2008 (6) TMI 115 - AT - Central Excise

Woven greig fabric produced during the manufacture of FWC - Demand raised is in respect of heat treated fabric, before it is processed into FWC - Leviability of basic excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 held that duty is leviable unless goods are specifically exempted revenue has not proved marketability of intermediate product - matter remanded to re-determine the marketability of product

Issues Involved:
1. Classification and duty applicability on Fourdrinier Synthetic Wire Cloth (FWC) and heat-treated woven greig fabric.
2. Validity of demand notices and invocation of the correct legislative provisions.
3. Marketability of the heat-treated woven greig fabric.
4. Applicability of exemption notifications for additional duty.
5. Internal consumption and its impact on additional duty levy.

Issue-Wise Detailed Analysis:

1. Classification and Duty Applicability:
The appellants manufacture Fourdrinier Synthetic Wire Cloth (FWC), classifiable under Chapter 59. The dispute involves the classification of heat-treated woven greig fabric, an intermediate product in the manufacture of FWC. The Department classified this intermediate product under Heading 54.09, subjecting it to additional duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

2. Validity of Demand Notices:
The appellants contested the demand notices on the grounds that 16 out of 17 notices did not specify the enactment under which the additional excise duty was demanded. The 17th notice cited the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, while the final order confirmed the demand under the 1957-Act. The Tribunal noted that not quoting the correct enactment is a serious lapse but held that the demands were valid since the basic law (Central Excise Act, 1944) and the applicable rules were invoked, and the rates indicated were those prescribed under the 1957-Act.

3. Marketability of the Heat-Treated Woven Greig Fabric:
The appellants argued that the intermediate product was not marketable, and the Department failed to provide evidence of marketability. The Tribunal acknowledged that marketability is a prerequisite for excisability, as established by the Hon'ble Supreme Court in multiple cases. The Tribunal noted that the earlier decision in the appellant's case did not adequately address the burden of proof on the Department to establish marketability. Consequently, the Tribunal remanded the matter for re-adjudication to determine the marketability of the impugned goods.

4. Applicability of Exemption Notifications:
The appellants claimed exemptions under various notifications (296/79, 28/94, 69/95, 22/96) for the relevant periods. The Tribunal found that these notifications exempted goods under Chapter 54 for internal consumption only if the end-product also fell under Chapters 54 or 55. Since FWC falls under Chapter 59, the exemptions were not applicable.

5. Internal Consumption and Additional Duty Levy:
The appellants contended that additional duty under the 1957-Act could not be levied on goods internally consumed and not sold. The Tribunal rejected this argument, stating that the 1957-Act levies an additional duty of excise on manufactured goods, not sales tax. The Tribunal referred to the Delhi High Court's decision in Parekh Prints, which supported the levy of additional duty on internally consumed goods.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for re-adjudication, specifically to determine the marketability of the heat-treated woven greig fabric. The Department was instructed to provide evidence of marketability and allow the appellants a reasonable opportunity to respond before passing a fresh order. If the product is found not to be marketable, the demand of duty and penalty would not sustain.

(Pronounced in the Court on 11-6-2008)

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