ORDER
S.L. Peeran, Member (J)
1. In both the appeals common question of law and facts arises and hence they are taken up together for disposal as per law.
2. The question that arises for consideration in these appeals is the exigibility of ‘Molten Iron’. The department by their show cause notice dated 11-9-1985 in E/1740/93-B1 to the appellants alleged that they were manufacturing excisable goods viz. molten iron falling under Tariff Item 25(i) of the erstwhile First Schedule of the Central Excises and Salt Act, 1944 and demanded duty of Rs. 75,35,693.46 on the alleged contravention of Rule 173B (G) and F of Central Excise Rules, 1944 and clearances of molten iron said to have been removed without payment of duty for the manufacture of exempted Ingot Moulds and Bottom Stools. It is alleged that ‘Molten Iron’ is manufactured in Blast furnance and it is cleared without payment of Central Excise duty for steel making to their Steel Melting Shops and also to their Ingot Mould Foundry for the manufacture of Ingot Moulds and Bottom Stools and other iron castings. It is also cleared to General Foundry for the manufacture of iron castings and that some ingot moulds and Bottom stools are cleared on payment of duty as the effective rate. But, it is alleged that major portion of Ingot moulds and Bottom stools are cleared from Ingot Mould Foundry without payment of duty for use inside T.I.S.C.O. works in manufacture of steel ingots in terms of the Notification No. 205/83-C.E., dated 1-8-1983.
3. It is alleged that the appellant had submitted the Classification List No. 6/83 effective from 1-8-1983 valid upto 16-3-1985 showing molten iron against which effective rate of duty of Rs. 70/- PMT Basic Excise Duty and 10% SED is shown and with remarks “Excise Duty is paid under later the better principle”. It is stated that the remark merely indicates that the appellant wanted to remove the molten iron under amended Rules 9 & 49 of Central Excise Rules, 1944 vide Notification No. 187/83-C.E. for further manufacture of goods falling under Tariff Item 25 of Central Excise Tariff which are not exempted from the payment of duty or chargeable to “Nil’ rate of duty. It is further stated that another classification list effective from 17-3-1983 was filed in respect of I.S.P. which was not approved and assessment of RT-12 returns were made provisionally.
4. After further examination and scrutiny of the documents, the department has alleged that the benefit of Notification No. 187/83-C.E., dated 1-8-1983, which amends Rules 9 & 49 of Central Excise Rules, 1944 is not admissible to the quantity of Molten Iron removed from the Blast furnaces of or on the manufacture of Ingot Moulds and Bottom Stools on which exemption is availed under Notification No. 205/83-C.E. because of the condition stipulated under proviso to Rules 9 and 49.
5. The show cause notice dated 29-9-1987 issued in E/2085/93-B1 classifies the Molten Iron & Ingot Moulds under sub-headings 7201.00 & 8454.00 for clearances made for the period from August, 1986 to August, 1987 of Rs. 34,46,845.20.
6. The appellants filed their reply stating that the ingot moulds and bottom stools are manufactured in their ingot mould factory and are sent to steel melting shops for use. After 40/50 heatings in the S.M.S., they become unfit for further use and thus they are broken into pieces (scrap) and again utilised in the S.M.S. for the manufacture of steel ingots and, therefore, on steel products, duty is discharged. It is stated that duty has been paid on removal of the iron and steel products, in the integrated steel plant and hence duty need not be paid on pig iron or on steel ingots, if the same is again used within the plant for the manufacture of iron and steel products on which duty is ultimately paid. It is specifically pleaded that the Molten Iron is in a red hot condition, and it is not in a condition of being marketed and that is not a commodity known in the market and hence it is not dutiable. It is further stated that it is again melted for making products of iron and steel and hence question of discharging duty does not arise. The appellants have also stated that the demands are time barred as there is no suppression or clandestine removal.
7. The appellants had also filed a detailed written statement, besides making personal submissions before the lower authorities. However, the ld. Collector has rejected all their submissions and held the said molten iron to be goods and liable to discharge the duty. The plea of time bar has also been rejected.
