1987 (7) TMI 101 - HC - Central Excise

Intermediate product which is not marketable is not liable to excise duty - Evidence - Classification of goods

Summary

Issues:
1. Whether the manufacturing process of V. Link Beltings involves the production of "cotton fabrics rubberised" subject to excise duty.
2. Whether the product in question is marketable and saleable, thus attracting excise duty.

Analysis:

Issue 1:
The petitioners, a manufacturing company, argued that the intermediate product used in the manufacture of V. Link Beltings, namely sheetings, is distinct from "cotton fabrics rubberised" as it lacks vulcanization at the stage of rubber compound application. They contended that the sheetings are not marketable or saleable goods but are solely for further processing. The Central Excise Inspector imposed excise duty alleging the production of "cotton fabrics rubberised." Despite representations and appeals, the duty demand persisted. The petitioners cited legal precedents, including the Supreme Court's decision in Union of India v. Delhi Cloth and General Mills, to support their stance that non-marketable intermediate products are not subject to excise duty. The court agreed with this argument, emphasizing that the sheetings did not constitute a finished product with marketability or serviceability, thereby ruling in favor of the petitioners.

Issue 2:
The department contended that the product was marketable based on an inspector's opinion, suggesting potential uses in vehicle bodybuilding and heavy machinery. However, the inspector's assessment relied on hearsay and lacked concrete evidence of marketability. The court concurred with the petitioners' objection to the hearsay opinion, noting the absence of factual basis for the marketability claim. Consequently, the court allowed the petition, directing the discharge of bank guarantees and refunding the excise duty paid by the petitioners. The court's decision was influenced by the absence of substantial proof of the product's marketability, aligning with the legal principle that excise duty applies to goods intended for sale to consumers.

In conclusion, the court ruled in favor of the petitioners, emphasizing the non-marketability of the intermediate product and the lack of concrete evidence supporting the department's claim of marketability. The judgment highlighted the legal principle that excise duty is applicable to goods intended for sale, underscoring the importance of marketability in determining excise duty liability.