ORDER
P.G. Chacko, Member (J)
1. In this appeal, M/s. Metro? Tyres Ltd. are aggrieved by the order of the Commissioner of Central Excise confirming against them a demand of duty of Rs. 3,37,808/- under Rule 9(2) read with Section 11A and imposing on them a penalty of Rs. 3,37,808/- under Rule 173Q. The impugned order was in adjudication of show cause notice (SCN) dated 30-3-88. The period of dispute was 1-3-1986 to 11-11-1987. The extended period of limitation under the proviso to Section 11A(1) was invoked for demanding the duty.
2. The appellants were engaged in the manufacture of tyres of cycles, motor vehicles, animal-driven vehicles (ADVs) and hand carts falling under Chapter 40 of the Schedule to the Central Excise Tariff Act, 1985. The ADV tyres and hand cart tyres, both falling under CSH 4011.10, were chargeable to nil rate of duty. The appellants manufactured bead wire rings (in short, BWRs) and used the same captively in the manufacture of the tyres. In the SCN, the department held the BWRs to be classifiable under CSH 7308.90 and alleged, inter alia, that duty of excise was chargeable on those BWRs which had been captively used in the manufacture of the fully exempted products viz. ADV tyres and hand cart tyres during the aforesaid period. The SCN invoked the extended period of limitation to demand such duty, alleging that the noticee had suppressed the factum of manufacture and removal of the BWRs, before the department. The noticee denied all the allegations and pointed out, in their reply to SCN, that the question whether to grant exemption from duty in respect of BWRs to be used in ADV/Hand Cart tyres was under the CBEC’s consideration. The party hoped that a notification in this behalf would be shortly issued by the Board under Section 11(c). The Collector who adjudicated the matter demanded duty of Rs. 3,30,353.25 on the BWRs used in the exempted ADV/Hand Cart tyres, apart from duty of Rs. 7454.40 on the rings used in other (dutiable) tyres. He also imposed a penalty of Rs. 2000/- on the assessee under Rule 173Q. The Collector’s order was set aside by this Tribunal in the assessee’s appeal as per Final Order No. E/551/98-B1, dated 9-3-98 [1998 (104) E.L.T. 655 (Tribunal)], which was an order of remand directing the adjudicating authority to reconsider, and give clear findings on, the “marketability” and “limitation” issues involved in the case. The Commissioner’s order impugned in the present appeal is pursuant to the remand order.
3. Heard both sides, ld. Advocate, Shri Harbans Singh submitted that the question whether BWR used for ADV tyre was marketable had already been answered in the negative by this Tribunal in CCE v. MRF Ltd. [2000 (115) E.L.T. 85 (T)]. He referred to the process of manufacture, given in the memo of appeal, of BWRs for tyres of ADVs, hand carts and motor vehicles, and submitted that these rubberised bead wire rings had very short shelf life and were neither marketed nor marketable. In this connection, the counsel relied on (i) the affidavit dated 19-5-2001 of M.L. Khosla (ii) the affidavit dated nil of Prakash Y. Kulkarni and (iii) the “note on rubberised bead wire rings for animal drawn vehicle tyres” dated 9-7-97 of Indian Rubber Institute. The BWRs of other manufacturers, considered by the adjudicating authority, were different from those manufactured by the appellants for cap-
tive use in ADV/Hand Cart tyres, the former not being rubberised. The counsel had a further case that all the evidence adduced by the party had not been duly considered by the Commissioner. On the time bar issue, ld. Advocate submitted that, during the material period, the appellants’ factory was under the physical control of Central Excise officers and hence their manufacturing activity was known to the department. The appellants bona fide believed that the BWRs were not ‘goods’ to be excised. There was neither any suppression of facts nor any intent to evade payment of duty on their part. The counsel thus contended that the extended period of limitation was not invokable in the appellants’ case for demanding duty and that any penalty was not imposable on them. As regards the demand of interest on duty, he submitted that there was no provision of law for any such demand during the period of demand.
4. Ld. SDR endeavoured to defend the Commissioner’s order on the strength of the reasonings stated therein.
5. We have examined the submissions. In Para (12) of the impugned order, the Commissioner has noted that there is no dispute with regard to two aspects viz. (a) manufacture and clearance, for captive consumption, of the impugned goods; (b) classification of the goods and the effective rate of duty applicable. The only issue before him was, broadly, whether duty of excise was liable to be paid on the BWRs manufactured and removed for captive use in the manufacture of ADV tyres during the material period. For this issue to be decided upon, it had to be determined as to whether the item was marketable (in order to be held to be excisable) and, if so, whether the demand of duty thereon was time-barred. The remand of the case by this Tribunal to the adjudicating authority was for this purpose.