8. In this appeal before us the appellants have submitted that the demands are time barred on the ground that details of the products had been mentioned in the RT-12 returns and this position was within the knowledge of the department for last several decades and, therefore, the question of any suppression or mis-declaration or clandestine manufacture and removal is unsustainable and, therefore, demand has to be quashed. It is their further contention that only 0.05% of the product goes to formation of the molten iron, which is in a highly unmarketable state, in as much as the iron is heated and is in a molten condition in a temperature of more than 1400°C and, therefore, the product in such a state is not in a position for removal from the factory and that there are no buyers and therefore, it cannot be said to be goods at all for the purpose of exigibility. The first and foremost aspect which the appellants have contended is with regard to these issues and are fully relying on the Hon’ble Supreme Court’s rulings rendered in the case of Bhor Industries Ltd. v. Collector of Central Excise reported in 1989 (40) E.L.T. 280. In this ruling the Hon’ble Supreme Court has laid down that marketability is an essential ingredient for dutiability and mere mention in the Tariff Schedule by itself does not make an article liable to excise. In support of the contention that the products are not goods and not in a marketable condition in as much as the temperature of molten iron is 1300°C to 1400°C, the appellants have produced certificates issued by:
(i) Office of the Development Commissioner, Ministry of Steel, Government of India dated 7-12-1992 wherein it is stated that Molten iron is obtained at a temperature of more than 1250°C and is not known as merchandise and is not marketed or bought and sold in that form,
(ii) Certificate from the Director, National Metallurgical Laboratory, CSIR, Jamshedpur, which states, that the temperature of molten iron is 1300°C to 1400°C and it is not known as merchandise in the trade and the same is not marketed or bought and sold in that form. It is stated by the appellant that the ld. Collector has not even dealt with the two certificates. This order passed by him is appreciated.
They further state that the condition of Notification No. 205/83 has been satisfied by them. The molten iron used by them in the ingot moulds and bottom stools is use in the factory of production in the manufacture of steel ingots and are melted after use in the factory. It is their plea that the whole object of the said Notification is fulfilled in as much as the molten iron which is used for obtaining ingot moulds and bottom stools, would ultimately be consumed or utilised like other molten iron for obtaining dutiable iron and steel products. They further stated that the Collector has committed a mistake in holding that the principle of “later the better” applies at the stage of manufacture of ingot moulds and bottom stools and not any further. It is pleaded that the principle of “later the better” applies right up to the stage of the final product namely, the products of iron and steel which are cleared from the factory on payment of excise duty. It is further stated by them that Rule 9 of the Central Excise Rules, 1944 has not been properly interpreted. They state that if a correct interpretation of the said rule is given then no duty would be payable, as molten iron as a raw material, was consumed or utilised in the place of manufacture for steel ingots and other iron and steel products.
9. We have heard Sh. Ravinder Narain, ld. advocate for the appellants and Sh. S.K. Sharma, ld. JDR for the Revenue. Ld. advocate reiterating the grounds made out in the appeal memo has heavily relied on the rulings rendered by the Hon’ble Supreme Court of India in the case of Bhor Industries (supra) and vehemently argued that the state in which the molten iron exists does not make the said product marketable at all and that the department has not discharged their burden of excisability of the said product. He has also relied on several other rulings to emphasise his point that mere mention in the Tariff Schedule of the Central Excise Tariff by itself does not make a product as goods for exigiblity and dutiability. In this context, he has also relied on the rulings of the Tribunal in the case of Punjab National Fertilizer Corporation v. Collector of Central Excise, reported in 1991 (54) E.L.T. 115, wherein several judgments had been distinguished and proper interpretation had been given to the rulings of the Hon”ble Supreme Court rendered in the case of Bhor Industries. It has been clearly held therein that even if a product arises in an intermediate stage, even then, they have to be marketable and mere mention in the Tariff Schedule by itself will not make the goods dutiable. The ld. Counsel also explained the principle of “later the better” and pointed out that the lower authorities have not understood the said principle as laid down in Rules 9 & 49 of Central Excise Rules, 1944.
10. Countering the arguments of the ld. advocate, Shri S.K. Sharma, ld. JDR fairly submitted that the question of marketability had not been gone into by the lower authorities and that is a case for remand on this issue. However, it is his submission that goods even if they are in high temperature, by help of innovations in science, has enabled transporting goods to other places. He submitted that although the product had not been mentioned in the Tariff that itself is not sufficient to hold the product as not marketable. In this context he relied on the rulings rendered in the case of Union of India v. Bata India Ltd. reported in 1993 (68) E.L.T. 756 (Cal.). As regards the time bar the ld JDR submitted that the appellants had not mentioned in RT-12 returns about the quantity utilised and, therefore, larger period was attracted. He further pleaded that the product is not an intermediate product but it is in the nature of bottom stools. Bottoms Stools also does not go into manufacture of the final product. He submitted that the purpose of the molten iron is not of an intermediate product and, therefore, the principle of “later the better” does not apply in the present case.
