2011 (8) TMI 90 - SC - Central Excise

Classification - Penalty - Rule 9(2) of the Central Excise Rules, 1944 - Intermediary product - There is no dispute with regard to the fact that the carbonless paper or self-copy paper emerges at the intermediate stage and has its own life but the same could be further used in the manufacture of stationery in continuous process - Circular dated 15.10.1991 - A bare glance on the aforesaid circular makes it crystal clear that the intermediary products referred to in the present appeal are not directly relatable to airlines tickets or embarkation/disembarkation cards - heading 48.16 with sub heading 4816.00, we find that it includes within its extent carbon paper, self-copy paper and other copying or transfer papers but other than those articles included in heading 48.09 which is specifically relatable to a particular size of paper and therefore we are in agreement with the findings recorded by the Commissioner that the intermediary products in the present case would fall and are classifiable under heading 48.16 whether the intermediary products are marketable or not - there is enough evidence available on record to show that not only the intermediary products in the present case are capable of being bought and sold in the market but they are in fact sold and purchased in the open market - Appeal is allowed

Summary

Issues Involved:
1. Classification of the intermediary product under the Central Excise Tariff Act.
2. Marketability of the intermediary product.

Issue-wise Detailed Analysis:

1. Classification of the Intermediary Product:

The primary issue revolves around the classification of the intermediary product emerging during the manufacture of carbonless computer stationery. The respondent-assessee argued that their products fall under sub-Headings 4901.90 and 4820.00, attracting NIL duty. The Department, however, classified the intermediary product as "coated paper" under Heading 48.16, which includes carbon paper, self-copy paper, and other copying or transfer papers, attracting a 20% duty.

The Tribunal had previously ruled in favor of the respondent, stating that the intermediary product does not fall under Heading 48.16. However, the Supreme Court disagreed, supporting the Commissioner's classification under Heading 48.16. The Court reasoned that the intermediary product, carbonless paper, is distinct and marketable, and thus should be classified under Heading 48.16, which is more specific than the general description under Heading 48.20.

2. Marketability of the Intermediary Product:

The second issue pertains to whether the intermediary product is marketable. The Department argued that the intermediary product, carbonless paper, is a well-known marketable commodity. The Commissioner supported this, citing evidence that the respondent had sold intermediary products in the market and had also purchased such products from the market, albeit of inferior quality.

The Supreme Court upheld the Commissioner's findings, emphasizing that marketability means the product must be saleable or suitable for sale in its condition. The Court referenced the case of Medley Pharmaceuticals Ltd. vs. The Commissioner of Central Excise and Customs, Daman, which established that marketability is an essential criterion for charging duty. The Court concluded that the intermediary product in question is marketable, as it is generally bought and sold in the market, and there is a demand for such articles.

Conclusion:

The Supreme Court set aside the Tribunal's judgment and restored the Commissioner's order, confirming the classification of the intermediary product under Heading 48.16 and recognizing its marketability. The appeal was allowed, but each party was ordered to bear its own costs.