2014 (6) TMI 859 - HC - Central Excise

Captive consumption - marketability - non-woven fabric - Excise duty, interest and penalty - Assessee engaged in the manufacture of Jute backed Floor Coverings - Jute backed Floor Coverings are exempted from the payment of duty - Assessee contended that non-woven fabric which is cleared in market is different from the fabric which is captively consumed and the same is not marketable as such, hence it is not excisable Whether under the facts and circumstances of this case, the impugned order passed by the CESTAT, holding that the loosely assembled fibre web in roll form emerging at a stage before the exempted finished jute carpet, is marketable and therefore liable to duty, without considering the relevant records and material submitted by the Appellants, is correct and sustainable in law. Held that - CESTAT in the impugned order comes to a finding that there is no dispute about the fact that the impugned product goes through first pass only whereas goods cleared from the factory go through second pass. Therefore, compactness/tensile strength/dimensional stability of non-woven fabrics cleared from factory is much more than the intermediate product. Having come to the aforesaid conclusion and itself making a distinction between the impugned product and the non-woven fabrics that were being cleared by the Appellant on payment of the requisite Excise Duty, we find that the CESTAT misdirected itself by shifting the burden on the Appellant of establishing that the impugned product is not marketable. Department led no evidence whatsoever to establish that the impugned product in the form that it is, is marketable and therefore dutiable under the provisions of the Act. Furthermore, we find that the CESTAT has not taken into consideration several orders passed by it earlier in similar matters such as that of the Appellant and which have been referred to by us, earlier in this judgement - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of whether the intermediate product emerging during the manufacture of jute carpets is marketable and hence liable to Excise Duty.

Detailed Analysis:

1. The appeal challenges the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) confirming the demand for Excise Duty on the intermediate product used in the manufacture of jute carpets. The Department alleged that the product attracted duty as it was marketable, while the Appellant denied marketability and contested the demand.

2. The Appellant, a manufacturer of products under Central Excise Tariff Act, was accused of not paying duty on the intermediate product used for jute carpets. The Department claimed the product attracted duty, while the Appellant argued it was not marketable. Show cause notices were issued, leading to the appeal.

3. The CESTAT initially allowed the Appellant's appeal but later confirmed the demand for Excise Duty. The Appellant contended that the CESTAT misdirected itself by considering only selective evidence and not acknowledging the lack of marketability of the product, as supported by the Appellant's General Manager's affidavit.

4. The Appellant argued that the impugned product lacked strength and stability to be marketable, contrary to the CESTAT's finding. They also pointed out previous CESTAT orders supporting their stance that the intermediate product was not marketable, questioning the correctness of the CESTAT's decision.

5. The Respondent supported the CESTAT's order, asserting that the impugned product was similar to nonwoven fabrics cleared by the Appellant, making it dutiable. The main issue revolved around whether the impugned product was marketable, a contention strongly opposed by the Appellant.

6. The Court analyzed the evidence, particularly an affidavit highlighting the deficiencies in the impugned product that rendered it non-marketable. The CESTAT's failure to consider this evidence in its entirety was noted, indicating a misdirection in its decision-making process.

7. The Court emphasized that the burden of proof regarding marketability rested on the Department, which failed to provide evidence supporting the marketability of the impugned product in its current form. The lack of evidence and failure to consider previous CESTAT orders on similar matters further weakened the CESTAT's decision.

8. Consequently, the Court allowed the appeal, setting aside the CESTAT's order and remanding the matter for fresh consideration. Both parties were given the opportunity to present additional evidence before the CESTAT for a comprehensive evaluation of the marketability of the impugned product. No costs were awarded in the judgment.