11. We have carefully considered the submissions made by both the sides and have perused the records and also gone through the orders passed by the original authority. As can be seen from the controversy before us, the main question to be decided by us is as to whether the product in question can be considered as “goods” and whether it is exigible and dutiable. In this connection the appellants have fully relied on the ratio of the rulings rendered by Hon”ble Supreme Court in the case of:
(i) Bhor Industries Ltd. v. Collector of C. Excise [1989 (40) E.L.T. 280 (S.C.)]
(ii) Collector of Central Excise v. Ambalal Sarabhai Enterprises [1989 (43) E.L.T. 214 (S.C.)]
(iii) Union of India v. Delhi Cloth & General Mills [1977 (1) E.L.T. (J 199) (S.C.)]
(iv) South Bihar Sugar Mills Ltd. v. Union of India [1978 (2) E.L.T. (J 336) (S.C.)]
(v) Union Carbide India Ltd. v. Union of India [1986 (24) E.L.T. 169 (S.C.)]
The ld. Collector had held that these rules are distinguishable. With all due respect to the ld. Collector, we have to state that these rulings are not distinguishable but directly apply to the facts of the case. The ld. Collector should have first and foremost decided about the exigibility of the goods, and given a finding about the goods being known in the market and as to whether they are in a marketable state and whether it could be transported, even if it is in a state of high temperature of 1300°C to 1400°C. The ld. Collector has not dealt with this aspect of the matter and has merely stated that these rulings of the Hon’ble Supreme Court are distinguishable. We are constrained to observe that the ld. Collector should have first applied his mind on these aspects of the matter and decided the case. We note hereinbelow crucial paragraphs Nos. 5 to 8 of the Bhor Industries case, which lay down the test of marketability:
* * * * * * *
12. It is very clear from the above ratio that the goods should be known in the market by the persons who deal and identify the same. The Hon’ble Supreme Court has made it very clear that the articles are to be separately defined identifiable commodities and has also held that simply because certain articles are mentioned within the Schedule that by itself would not make the product dutiable under excise law. Marketability, therefore, has been held by the Hon’ble Supreme Court as an essential ingredient in order to make the goods dutiable under the Schedule of Central Excise Tariff Act, 1985. The Revenue has failed to show in this case that the product ‘Molten Iron’ is known in the market and it is also marketed in such a state of high temperature. The Revenue has not placed any evidence on this crucial test of marketability and, therefore, the demand raised by them has naturally to fail. The appellant has produced certificates to show that the molten iron is obtained in very high temperature and it does not have a market and also is not in a marketable state. This contention has not been adverted to by the Revenue. Its mere use by the appellant at one stage in the manufacture of final product by itself will not make the products dutiable and exigible. Hence, the appellants succeed on this ground alone. However, we may mention that the demands raised in the first appeal is also time barred. The department is fully aware of the process of manufacture of final product and the department had been collecting duty for several decades. In view of our findings and by applying the ratio of the Hon’ble Supreme Court rendered in the above noted case, the appellants succeed and appeals are allowed.
Sd/-
(S.L. Peeran)
Dated: 8-3-1994 Member (J)
P.C. Jain, Member (T)
13. I have carefully gone through the order proposed by my learned Brother, Shri S.L. Peeran, Judicial Member but I regret, with respect, that I am unable to agree with the conclusion reached by him that 'marketability' is essential in all circumstances for deciding ex- cisability.
14. It is true that entries in the Central Excise Schedule of the Tariff are to be understood in the sense in which the people i.e. manufacturers, dealers and consumers of the goods mentioned in the Schedule understand them unless there is a statutory definition in the Schedule itself. It is also true, as held by the Supreme Court in a number of decisions namely –
(i) U.O.I. v. D.C. & General Mills Co. [1977 (1) E.L.T. (J199)]
(ii) Union Carbide India Ltd. v. U.O.I. [1986 (24) E.L.T. 0169)]
(iii) South Bihar Sugar Mills v. U.O.I. [1978 (2) E.L.T. (J336)]
(iv) Bhor Industries Ltd. v. Collector [1989 (40) E.L.T. 280]
(v) Collector v. Ambalal Sarabhai Enterprises [1989 (43) E.L.T. 214]
that excisable goods should be marketable goods. ‘Goods’ which are not marketable cannot be excisable.