6.1. We shall examine whether, as claimed by the counsel, the main question of marketability of the subject item is covered in the assessee’s favour by the decision in the MRF case (supra). In that case also the item considered by this Tribunal was BWRs which were “steel wires in circular shape coated with rubber compound by mechanical operation and wrapped with rubberised bead chaffer fabric”. The Tribunal upheld the finding of the lower appellate authority that the product had a very short shelf life and hence was not marketable. Thus the BWRs in that case were held to be non-excisable and the order of the Commissioner (Appeals) was affirmed. While the Counsel for the appellants has strongly relied on the decision of the Tribunal in the MRF case, the DR has argued to the effect that the said decision is per incuriam in view of the fact that the Order-in-Appeal Nos. 601 to 604/91, dated 23-4-91 of the Collector of Central Excise (Appeals), Chandigarh in the case of M/s. Metro Tyres Ltd. had been set aside by this Tribunal by Final Order Nos. E/32 to 41/94-B1, dated 7-1-94. The DR was referring to Para 3 of the Tribunal’s order reported in 2000 (115) E.L.T. 85 (Tribunal). He has submitted that the observation contained in the last sentence of the said Para 3 is not factually correct in view of Final Order Nos. E/32 to 41/94-B1, ibid. Para 3 of the Tribunal’s order in the MRF case, referred to by the DR, is extracted below :-
“The appellate authority, namely, Collector of Central Excise and Customs, Bombay in the impugned order dealt with identical goods manufactured by three other manufacturers, namely, M/s. Dunlop India Ltd., M/s. Metro Tyres Ltd. and M/s. Goodyear (India) Ltd. In the case of those three manufac-
turers, three different Collectors of Central Excise took the view that Bead Wire Rings are not marketable and hence not chargeable to duty. Case relating to M/s. Dunlop India Ltd. was decided by the Collector of Central Excise (Appeals), Madras in Appeal No. 173/89, Collector of Central Excise, Ludhiana decided the issue relating to M/s. Metro Tyres Ltd. as per order-in-appeal, dated 23-4-1991, while in the case of M/s. Goodyear (India) Ltd. the decision was of Collector of Central Excise, Delhi in Appeal No. 138/91, dated 31-1-1991. Those orders have not been got reversed by any course known to law.”
We have perused Final Order Nos. E/32 to 41/94-B1 ibid and we find that Order-in-Appeal Nos. 601 to 604/91, dated 23-4-91 passed by the Collector (Appeals), Chandigarh was set aside by this Tribunal and the excisability of the tyre bead wire rings manufactured by M/s. Metro Tyres Ltd. was remanded to the original authority with a specific direction for examining the marketability of the product and determining its excisability accordingly. But nothing has been placed on record before us to show that the orders-in-appeal passed by the Appellate Collectors in the cases of M/s. Dunlop (India) Ltd. and M/s. Goodyear (India) Ltd. were also set aside by the Tribunal or any competent Court. Moreover, what is contained in the above extract from the order in MRF case is not the only ground, in that case, for holding the BWR to be non-marketable. We therefore do not subscribe to the DR’s view that the decision in that case is per incuriam.
As we have already noted, the BWRs before the Tribunal in the cited case of MRF were “steel wires in circular shape coated with rubber compound by mechanical operation”. We find that the product under consideration in the instant case is also BWR in circular shape coated with rubber compound by mechanical operation. This is clear from the un-disputed process of manufacture stated in the memorandum of appeal, extracted below :-
“Bead wire, which is a high tensile steel wire suitably treated (e.g. copper coated) so as to ensure adhesion to rubber, is received in large spools. A number of such spools are mounted on free rolling stands. A particular number of Bead Wires (depending on the tyre size) are drawn from these spools and passed as a layer through a cross head Extruder die to give coating of bead rubber compound. The rubber coating insulates the wire from each other and holds them together. The layer of rubber coated wires emerging from the aforesaid “die” is cooled by passing over water-cooled drums and coiled on a (Bead) Former to form a ring of specific diameter and required number of wires after which the wires are severed with a Cutter and the Bead ring removed from the (Bead) Former. The free ends of the Bead ring are wrapped with a rubberized fabric to hold them in position.”
It thus appears that the BWRs manufactured by the appellants and those manufactured by M/s. MRF Ltd. are like goods manufacturally. However, whether they are comparable with regard to shelf life will depend on the nature of the rubber compound used, and the shelf life is determinative of marketability of the item.
6.2. As held by the Hon’ble Supreme Court in A.P. State Electricity
Board v. CCE [1994 (70) E.L.T. 3 (S.C.)], the marketability of goods in a given
case should depend on the facts of that case. This view has been followed by
the Court in U.O.I. v. Sonic Electrochem (P) Ltd. [2002 (145) E.L.T. 274 (S.C.)]
cited before us by the counsel. In MRF case (supra), the Tribunal approved
the lower appellate authority’s finding that the BWRs were not marketable in
the absence of evidence calling for a contra finding. In the instant case before
us, we have to examine the available evidence to test the correctness of the
impugned order on marketability of the appellants’ BWR.
