ORDER
V.K. Agrawal, Member (T)
1. These are two appeals – one filed by M/s. Gujarat Narmada Valley Fertilizers Co. Ltd. against the Order No.10/93, dated 23-3-1993 passed by Collector, Central Excise, Vadodara and second Appeal has been filed by Revenue against Order-in-Appeal No. 153/BRD/94, dated 15-9-1994 passed by the Collector (Appeals). As the issue involved in both the appeals is the excisabllity of products coming into existence at intermediary stage of production of final product, these are being disposed of by one common order.
2.1 The Appellant Company manufacture Fertilizer/Ammonia. They also manufacture ‘Butachlor’ falling under sub-heading 3808.10 of the Schedule to the Central Excise Tariff Act. During the manufacturing process of ‘Butachlor’, the following three intermediate product come into existence.
(i) Chloro Acetyl Chloride
(ii) 2, 6 Diethyle Chloro Acetanilide (DECA)
(iii) Chloro Methyl Butyl Ether (CMBE).
2.2. The Collector, Central Excise, in the impugned order dated 23-3-1993, confirmed the demand of duty amounting to Rs. 82,07,861/- in respect of products ‘DECA’ and ‘CMBE’ removed during the period from September, 1987 to June, 1989, imposed penalty of Rs. 30 lakhs and confiscated land, building, plant etc. with an option to redeem the said on payment of fine Rs. 5 lakhs, holding that –
(i) In view of Note l(a) to Chapter 29, the impugned goods are covered by Chapter 29 even if they are crude or contain impurities.
(ii) They had submitted ex-factory cost of the impugned products which proved that these products were independent and identifiable products.
(iii) It is evident from the statement dated 4-4-1991 of Shri Patadia that the intermediate products DECA and CMBE are not only isolated but they are also stored in the manner considered suitable for their intended use in the factory and it is possible to withdraw them as samples were drawn.
(iv) The Chemical Examiner has opined that DECA is an Organic Chemical, derivative of Carboxy amide compound; that CMBE is an Organic Chemical, a halogenated derivative of Ether.
(v) The Flow Chart of manufacturing process distinctly show preparation vessels and isolation vessel for DECA, and preparation vessel and measuring vessel for CMBE.
(vi) As per letter dated 24-3-1990 of M/s. Gharda Chemicals, the intermediate products could be used in the manufacture of Alachlor; that these products have potential marketability not only because any other factory adopting a similar manufaturing process can purchase them but also because a manufacturer of Alachlor in India or abroad can buy the impugned product. He also relied upon the decision in Kores India Ltd. v. C.C.E. – 1987 (27) E.L.T. 292 (T), Hindustan Ferodo Ltd. v. C.C.E. – 1987 (30) E.L.T. 502 (T) and Geep Industrial Syndicate v. C.C.E. – 1987 (31) E.L.T. 1040 (T).
(vii) Extended period of limitation is invokable as no classfication list was filed nor a licence was obtained and suppression is merely another word for such non declaration. Reliance was placed on British India Corporation v. C.C.E. -1986 (25) E.L.T. 727 (T) and C.C.E. v. A.C.C. Ltd. – 1989 (44) E.L.T. 271 (T).
3. In Appeal No. E/45/95-C, the Collector (Appeals) in the impugned order dated 15-9-1994, set aside the Adjudication order, confirming the de-nand of duty as nothing was mentioned in the order on the basis of which the mpugned goods could be treated as marketable; that Note l(a) to Chapter 29 ioes not mean that compounds containing impurities, if are not marketable, would be chargeable to duty. Reliance was placed on decision in Bhor Indus-tries Ltd. v. C.C.E. -1989 (40) E.L.T. 280 (S.C.) wherein it has been held that the riterion of marketability has to be satisfied for treating any goods liable to excise duty. Hence, the appeal by the Revenue.