15. In the D.CM.’s case, supra, tariff entry was ‘refined V.N.E. Oil’. Goods under dispute were ‘refined V.N.E. Oil’ but not deodorised. On the strength of evidence on record, it was found by the Apex Court that ‘refined V.N.E. Oil’ as known to the market was not only required to be ‘refined’ but also deodorised. Since the subject V.N.E. Oil was admittedly not deodorised, it was held that the subject V.N.E. Oil was not a ‘refined’ V.N.E. Oil in terms of the tariff entry.
15.1 In South Bihar Sugar Mills, it was held by the Supreme Court that ‘Kiln gas’ – the subject of dispute – though containing a substantial amount of ‘carbon dioxide’ was not marketed as ‘carbon dioxide’ – the tariff entry.
15.2 In ‘Union Carbide’, it was held that aluminium cans or torch bodies in crude form produced by extrusion process were neither sold nor marketable. Hence these were not goods and therefore, not liable to excise duty under Section 3 of the CE & S Act, 1944 read with Tariff Entry 27 of the Central Excise Tariff.
15.3 Similarly, in Bhor Industries, crude PVC film with rough edges was not considered as ‘marketable’ and hence not covered by the tariff entry ‘Plastic film’.
15.4 Again in Ambalal Sarabhai Enterprises, it was held the product under consideration was too unstable and having a shelf-life of a few hours, that it was not marketable. Hence it was not considered excisable.
16. I, however, observe that there are cases decided by the Apex Court which did not consider the ‘marketability’ criterion as relevant to exigibility of the product to excise duty.
16.1 In Collector of Customs v. Oriental Timber Inds. [1985 (20) E.L.T. 202 (SC)], the Apex Court was considering Tariff Item 16B of the Ist Schedule to CE & S Act, 1944. It read as follows, as extracted in para 14 of the report :-
* * * * * * * In para 16 of the Report the Court observed as follows :- "There can, however, be no doubt that plywood is manufactured as soon as the product comes out of the press and plywood in sheets, blocks, boards, or the like come within Item 16B, even if they are not trimmed and their edges are not sanded, as the item does not speak of trimmed or sanded plywood."
17. In para 17 the Court further relied on its earlier judgment in the case of Union of India v. Hindu Undivided Family business known as Ramlal Mansukhrai [1978 (2) E.L.T. (J 389)] and observed that that case “lends support to the contention raised on behalf of the Excise Authorities that plywood as and when the same comes out of the press at the panel stage, even though not trimmed and sanded, becomes liable to excise duty under Item 16B of the First Schedule.
18. Facts of the case, in HUF Ramlal Mansukhrai are given in para 18 of Oriental Timber as reproduced below :-
* * * * * * * 19. Allowing the Union of India's appeal, the Court observed as follows in para 19 :- * * * * * * *
20. The Court also considered in Oriental Timber the question of marketability based on D.C.M.’s and South Bihar’s cases, supra in HUF Ramlal Mansukhrai, and distinguished those cases with reference to the specific tariff description of Tariff Item 26A(2) in HUF Ramlal’s case and Tariff Item 16B in Oriental Timber. In this connection, paras 20 and 21 of Oriental Timber’s report are reproduced below :-
* * * * * * * 21. Question of marketability again came up for consideration in the case of Indian Aluminium Cables v. UOI [1985 (21) E.L.T. 3 (SC)]. In that case the Apex Court was examining the Tariff Entry 27(a)(ii) vis-a-vis tariff entry 68 -the residuary entry. "Aluminium - (a)(ii) wire bars, wire rods and castings, not otherwise specified." In this connection, we reproduce below paras 12 and 13 of the said Report regarding excisability vis-a-vis marketability. We may note at this stage that the Court has noticed D.C. & General Cloth Mills case (supra) - first judgment in a Central Excise case on the question of marketability: - * * * * * * *
22. Learned advocate has contended that Bhor Industries and Ambalal Sarabhai Enterprises, (supra) are later in point of time than HUF Ramlal, Oriental Timber and Indian Aluminium Cable and therefore, greater weight should be attached to the question of marketability of goods before they can be considered to be excisable. I am afraid that such a view would not be a correct approach. It is further to be stated at this stage both Bhor Industries and Ambalal Sarabhai Enterprises have not noticed HUF Ramlal, Oriental Timber and Indian Aluminium Cable. I would prefer to examine whether the apparently conflicting judgments of the Supreme Court can be reconciled and a principle of law determined therefrom.