6.3. The adjudicating authority noted that the BWRs were manufactured in one section of the assessee’s factory and removed to another section for use in the manufacture of ADV tyres in the latter section of the factory. The authority obviously thought that, if the BWRs could be so removed from one part of the factory to another, they he sufficient shelf life and should be marketable. We are unable to accept thus view for want of cogent finding as to the intervel between the time of emergence of BWR and the time of its consumption in the manufacture of tyre. The Commissioner has relied on an affidavit of Shri Prakash Y. Kulkarni, Technical consultant of the appellant-company. Shri Kulkarni in his affidavit stated that the BWRs in question were to be used preferably within 8 to 10 hours. Ld. Commissioner, harping on the word ‘preferably’, held that the shelf life of the impugned goods could not be restricted to any specified time period of short duration. In our view, this inference of the adjudicating authority is not flawless inasmuch as the deposition of Kulkarni could judiciously be interpreted to mean that the BWR must be used, at any rate, within 10 hours from the time of its manufacture. In our view, this period is too short for the manufacturer to take out the item to the market and for any instant buyer to take it to his factory and use it in the manufacture of tyre. We think that the decision of the Apex Court in Moti Laminates Pvt. Ltd. v. CCE [1995 (76) E.L.T. 241 (S.C)] wherein an intermediate product of the assessee, which was captively used in the manufacture of final product, was held to be non-marketable on the ground that it had a shelf life not exceeding 15 days even in controlled conditions, is apposite to this context.
6.4. Yet another view taken by the Commissioner is that that appellants’ BWRs for ADV tyres were to be held excisable like similar goods (i.e., BWR for ADV tyre) of M/s. Hindustan Tyre Co., Ludhiana, who were discharging duty liability thereon. We cannot agree with this logic either. That another manufacturer has paid duty on a similar product is per se no ground to decide marketability and excisability of the appellants’ product. The position would have been different, had it been shown that the appellants’ BWR was identical to the other manufacturer’s BWR and that the latter was actually marketed. There is no such finding in this case. Ld. Commissioner has also relied on certain facts stated, and certain observations made, in the Tribunal’s Final Order Nos. E/32-41/94-B1 ibid. In that order, it was noted that M/s. Modi Tyres Ltd. were manufacturing BWRs in one unit and removing the same to another unit of their’s for use in the manufacture of tyres. It was observed that there was force in the argument of the Revenue that such removal of BWR from the factory of its production to the factory of production of tyres indicated that the BWR had shelf life and was marketable. We do not think that this observation will help the Revenue in the instant case wherein the assessee’s BWRs were admittedly not removed out of their factory. Further, the above observation which was made while remanding the marketability issue to the adjudicating authority for de novo adjudication was not intended to bind even the lower authority in that case. It was, at best, an obi-
ter only. Another evidence considered by the Commissioner is the affidavit of one Shri Surinder Singh, Partner of Shri Gurpreet Rubber Industries, Ludhiana. The said Surinder Singh had stated in his affidavit that they had purchased BWRs from M/s. Khosla Enterprises, Ludhiana and used the same in ADV tyres. Ld. Counsel has submitted that the appellants were not allowed to cross-examine Surinder Singh. It has been further submitted that the BWRs referred to by Surinder Singh were not rubberised and hence different from the BWRs manufactured by the appellants. According to the affidavit of Surinder Singh, Khosla Enterprises had supplied BWRs for ADV and moped tyres to M/s. Gurpreet Rubber Industries. But we have noticed on record an affidavit of Sh. Jatinder Khosla, Proprietor of Khosla Enterprises, who stated that the BWRs supplied to Gurpreet Rubber Industries were not rubberised. The affidavit of Surinder Singh, therefore, fails to support the Revenue in this case.
6.5 We note that two pieces of evidence gathered by the department have not been considered by the Commissioner. One of them is a statement of Shri Om Parkash Pahwa, Partner of M/s. Ram Lubhaya & Co., who stated that they were manufacturing BWRs on job work basis for M/s. Ralson (I) Ltd., Ludhiana. We have perused this statement. The process of manufacture of BWRs stated by Shri Om Parkash Pahwa, is as under :-
“1. Steel wire is cut according to specific size required for the rings.
2. The cut wire put on the frame to get required shape of rings and thereafter it joined by galvanised iron wires.
3. Such rings are thereafter inspected.”
The above process shows that the product of M/s. Ram Lubhaya & Co. was not rubberised bead wire rings and was different from the appellant’s product. Hence the statement of Om Parkash Pahwa is not of any aid to the Revenue’s case. The department had also relied on a classification declaration dated 19-7-99 of M/s. Govind Rubber Ltd., a copy of which is also available on record and which we have perused. The goods declared by M/s. Govind Rubber Ltd. was “tyre bead wire rings for use in the manufacture of tyre for cycles and cycle rickshaws”. That party did not, apparently, manufacture tyre bead wire rings for use in ADV tyres. The reliance placed by the department on the declaration of M/s. Govind Rubber Ltd., was only misplaced.
7. It is trite law that it is the Revenue’s burden to establish marketability of a manufactured item so as to hold it to be excisable. In the instant case, the Revenue failed to show that the appellants’ BWRs for ADV Hand Cart tyres had sufficient shelf life and were marketable. Therefore, following the decision of the Tribunal in MRF case (supra), we hold that the bead wire rings manufactured by the appellants and captively consumed in the manufacture of ADV tyres during the material period were not marketable and hence not excisable as contended by them. Having held so, it is not necessary for us to look into any other issue in this appeal. The impugned order is set aside. The appeal is allowed.