4. Shri Willingdon Christian, ld. Advocate submitted on behalf of the rompany, that the impugned products are incomplete and are in process ma-:erials; in crude form, unstable and are not marketable; that DECA is always in [he form of slurry, in the presence of Ethylene dichloride as solvent; that DECA is stable in the range of 60 – 80° C temperature; that CMBE is kept between -5 to + 15° temperature; that CMBE is very hazardous and in normal environment, it gets evaporated and also decomposed into Butanol, Methyl ether and HCL Gas; that Methyl Ether and HCL create suffocation for human beings. He, further, submitted that their manufacturing system is such that the impugned goods are continuously generated and being used further while this manufacturing process is going on, that they do not have means to segregate and store these goods and to sell them after final manufacturing stage; that Shri A.T. Patadia, Senior Manager, in his statement dated 4-4-1991 has clearly stated these facts, that he had further deposed that sample of DECA is drawn under vacuum. The ld. Counsel also relied upon the affidavit of Shri Amarnath Aggarwal, Executive Director (Operation) in which he has mentioned that the company has adopted the technology supplied by M/s. Gharda Chemicals; that this technology has not been adopted by any other person; that present manufacturing system is such that at no stage or in no manner these two in process materials can be taken out or removed or stored separately. He has mentioned in his affidavit that CMBE is in crude form, unstable, impure, hazardous and not marketable; that DECA is also not useable or used by any body, that DECA is not a Carboxy amide function compound and is also not halogenated derivative of Carboxy amide compound because DECA is a combination of Chloroacetyl Chloride and 2, 6, Di-ethyelaniline at 70°C temperature. He also referred to the letter dated 24-3-1990 from M/s. Gharda Chemicals in which they confirmed that there is no factory in India or Overseas which has commercialised the Technology supplied by them and inasmuch as none of the intermediaries are marketable.
5. The ld. Counsel emphasized that for deciding durability, the essential criteria is marketability and it continues to be so irrespective of Note l(a) to Chapter 29 as the test of marketability applies even to products mentioned in Tariff as held in Bhor Industries case, supra; that it is the Revenue which was to discharge the burden to prove that the commodity is marketable as held in the case of Hindustan Sanitaryware Industries v. C.C.E. – 1998 (27) RLT 756 (T), Nirlon Synthetic Fibres and Chemicals Ltd. v. C.C.E. – 1996 (86) E.L.T. 457 (S.C.) and U.O.I, v. Garware Nylon Ltd. -1996 (87) E.L.T. 12 (S.C.). The ld. Counsel further, mentioned that Chartered Accountant’s certificate cannot establish marketability; mat moreover the calculations were made purely on theoretical basis on account of pressure from the Department. He also contended that test report of Chemical Examiner does not reflect on marketability nor about stability nor about crude form or otherwise. Regarding the time gap between the time of drawl of sample and the date of test report, Shri Patadia has clarified in his statement dated 4-4-1991 that the sample of DECA may be in neutralised state and of communication of test report cannot be equated with date of carrying out the examination that neither flow chart nor letter from M/s. Gharda Chemicals say anywhere that the products are marketable; that the Collector talks about potential marketability based on contingencies conceived by him like a manufacturer adopting a similar manufacturing procedure. He also relied upon the decision in U.O.I. v. Delhi Cloth and General Mills Co. Ltd. -1997 (92) E.L.T. 315 (S.C.) in which Calcium Carbide was held to be non marketable as it was not of a purity that rendered it marketable and also it was not packed in such a way as to make it marketable.
6. Finally he submitted that demand is time barred in Appeal No. E/4411/93-C as notice was issued on 24-9-1991 for demanding duty from September, 1987 to June, 1989; that they have all along harboured a bonafide belief and strong contention that the disputed products were not excisable; that there is not a whisper of allegation or evidence to refute the fact about holding of bona fide contention; that at the time of applying for L-4 Licence, they had given entire process of manufacture of Butachlor; that this is evident from the Range Superintendent’s letter dated 19-10-1987; that from the various letters and correspondence exchanged from 19-10-1987 onwords, it is absolutely established that the Range Officer had complete details about the disputed products as well as the manufacturing process; that simply because they did not carry out the instruction contained in letter dated 19-10-1987, it would not amount to suppression as suppression of facts arises when one party conceals or suppresses the facts which are not known to the other party. He relied upon the following decisions:-