22.1 It is to be observed that in the three judgments of the Supreme Court where marketability of a product has not been held to be essential, it is essentially on the basis of the peculiar wording of the tariff entries. In HUF Ramlal, it was Tariff Item 26A which inter alia levied duty
on”…circles…in any form or size”. In Oriental Timber, it was
“plywood,…in sheets, blocks, boards or the like”. In Indian Aluminium Cable, it was “aluminium…wire, bars, wire rods and castings, not otherwise specified”. It is noticed in all the said tariff entries that excise duty was leviable on the basis of physical form or shape of the goods and the goods under consideration had acquired that physical form or shape which had been subjected to duty. It is under such facts and circumstances that it was held, in each of the three cases, mentioned above in this sub-para, that marketability was not an essential criterion.
22.2 On the other hand, in those cases where marketability has been held to be an essential criterion for excisability, namely in (i) D.C. & General Mills, (ii) South Bihar Sugar Bills, (iii) Union Carbide Ltd., (iv) Bhor Industries, (v) Ambalal Sarabhai Enterprises, tariff entries under which the Revenue sought the goods liable to duty were of generic name and there was evidence available on record as to how the tariff entry was understood by the trade and the goods under consideration did not fulfil the said trade understanding.
23. In the present case, we notice that the Tariff Entry 25 seeks to levy duty on “molten iron”, a physical form or shape of iron. There is no dispute that the goods under consideration on which the Revenue seeks to impose duty is ‘molten iron’. Affidavits brought on record by the appellants themselves speak unequivocally of one single fact that ‘molten iron’ because of its high temperature is incapable of marketing. In such facts and circumstances, marketability of goods as an essential ingredient of excisability of goods would not be a relevant criterion. To make marketability sine qua non in the foregoing facts and circumstances is to render the tariff entry itself nugatory and thereby defeat the legislative intention of levying duty on ‘molten iron’.
23A. Let me now examine the other pleas of the appellants. Learned advocate has submitted that duty has been demanded on ‘molten iron’ used in manufacture of ingot moulds and bottom stools which stand exempted by Notification 205/83. Reason for demand of duty is that ‘molten iron’ is one commodity under Tariff Item 25 which is chargeable to duty in its own right. Since it is used in the same factory in manufacture of exempted products – ingot moulds and bottom stools – under Notification 205/83, dated 1-8-1983, benefit of non-levy of duty on ‘molten iron’ in terms of proviso to Rule 9 of the Central Excise Rules cannot be extended. Learned advocate has submitted Notification 205/83 is peculiarly worded. I reproduce it, for proper appreciation of his arguments: –
“Exemption to ingot moulds, bottom stools, stirring/poking rods, splash plates and troughs if used within the factory for manufacture of steel in got. – In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods, falling under Item No. 25 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and commonly known as –
(i) Ingot moulds,
(ii) Bottom stools,
(iii) Stirring/poking rods,
(iv) Splash plates, and
(v) Troughs.
From the whole of the duty of excise leviable thereon under Section 3 of the said Act;
Provided that such goods are used in the factory of production in the manufacture of steel ingots and are melted either during or after such use in the said factory.
