2002 (11) TMI 563 - Commissioner - Central Excise

Summary

Issues Involved:
Manufacture of pesticidal chemical slurry for captive use, chargeability to Central Excise duty, marketability of the product, eligibility for CENVAT Credit, SSI Exemption qualification.

Manufacture of Pesticidal Chemical Slurry for Captive Use:
The case involved the appeal against the Order-in-Original alleging manufacture of pesticidal chemical slurry by the appellant. The Assistant Commissioner confirmed the demand under Central Excise Act and imposed a penalty. The appellant contended that the slurry manufactured for captive use did not amount to the manufacture of another dutiable product. The appellant argued that the admixture of insecticides or pesticides and addition of water did not squarely fall under the provisions of Chapter Note 2 of Chapter 38 of the Schedule. The appellant emphasized that no manufacture had occurred for chargeability to duty.

Marketability of the Product:
The key issue was the marketability of the slurry. The appellant argued that for chargeability to duty, it was crucial to establish the marketability of the product. They relied on a Supreme Court decision emphasizing the twin requirements of manufacture and marketability for dutiability. The appellant contended that there was no evidence presented by the department to establish the commercial acceptability of the slurry in the market. The absence of proof regarding the commercial identity of the slurry in the market was highlighted as a significant factor in determining its dutiability.

Eligibility for CENVAT Credit and SSI Exemption:
The appellant also raised the issue of eligibility for CENVAT Credit and SSI Exemption. They claimed that even if the goods were held dutiable, they should qualify for CENVAT Credit. Additionally, the appellant sought the benefit of SSI Exemption based on the annual turnover of the item. The appellant argued that the impugned order demanding duties on the slurry and imposing a penalty should be set aside as not sustainable.

Judgment:
The Commissioner upheld the finding that the slurry manufactured by the appellant for captive use amounted to manufacture under Chapter Note 2 of the Schedule due to the addition of chemicals and inert carriers. However, the Commissioner noted that there was a lack of material evidence to establish the commercial acceptability of the slurry in the market. Citing the importance of marketability for dutiability, the Commissioner set aside the order demanding duties on the slurry. The penalty imposed was also deemed unsustainable, and the appeal was allowed in favor of the appellant.