1989 (8) TMI 72 - SC - Central Excise

Whether starch hydrolysate was actually marketable? Held that - In view of the fact that there was positive evidence that starch hydrolysate was never marketed and in view of the further fact that, in the light of the nature of the goods being highly unstable, it is highly improbable that the goods were capable of being marketed and there being, in spite of opportunities, no evidence produced at all that the goods, in fact, were capable of being marketed, in our opinion, it must be held as did the Tribunal that the starch hydrolysate was not dutiable under the Act. As the Revenue has failed to discharge its onus to prove that starch hydrolysate was dutiable. In the premises, the Tribunal cannot be said to have committed any error. The appeal must, therefore, fail and is, accordingly, dismissed.

Issues Involved:
1. Marketability of starch hydrolysate.
2. Classification of starch hydrolysate under the Central Excise Tariff.
3. Liability to excise duty on starch hydrolysate.
4. Burden of proof on the Revenue regarding marketability.
5. Tribunal's approach and findings.

Issue-wise Detailed Analysis:

1. Marketability of Starch Hydrolysate:
The primary issue was whether starch hydrolysate, produced and used captively by the respondent, was marketable. The respondent contended that starch hydrolysate was not "goods" as it was not marketable due to its highly unstable nature, leading to fermentation and decomposition within a couple of days. The Tribunal found that starch hydrolysate was not and never was a marketable commodity, thus not qualifying as "goods" on which excise duty could be charged. The Supreme Court upheld this finding, emphasizing the necessity for goods to be marketable to attract excise duty.

2. Classification of Starch Hydrolysate under the Central Excise Tariff:
The Revenue argued that starch hydrolysate should be classified under Item No. 1E of the Central Excise Tariff, which covers glucose in any form, including liquid glucose. The respondent contended that starch hydrolysate was not glucose and, even if dutiable, it would not fall under Item No. 1E. The Tribunal and the Supreme Court found that the Revenue failed to establish that starch hydrolysate was known in the market as glucose or glucose syrup, thus it could not be classified under Item No. 1E.

3. Liability to Excise Duty on Starch Hydrolysate:
The Collector of Central Excise had initially held that starch hydrolysate was glucose and levied excise duty and a penalty on the respondent. The Tribunal set aside this order, concluding that starch hydrolysate was not marketable and, therefore, not liable to excise duty. The Supreme Court affirmed the Tribunal's decision, reiterating that excise duty is levied on goods that are marketable or capable of being marketed.

4. Burden of Proof on the Revenue Regarding Marketability:
The Supreme Court emphasized that the burden of proof lies on the Revenue to establish that the goods in question are marketable. The Tribunal noted that the Revenue did not conduct any market inquiry or provide evidence to prove that starch hydrolysate was marketed or marketable. The Supreme Court agreed, stating that the Revenue failed to discharge its onus to prove the marketability of starch hydrolysate.

5. Tribunal's Approach and Findings:
The appellant argued that the Tribunal misdirected itself by not considering whether starch hydrolysate was conceptually marketable. The Supreme Court, however, found that the Tribunal applied the correct test by considering whether starch hydrolysate was actually marketable, based on evidence. The Tribunal's reliance on the affidavit of Shri Khandor and the lack of contrary evidence from the Revenue supported the conclusion that starch hydrolysate was not marketable. The Supreme Court upheld the Tribunal's findings, dismissing the appeal.

Conclusion:
The Supreme Court dismissed the appeal, affirming the Tribunal's decision that starch hydrolysate was not marketable and, therefore, not liable to excise duty. The Revenue failed to provide evidence of marketability, and the Tribunal's approach in evaluating the evidence was deemed appropriate. The appeal was dismissed with no order as to costs.

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