1995 (2) TMI 67 - SC - Central Excise

Whether various goods mentioned in the Schedule of Excise Tariff are dutiable as such or they would be, excisable goods as defined in the Act, only when they are marketable or capable of being marketed? Whether resin or resol produced by the appellants can be considered to be goods for purposes of levy under the Act? Held that - Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc. is linked with marketability. An article does not become goods in the common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. Since the test of marketability or capable of being marketable applies even to those goods which are mentioned in the tariff item the intermediate resin produced by the appellants which are mentioned as resols under Tariff Item No. 15A were not exigible to duty. The finding of the Tribunal that once the product manufactured by the appellants answered the chemical description of the product under Tariff Item 15A it was assessable to duty whether it was marketable or not was thus not well founded.In the result, these appeals succeed and are allowed. The question of law raised by the appellants is decided by saying that resin at A stage which are chemically known as resols could not be subjected to duty. In favour of assessee.

Issues Involved:
1. Whether various goods mentioned in the Schedule of Excise Tariff are dutiable as such or only when they are marketable or capable of being marketed.

Issue-wise Detailed Analysis:

1. Dutiability of Goods under Excise Tariff:
The primary issue addressed in this judgment is whether goods listed in the Excise Tariff Schedule are automatically dutiable or if they must be marketable or capable of being marketed to be considered 'excisable goods' as defined in the Central Excises & Salt Act, 1944.

Analysis:
The court emphasized that for goods to be dutiable under the Act, they must be marketable or capable of being marketed. This principle was reaffirmed in the case of Indian Cable Co. Ltd. v. Collector of Central Excise, where it was held that marketability is a prerequisite or "sine qua non" for the levy of duty. The court noted that the appellants manufactured laminated sheets and used intermediate products like phenol formaldehyde, which were not stable and were captively consumed. The Department did not initially levy duty on these intermediate products as they were not marketed or sold.

2. Marketability of Intermediate Products:
The court examined whether intermediate products, such as the resin solutions used by the appellants, could be considered marketable and thus dutiable.

Analysis:
The appellants contended that the intermediate products were unstable and not marketable in their semi-processed condition. The Assistant Collector found the solutions unstable but suggested they could be marketable with stabilizers. However, the Collector (Appeals) and the Tribunal had differing views on whether these products were excisable. The Tribunal concluded that the intermediate products, being chemically known as 'resols,' were dutiable despite their lack of marketability in their current state.

3. Legal Precedents on Marketability:
The judgment reviewed various legal precedents to establish the necessity of marketability for excise duty.

Analysis:
The court referred to several cases, including Union of India v. Delhi Cloth & General Mills Co. Ltd., South Bihar Sugar Mills Ltd. v. U.O.I., and A.P. State Electricity Board v. Collector of C. Ex., which consistently held that goods must be marketable to attract excise duty. The court reiterated that the mere mention of an item in the tariff schedule does not make it dutiable unless it is marketable or capable of being marketed.

4. Captive Consumption and Marketability:
The court addressed the issue of captive consumption and its impact on the dutiability of goods.

Analysis:
The amendment of Rules 9 and 49 in 1979 made captively consumed goods dutiable. However, the court clarified that this presumption could be rebutted if it was shown that the goods were neither marketable nor capable of being marketed. The court cited Bhor Industries Ltd. v. C.C. E. and Collector of Central Excise v. Ambalal Sarabhai Enterprises to support the view that even captively consumed goods must meet the marketability test to be dutiable.

5. Conclusion on Dutiability of Resins:
The court concluded that the resins produced by the appellants, known as 'resols,' were not dutiable as they did not meet the marketability criteria.

Analysis:
The court found that the intermediate resin solutions were unstable and not marketable without further processing. The Assistant Collector's finding that the solutions were not marketable without stabilizers was upheld. The court concluded that the resins, even if they could last for 15 days under controlled conditions, were not marketable or capable of being marketed. Therefore, they could not be subjected to excise duty.

Judgment:
The appeals were allowed, and it was decided that the resin at 'A' stage, chemically known as 'resols,' could not be subjected to duty. The appellants were entitled to their costs.

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