1. C.C.E., v. Chemphor Drugs & Liniments – 1989 (40) E.L.T. 276 (S.C.)
2. Padmini Products v. C.C.E. – 1989 (43) E.L.T. 195 (S.C.)
3. Hi-life Tapes (P) Ltd. v. C.C.E. – 1990 (46) E.L.T. 430 (T)
4. South India Viscos Ltd. v. C.C.E. – 1995 (78) E.L.T. 737
5. Thermax Ltd. v. C.C.E. – 1996 (13) RLT 645 (T)
7. Countering the arguments, Shri H.K. Jain, ld. SDR, submitted, on behalf of the Revenue, that the contention of the ld. Advocate that no separate identifiable marketable goods come into existence is contrary to the statement of Shri Patadia who has deposed that in DECA isolation vessel, the DECA slurry was neutralised at 70° C; the quantity of CMBE is taken out on the basis of the quantity and purity of DECA, from the vessel; that hence the purity and the quantity of both the products are being constantly’observed; that Chartered Accountant has certified the cost which proves the verification of quantity and also that the value is determinable, that he has not given the valuation on theoretical basis as claimed by them. The ld. SDR submitted that requirement of a particular temperature for keeping the product does not make it unstable as there are many products such as Ice cream which are marketed in specific temperature; that the impugned products are stable at the temperature given by them; the test report given by the Chemical Examiner establishes that the products in question are clearly identifiable organic compound and the quantity did not deteriorate during the period which proves adequate shelf-life; that once the shelf life is proved, it logically follows that the product is capable of being stored. The Supreme Court in South Bihar Sugar Mills Ltd. v. U.O.I. – 1978 (2) E.L.T. (J 336) (S.C.) held that “a product if not actually sold will not make any difference in determining the excisability of the product.” Further letter dated 24-3-1990 of Gharda Chemicals mentions that products in question can be used in the manufacture of Alachlor and as held by Tribunal in Indian Oil Corporation v. C.C.E. – 1984 (15) E.L.T. 456 (T) “goods do not cease to be marketable simply because they are not Marketed but are used by the Appellants themselves.” The ld. SDR submitted that product is thus marketable though it is not sold; that actual marketing is not necessary as held by the Tribunal in Associated Cement Companies Ltd. v. C.C.E. – 1996 (88) E.L.T. 149 (T). Reliance was also placed on the decision in A.P. State Electricity Board v. C.C.E. – 1994 (70) E.L.T. 3 (S.C.) wherein it was held by the Apex Court. “The fact that the goods are not in fact marketed is of no relevance. So long as the goods are marketable, they are goods for the purpose of Section 3 …. The marketability of article does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country.” He also submitted that removal of goods within the factory for captive consumption amounts to manufacture as held by the Apex Court in C.C.E. v. Kohinoor Mills – 1995 (77) E.L.T. 42 (S.C).
8. Regarding demand being time barred, the . S.D.R. contended that as far as appeal filed by the Revenue is concerned, all demands are within the time limit specified in Section 11-A of the Central Excise Act; that the facts and evidence do not indicate that the company had any bonafide belief regarding non excisability of the impugned products that had it been so, they would not have approached the Government for granting an exemption; that they had also not declared these products to the Department. He relied upon the decision in V.S.T. Tiller Tractors v. C.C.E. – 1987 (31) E.L.T. 5 (T), British India Corporation v. C.C.E. – 1986 (25) E.L.T. 727 (T) and C.C.E, v. A.C.C. Ltd. – 1989 (44) E.L.T. 271 (T).
9. In reply, the ld. Advocate referred to the decision in C.C.E., v. Bomin (P) Ltd. – 1996 (16) RLT 852 (T) that the Revenue should first advert to the plea upheld that the electric motor used as an integral part of power driven pump is not marketable; that even in respect of goods captively consumed, the marketability thereof has necessarily to be established. He also referred to the Judgement in the case of Indian Cable Company Ltd. v. C.C.E. – 1994 (4) RLT 437 (SC), wherein it was held that “Marketability” is a decisive test for dutiability.
