1999 (9) TMI 852 - AT - Central Excise

Crushed clay/Batch mixture - Marketability - Dutiability - SSI Exemption - Value of clearances

Summary

Issues:
- Whether crushed clay manufactured by Appellant No. 2 for use in the manufacture of glazed stoneware pipes by Appellant No. 1 is excisable and dutiable.

Detailed Analysis:

Issue 1: Excisability and Duty Liability of Crushed Clay:
- The Collector confirmed the duty demand on Appellant No. 1 and Appellant No. 2, holding that the process of crushing, grinding, and sieving the clay amounts to manufacture, making the crushed clay marketable. The Tribunal's decision in Ajanta Marbles and Chemicals v. C.C.E. was cited to support this view.
- The Appellants argued that crushed clay and Batch Mixture are the same, emphasizing that the impugned product is not marketable. They presented evidence that the Batch Mixture is not a standard item available in the market. Reference was made to a previous case where marketability of a similar product was questioned.
- The Appellants contended that the demand is time-barred under Section 11A(1) of the Central Excise Act and highlighted that no deliberate withholding of information occurred. They also cited favorable decisions in similar cases regarding the interpretation of law.
- Ultimately, the Tribunal found that the Department failed to prove the marketability of the crushed clay. The Appellants' argument that no excise duty is leviable under Explanation III to Notification No. 175/86 was upheld, as the product was used as an input for further manufacture of specified goods within the factory, exempting it from duty liability.

Issue 2: Application of Explanation III to Notification No. 175/86:
- The Tribunal analyzed Explanation III, which states that clearances of specified goods used for further manufacture within the factory of production shall not be considered for calculating aggregate clearances under the notification. Citing previous cases, it was established that the final product need not avail exemption under the same notification, as long as it is a specified good. The Tribunal ruled in favor of the Appellants based on this explanation, exempting the product from duty liability.

Conclusion:
- The appeals were allowed on the grounds of marketability and the applicability of Explanation III to Notification No. 175/86. The demand for duty on the crushed clay used in the manufacture of stoneware pipes was deemed not sustainable, and the Appellants were relieved from duty liability.