fact that the goods were used in captive consumption and not sold, and the mere fact that the item was used in captive consumption itself is not determinative of that article is capable of being sold in the market or known in the market as goods. He has relied on the decision of the Hon’ble Supreme Court in the case of Bhor Industries Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 280 (S.C.). Shri Jitender Singh also relied on a decision of the Andhra Pradesh High Court in the case of BMP Beltings Ltd. v. Union of India, reported in 1990 (50) E.L.T. 10 (A.P.) and laid special emphasis on Para Nos. 2, 8 & 9. He argued that Hon’ble Andhra Pradesh High Court has followed the Supreme Court decision in the case of Bhor Industries Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 280 (S.C.) and Collector of Central Excise v. Ambalal Sarabhai Enterprises, reported in 1989 (43) E.L.T. 214 (S.C.). He argued that since the goods are not marketable and as such, the order passed by Member (Judicial) is correct. Smt. J.M.S. Sundaram, the learned SDR, in reply, argued that the facts of the present case are different from the facts of the High Court judgment cited by the learned advocate and it is not relevant. She referred to HSN 40.09 and clearly stated that the goods are not marketable and as such, the case should be remanded,
19. I have heard both the sides and have gone through the facts and circumstances of the case. Before I proceed on the merits of the case, I would like to observe that the present appeal is a review application to be treated as an appeal by the Tribunal and the Board had passed an order on 9th August, 1989 and had directed the Collector in terms of provision under Section 35E(1) of the Central Excises and Salt Act, 1944 for referring the following points to the Tribunal :-
“(a) whether after taking into consideration the facts stated above the said order of the Collector is legally correct and proper order; and
(b) whether, by an order passed under Section 35C of the Act the Tribunal should set aside the order and confirm the demand in full or pass such other order as it may deem fit.”
The Collector in his grounds of appeal has raised the following issues :-
“(a) The item mentioned in the. erstwhile T.I. 16A(3) is “piping and tubing of unhardened vulcanised rubber”. No exemption is provided for this item in the GET. Therefore, if an item is found, on chemical analysis, to be piping and tubing of unhardened vulcanised rubber then that product is assessable to duty under the aforementioned Tariff Item. In this case Respondent has not challenged Chemical Examiner’s opinion that the product in question was “piping and tubing of unhardened vulcanised rubber”. Therefore, the product is chargeable to duty and there cannot be any dispute on that.
(b) Respondent challenge the duty demand on the sole ground that it is an intermediate product, got manufactured in a continuous process of manufacture of synthetic fibre hose pipe. Their claim is that the product in question is not an identifiable product having a distinct character, name and use. They have also cited various cases. This stand of the party is not correct. All the various decisions quoted by the Respondent and Collector say that products which cannot be identified as “goods” (having no distinct character, name and use are not goods) and hence not excisable. The facts of those cases cited and the facts in this case are entirely different, in view of the following :-
(c) The Supreme Court in Union of India v. Delhi Cloth and General Mills 1977 (1) E.L.T. (J191) has held that duty is on the manufacture of goods and not on sales. Therefore, the fact that a substance produced at an intermediary stage is not put in the market should not make any difference. The EPDM rubber tubing of unhardened vulcanised rubber whether it is marketed or not is marketable item. Duty incidence is on its manufacture and not on its sales.
(d) Delhi High Court in Caltex Oil Refinery v. Union of India (1979 (4) E.L.T. Q 581) has held that intermediary products would be dutiable if it is obtained by one process and is used for being completed into other product by a separate distinct process. In this case, on Respondents own admission, first they manufacture a circular jacket containing polyester spun yarn in the warp and filament yarn in the weft. The EPDM rubber lining is inserted with the help of steam. It is, therefore, evident that EPDM rubber lining and hose pipe are manufactured separately by two distinct process and then bonded into one by a distinct process. Thus the case cited above is squarely applicable in this case.
(e) Gujarat High Court in Maniklal Hiralal Spgn. and Weaving Mills v. Union of India 1978 (2) E.L.T. (J 618) held that intermediary product which is by itself an excisable article is liable to excise duty even though it is not removed from the factory. The rubber tubing or unhardened vulcanised rubber, which is the product in question in this case, is by itself an excisable article and therefore it is leviable to excise duty.
(f) The contentions of the Respondent that rubber tubing is not goods is not correct; it has distinct character, name and use. It is an excisable product capable of being bought or sold. The mere fact that it is not actually sold does not make any change in its essential character. If the contentions of the party that because it is not marketed it is not goods is true then the ammunitions supplied to Defence are not goods since they are not sold. Ammunition, as such can be bought or sold. The fact that the ammunition supplied to the Defence is not bought or sold is of little consequence. It is enough if piping and tubing of unhardened vulcanised rubber is a tariff entry in the erstwhile Central Excise Tariff. To say that it is not goods, simply because the Respondent do not sell them is a travesty of justice.
(g) The Collector should have taken the above facts into consideration and confirmed the demand in full on the Respondent.”
A perusal of the order passed by the Board and grounds of appeal of the review application shows that the Collector has not confined himself to the grounds of the points referred to the Tribunal. Neither the appellant nor the respondents had raised the issue before the Bench. Hon’ble Supreme Court in the case of The Commissioner of Income Tax v. Hardutroy Motilal Chamaria, reported in AIR 1968 Supreme Court 153 in Para No. 5 had held as under :-
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The Collector in the grounds of appeal cannot agitate more than the points to be referred to the Tribunal. Since in the matter before me, as a third member, I am looking only at the point referred to me in view of the decision of the Allahabad High Court in the case of Jan Mohammed v. Commissioner of Income Tax, reported in AIR 1953 Allahabad 119. The learned Member (Judicial)’s finding is based only on the ground that there is no evidence on record as to the non-marketability. The learned SDR Mrs. J.M.S. Sundaram has cited a decision of the Tribunal in the case of Basant Rubber Factory (Pvt.) Ltd. v. Collector of Central Excise, Bombay, reported in 1983 (12) E.L.T. 408 (Tri.). Para No. 5 from the said judgment is reproduced below :-
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The Tribunal in the case of Singareni Collieries Co. Ltd. v. Collector of Central Excise reported in 1988 (37) E.L.T. 361 in Para Nos. 7 to 11 has held as under :-
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Hon'ble Delhi High Court in the case of J.K. Synthetics Ltd. v. Collector of Central Excise, Delhi, reported in 1985 (21) E.L.T. 410 (Del.) in Para No. 80 had held as under :-
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20. In the matter before me, there is no dispute as to the product i.e. EPDM rubber tubing. My learned brother Member (Judicial) Shri G.A. Brahma Deva has relied on the decision of the Hon’ble Supreme Court in the case of Bhor Industries Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 280 (S.C.). There is no dispute in respect of this case but in the matter before me, there is no dispute as to the product in dispute. The only dispute is whether it is marketable or not and no evidence has been placed by the Department. As already observed, as a third Member, I am not to give my independent decision. I have to agree with one of the Members who have referred the matter before me. In view of the above discussion, I agree with the conclusions arrived at by my learned brother Shri S.K. Bhatnagar, Vice-President. The question referred to me is answered accordingly. The matter may be placed before the regular Bench for passing appropriate orders, in accordance with law.
Sd/-
(Harish Chander)
Dated: 5-8-1994. President
FINAL ORDER
21. In view of the majority opinion the order of the Collector is set aside and the matter is remanded for de novo consideration in the light of the observations and findings of the Vice-President and the law.