2. Nothing contained in this notification shall apply to the goods which are produced or manufactured in a free trade zone and brought to any other place in India (vide Notification No. 81/83-CE., dated 1-3-1983). [Notification 205/83-C.E., dated 1-8-1983]”
He submits that condition of the Notification 205/83 is that ‘ingot moulds’ and ‘Bottom stools’ are used in the factory of production in the manufacture of steel ingots and are melted during or after such use in the said factory. The underlined portion of the condition ensures that molten iron obtained on melting scrapped ingot moulds and bottom stools come to the common pool of molten iron which is again used in making Iron and Steel products liable to duty or exempted ingots moulds and bottom stools. Thus the cycle repeats itself and the process goes on in this cyclic manner. It is thus ensured that no amount of ‘molten iron’ goes out of the factory without payment of due duty. The object of introducing condition Nos. (i) to (iii) in proviso to Rule 9 is to conform the proviso to the substantive condition of rule 56A(2) first proviso. Thus introduction of proviso to Rule 9 under Notification 187/83-C.E., dated 1-8-1983 was a measure of simplification and avoiding scriptory work; otherwise purpose of this proviso could be sub-served by Rule 56A. It is to be noted that conditions No. (i) to (iii) in the proviso bring in the concept of Rule 56A, because the final product, as per condition No. (i) in the proviso to Rule 9, is to be specified under Rule 56A. Final product under Rule 56A is the one that is cleared from the factory on payment of duty. If the final product is itself exempted or is chargeable to nil rate of duty, duty on the inputs used in such final product would also be avoided and, therefore, Rule 56A would not be applicable. Purpose of Rule 56A is to avoid duty on inputs if specified final product is dutiable under the same item. This avoidance of duty on inputs is made through the procedure of credit of duty paid on inputs and utilisation thereof for payment of duty on the final product. In other words, Rule 56A ensures that duty either at the input stage or the final product stage at least is paid. Duty does not get totally avoided at all stages, unless there are specific exemptions to that effect. In the instant case, in view of the peculiar condition of Notification 205/83, such a state of total avoidance of duty both on the final product stage and the inputs stage does not arise. As rightly pointed out by the learned advocate, no quantity of ‘molten iron’ escapes excise duty because of the condition of Notification 205/83. To demand duty, as the Revenue seeks to do, would be to demand duty repeatedly on the same goods ‘molten iron’. This is plainly impermissible. Hence, I allow both the appeals. 24. Before parting, I would, however, like to agree on the question of time bar with my learned Brother. But a finding on this question is merely of academic interest, in view of my finding on merits of the demand.
Sd/-
(P.C. Jain)
Dated : 21-4-1994 Member (T)
POINT OF DIFFERENCE
Whether in the facts and circumstances of this case and the various judgments of the Apex Court, marketability of molten iron is essential in determining its dutiability under the Central Excises & Salt Act, 1944 read with Central Excise Tariff Act, 1985.
Sd/- Sd/-
(P.C. Jain) (S.L. Peeran)
Dated: 28-4-1994 Member (T) Member (J)
P.K. Kapoor, Member (T)
POINT OF DIFFERENCE
Whether in the facts and circumstances of the case and various judgments of the Apex Court, marketability of molten iron is essential in determining its dutiability under the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985.
25. I have heard both sides on the point of difference set out above.
26. Appearing on behalf of the appellants Shri Ravinder Narain, ld. Sr. Advocate stated that the ld. Member (Technical) has expressed the view that marketability as an essential criteria for excisability of any goods as laid down by the Supreme Court in the judgments listed in para 14 of the Order recorded by the ld. Member (Judicial) would apply only in cases where the tariff entries under which any goods liable to duty are sought to be assessed bear generic names and there is no evidence as regards the understanding of the trade as regards that tariff entry. He added that in support of his finding that marketability of a product would not be essential when the relevant tariff entry is specific and the goods in question have acquired the physical form or shape so as to be covered by that entry. Member (Technical) has placed reliance on the judgments of the Supreme Court in the case of Collector of Customs v. Oriental Timber Industries, Union of India v. Hindu Undivided Family Business known as Ramlal Mansukhrai and Indian Aluminium Cables v. Union of India. He contended that marketability is an essential ingredient for any goods to be considered as dutiable since as held in the case of Bhor Industries Ltd. v. Collector of Central Excise (supra) and all the judgments listed in para 14 of the order recorded by Member (Judicial), the Supreme Court has held that simply because a certain article falls within the Schedule, it would not be dutiable under excise law of the said article if not “goods” known to the market. He stated that in the case of Hindustan Polymers v. Collector of Central Excise reported in 1989 (43) E.L.T. 165, the Supreme Court had referred to the earlier judgments in the case of Union of India v. Delhi Cloth and General Mills Ltd., South Bihar Sugar Mills Ltd. v. Union of India and Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay and held once again that for articles to be goods, they must be known in the market as such and they must be capable of being sold or being sold in the market as such. He added that even in