2001 (12) TMI 664 - AT - Central Excise

Fabric - Double texture fabric/unvulcanised sandwiched fabrics - Dutiability - Marketability - Intermediate product

Issues Involved:
1. Dutiability of unvulcanised sandwiched fabric assembly.
2. Marketability of the intermediate product.
3. Applicability of Notification No. 217/86-C.E.
4. Classification under Heading 59.05 of the Central Excise Tariff.
5. Invocation of the extended period of limitation.
6. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Dutiability of Unvulcanised Sandwiched Fabric Assembly:
The main issue was whether the unvulcanised sandwiched fabric assembly, emerging as an intermediate product in the manufacture of rubberised canvas footwear, is dutiable. The Commissioner of Central Excise, Delhi, confirmed the demand of duty by treating the intermediate product as double textured rubberised fabric and classifying it under Heading 59.05 of the Central Excise Tariff. The appellants argued that the product was in a raw, crude, and elementary stage, not vulcanised, and had a short shelf life, making it unfit for sale or marketing. The adjudicating authority's finding that vulcanisation occurred at the stage of emergence of rubberised fabric was contested by the appellants, who maintained that vulcanisation only took place during the final footwear manufacturing process.

2. Marketability of the Intermediate Product:
The appellants contended that the intermediate product was not marketable due to its short shelf life and unvulcanised state. They provided expert opinions and affidavits to support their claim. The Commissioner, however, based on his observations and the fact that the product was sent to job workers, concluded that the product was marketable. The Tribunal held that the burden of proving marketability lies with the Revenue, which failed to produce any evidence to counter the appellants' stand. The Tribunal referred to several case laws, including decisions of the Calcutta and Delhi High Courts in the appellants' own cases, which supported the non-marketability of unvulcanised rubberised fabrics.

3. Applicability of Notification No. 217/86-C.E.:
The Revenue argued that the exemption under Notification No. 217/86-C.E. was not available as the intermediate excisable product was captively used in the manufacture of exempted footwear. The Tribunal did not provide a detailed finding on this issue due to its decision on the marketability and excisability of the product.

4. Classification under Heading 59.05 of the Central Excise Tariff:
The Commissioner classified the intermediate product under Heading 59.05, which pertains to rubberised textile fabrics. The appellants argued that the product did not meet the criteria for this classification as it was not vulcanised and was in an unmarketable state. The Tribunal's decision on the marketability and excisability of the product influenced the classification issue.

5. Invocation of the Extended Period of Limitation:
The appellants argued that the extended period of limitation was not applicable as the facts were known to the Revenue, and there was no suppression of information. They cited the ongoing disputes before various High Courts and the favorable verdicts as reasons for their belief that the product was not dutiable. The Tribunal did not provide a detailed finding on this issue due to its decision on the marketability and excisability of the product.

6. Imposition of Penalty:
The Commissioner imposed a penalty of Rs. 1 crore on the appellants. The appellants challenged the imposition of the penalty, arguing that it was neither justified nor warranted. The Tribunal did not provide a detailed finding on this issue due to its decision on the marketability and excisability of the product.

Separate Judgments:
The Tribunal delivered separate judgments. The Member (Judicial) held that the product was not marketable and hence not excisable, while the Member (Technical) held that the product was marketable and excisable. The matter was referred to a third member, who agreed with the Member (Technical), leading to the rejection of the appeal on merits. However, the issues of limitation, applicability of notification, and quantum of penalty were left open for rehearing.

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