10. We have considered the submissions of both the sides. The manufacturing company has emphasized vehemently that marketability of the product is to be proved before it can be subjected to levy of Central Excise Duty. According to them the products in question are unstable, crude, unfinished and unmarketable. They have not brought any technical data or chemical report in support of their contention that the products are unstable or are in unfinished form. On. the other hand Department has brought on record the test report of the Chemical Examiner according to which both the products are organic chemical. The manufacturer had not challenged the test report by requesting the Department for retest by the Chief Chemist. Moreover, no chemical report of their own Laboratory has been placed on record. Collector was right in drawing the conclusion in facts, that the samples were drawn, sent to the Chemical Examiner and these were tested, go to show that the products in question are not unstable and they have adequate shelf life. The fact that the products are stable in specified temperature will not make them unstable as many products are stored and transported in controlled atmosphere. Once the product is stable and has shelf-life, it can be brought to the market for being bought and sold. The fact that it contains impurities will not be material as per Note l(a) to Chapter 29 the Organic Compound falls in the chapter even if it contains impurity. The ld. Advocate has relied upon the decision in the case of Indian Cable Company Ltd. (supra). The Apex Court held that ‘marketability’ is a decisive test for dutiability. It only means “Saleable”, or “suitable for sale”. It need not be in fact “marketed”. The article would be, capable of being sold or being sold, to consumers in the markets as it is without anything more. In this case the entire quantity is captively consumed and that is why the product is not being actually sold. The second reason for it being not actually sold is that this particular technology has only been adopted by the Company. If similar technique is adopted by any other manufacturer the product in question can be bought and sold. This is apparent from the letter dated 24-3-1990 of M/s. Ghardia Chemicals P. Ltd., the Company which had supplied the technology to the party involved in those appeals. Nowhere M/s. Gharda Chemicals says in the letter that the impugned products are not marketable or cannot be bought and sold as they are unstable or do not have shelf life. Their letter reads as follows :
“To the best of our knowledge and information, there is no factory in India or overseas which has commercialised the route of manufacture adopted in the technology supplied by M/s. Ghardia Chemicals Ltd. to M/s. GNFC for the manufacture of Butalchlor. Inasmuch none of the intermediates are marketable in India or Overseas.”
10. Actual sale is thus not necessary for the purpose of marketability. M/s. Ghardia Chemical has mentioned the products as not marketable as no one else has adopted the technology. The Revenue has rightly relied on the Judgement in I.O.C. case wherein the Supreme Court held that “They overlook the fact that the goods were not marketable simply because they did not market them but used it themselves.. This is not the same thing as not being marketable. The fact that it was marketable is proved by its utility for the purpose to which it was put.” We also observe from their letter dated 4-1-1990 addressed to the Superintendent that the production figures were not submitted by them on theoritical basis only as actual figures for some months were also given. In view of this, it cannot be said that the impugned products are not marketable. Accordingly the appeal filed by the Revenue is allowed.
11. We, however, agree with the ld. Advocate that the extended period of limitation is not invokable in the present case as they have given the manufacturing process of Butachlor alongwith Application for licence (AL-4) dated 21-2-1987 in which names of all the intermediary products were clearly mentioned at Step I, Step II and Step III. This goes to show that the manufacturer has not suppressed any fact from the Department. Further, the Range Superintendent has himself observed in his letter dated 19-10-1987 that during the process intermediate excisable goods come into existence which is excisable and he requested them to observe the Central Excise formalities and discharge the duty liability. If they had not followed the formalities and paid the duty, adequate provisions exist in Central Excise Rules to order provisional assessment and/or take other actions.Accordingly, the demand is hit by time limit of six months as specified in Central Excise Act.
12. Accordingly the appeal filed by Revenue is allowed and appeal filed by M/s. Gujarat Narmada Valley Fertiliser Co. Ltd. is allowed on time limit.