regard to Sales Tax, the Supreme Court has stressed on marketability aspect since in the case of State of Tamilnadu v. Pyare Lal Malhotra reported in AIR 1976 SC 800, it has been held that while in the law dealing with the Sales Tax, the taxable event is the sale and the manufacture of goods, nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event in the sales tax law, it may also be necessary to consider whether a manufacturing process which has altered the identity of the commercial commodity has taken place and the law of sales tax being also concerned with goods of various descriptions, it becomes necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description. He submitted that even in the case of Union of India v. Bata India Ltd. reported in 1993 (68) E.L.T. 756, the Calcutta High Court has held that unless vendible, no product can be subjected to levy of excise duty. The ld. counsel for the appellants contended that Member (Technical) had erred in concluding that the Supreme Court in the cases of H.U.F. Ramlal Mansukhrai, Oriental Timber and Indian Aluminium Cables had held that in respect of products in question which on the basis of their physical form or shape could be deemed as covered by the relevant entry of the tariff for the purposes of their dutiability, marketability would not be essential. He submitted that in each of these cases the question that came up for consideration before the court was whether the disputed product was classifiable under a particular item of the Tariff and the question of marketability was neither raised nor considered. He stated that in the case of H.U.F. Ramlal Mansukhrai, the dispute was whether the uncut circles of alloys of copper and tin and copper and zinc produced by rolling billets were dutiable under Item 26A(2) of the Tariff which inter alia covered circles of copper and copper alloys, in any form or size, the court held that “uncut” circles were dutiable under the said Item, since had the Legislature intended to tax only trimmed circles, they would not have used the expression “circles in any form”. He added that similarly in the case of Collector of Customs v. Oriental Timber Industries the only question before the Supreme Court was whether plywood sheets, blocks, boards etc. even before trimming and sanding of their edges were classifiable under Item 16B of the Schedule to the Central Excises and Salt Act, 1944. He stated that these items were covered by Item 16B since the item did not speak of trimmed or sanded plywood. The ld. counsel submitted that even in the case of Indian Aluminium Cables v. UOI also the question before the Supreme Court was essentially of classification and having regard to material available on record, the court held that aluminium wire rods, whether obtained by extrusion process, the Conventional process or Properzi process are both aluminium wire rods. On these considerations, the court held that Properzi wire rods were classifiable under Tariff Entry 27(a)(ii) which covered inter alia “Aluminium wire rods”. He reiterated his stand that in all the judgments, cited by the ld. Member (Technical), the issue to be decided related to classification and the question of marketability was not raised by any of the concerned parties.
27. On behalf of the respondents Shri B.K. Singh, the ld. SDR stated that in the judgments quoted by ld. Member (Judicial) the dispute was regarding the excisability of products such as ‘Kiln gas’, ‘PVC Film with rough edges’, ‘aluminium cans or torch bodies in crude form’ which were not specifically covered by any entry or heading of the relevant Tariff. He contended that it follows by the judgments of the Supreme Court cited by the ld. Member (Judicial) that in respect of products which are specifically covered by an entry or heading of the tariff, their marketability would not be an essential criteria for their excisability. He stated that in the case of Safari Industries (I) Pvt. Ltd. v. Collector of Central Excise reported in 1991 (54) E.L.T. 308, the Tribunal having regard to the fact that “excisable goods” have been defined as goods specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to duty of excise, the question of manufacture and marketability becomes essential characteristics only when the item in question is not covered by any specific heading in the tariff and when a specific entry in the Tariff is applicable to the manufactured goods they have to be deemed as excisable. He added that the view that goods specified in the tariff have to be deemed as excisable is also supported by the Calcutta High Court judgment in the case of Union of India v. Bata India Ltd. He stated that on these considerations in respect of ‘molten iron’ which was specified in the relevant entry of the tariff, as held by Member (Technical), marketability could not be an essential criteria for dutiability. He submitted that in case a view different from the earlier decisions of the Tribunal is taken in this regard, it would be necessary to refer the matter to a larger Bench for decision.
28. In this rejoinder, Shri Ravinder Narain stated that in the Tribunal’s decision in the case of Safari Inds. (I) Pvt. Ltd. even though the judgment of the Supreme Court in the case of Bhor Industries was cited, the Tribunal had not examined the issue with reference to the law laid down by the Apex Court in that judgment. He reiterated his stand that in the judgment of the Calcutta High Court in the case of Union of India v. Bata India Ltd. marketability has been stressed as an essential criteria for dutiability. He contended that reference to Larger Bench as suggested by the Ld. SDR was not necessary since all that was required at this stage was to resolve the point of difference as formulated by the Members constituting the Bench who originally heard the matter.
29. I have considered the submissions made on behalf of both sides. It is seen that in terms of various judgments some of which have been listed in the order recorded by the Ld. Member (Judicial), it is now well settled that simply because of a certain article falls within the Schedule to the Central Excise Tariff Act, 1985 it would not be dutiable under excise law if it is not “goods” known to the market since for dutiability under the Schedule, marketability, is an essential ingredient. Para 7 of the judgment of the Apex Court in the case of Bhor Industries Ltd. v. Collector of Central Excise being relevant is reproduced below: –
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On a plain reading of the para extracted above it is evident that even if an article falls within the Schedule or is specified therein, in order that it may be dutiable, its marketability would be an essential ingredient. Hence, I am of the view that there is no force at all in the contention of the Ld. SDR that the principle of marketability as an essential ingredient would not apply in respect of articles which are specifically covered by any entry in the Tariff Schedule. For these reasons I am inclined to agree with the Ld. counsel for the appellants that in each of the three judgments cited by the Learned Member (Technical) the only issue that arose for consideration was whether having regard to the nature and the form of the product in question, it could be deemed as covered by a particular entry in the Tariff Schedule. I also find that the Ld. counsel has rightly pointed that these cases while deciding the classification of the products in question mainly on the basis of the wording of the relevant tariff item, the Supreme Court had also taken into account how the product was known in trade parlance and its marketability. In the case of HUF Ramlal Mansukhrai the question that arose for consideration was whether cut articles of copper and copper alloys could be deemed as covered by Item 26A(2) of the Tariff Schedule, the court rejected the argument that only trimmed circles could be treated as circles on the grounds that Item 26A itself envisaged the levy of excise duty on ‘circles in any form or size’ and there was nothing in the item from which inference could be drawn that the intention of the Legislature was to tax trimmed circles and not uncut circles. It is evident that in arriving at their finding the court took into account the fact that there was no evidence that in commercial community uncut circles were not known as circles. Similarly, in the case of Oriental Timber, the question for consideration was whether plywood at panel stage not trimmed and sanded was covered by Item 16B of the Tariff Schedule under which plywood in sheets, blocks, boards or the like attracted duty. The Court held that even plywood coming out of the press and which was not trimmed or sanded was covered by Item 16B since it had been worded in very broad terms and there was nothing to indicate in that item that plywood must be trimmed or sanded. In fact in this case also the Court took into account the marketability aspect of the product in question by observing that “there is nothing to indicate that plywood in panel stage, not trimmed and not sanded, is not known in the market as plywood.” In the case of Indian Aluminium Cables v. UOI also the issue for decision before the Apex Court was one of classification since the point to be decided was whether Properzi Rods could be deemed as Aluminium wire rods which were specified under Tariff Item 27(a)(iii). It is evident from paras 12 and 13 of the judgment of the Supreme Court in that case, extracted in para 21 of the order recorded by the Ld. Member (Technical), that in arriving at the finding that Properzi rods and wire rods could not be treated as distinct items, the Supreme Court had also taken into account the marketability aspect of the goods in question since the claim that Properzi Rods were not marketable was rejected and it was held that on the basis of the material available on record it was not possible to positively conclude that Properzi rods and wire rods are treated as distinct items in commercial parlance. Both sides have placed reliance on the judgment of the Calcutta High Court in the case of Union of India v. Bata India Ltd. (supra). It is seen that the High Court has held that if the goods find a place as an item in the Schedule to the Act it will only raise a presumption that they are excisable but shall cease to be excisable if they have no market. It is evident that the High Court held marketability of the goods as an essential ingredient in order to render them dutiable under the Schedule, since while holding the disputed product as excisable the Court observed that the assertion of the respondent as regards non-excisability lacked corroboration and no evidence had been adduced that the goods were not marketable. In this regard it would be relevant to refer to para 30 of the judgment which is reproduced below: –
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In this regard it would also be pertinent to note that in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises reported in 1989 (43) E.L.T. 214 the Hon’ble Supreme Court has held that if the department was to charge duty on an article and such levy is disputed by the assessee on the grounds that the goods were not marketable, then the burden to prove that the goods are either marketed or marketable would be on the department.
30. In view of the above discussion, I hold that in terms of the various judgments of the Apex Court marketability of molten iron would be an essential ingredient in determining its dutiability under the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, [1985].
Sd/-
(P.K. Kapoor)
Dated : 25-11-1994 Member (T)
31. In view of the majority decision, we hold that the marketability of moltlen iron is essential in determining its dutiability under the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985. The appeals are accordingly allowed.