2000 (11) TMI 163 - SC - Central Excise

Whether glass lumps are goods as understood in excise law? Held that - It is clear that the marketability of the goods is an essential ingredient of excisable goods for being subjected to the excise duty. That the goods are marketable, has to be proved by the excise authorities. In this case the appellants filed affidavits of certain concerns showing that they are not interested in purchasing glass lumps . No evidence whatsoever has been brought on record by the excise authorities to show that the said goods are marketable in the sense stated above. Based on the evidence of affidavits filed by the appellant it is sought to be argued that the deponents may not be interested in purchasing glass lumps but it does not disprove marketability of the goods. We are unable to accept this contention. The burden of showing that the goods are marketable is on the Revenue. In the absence of any proof brought on record by the Revenue that glass lumps are marketable or capable of being marketed, it is not possible to hold that the test of marketability is satisfied. For these reasons we set aside the order of the CEGAT under challenge and allow the appeal with costs.

Summary

Issues:
1. Classification of 'glass lumps' as excisable goods under specific items.
2. Validity of demand notice for excise duty without a show cause notice.

Analysis:

Issue 1: Classification of 'glass lumps' as excisable goods
The main appeal revolves around the classification of 'glass lumps' as excisable goods under different items pre and post a specific date. The appellant, a manufacturer of 'glass wool' and 'glass staple fibre,' argued that 'glass lumps' are merely by-products, not known in the market by the same name, and not marketable goods, thus should not be treated as excisable goods. On the other hand, the Revenue contended that since the appellant is the sole manufacturer of 'glass lumps' and they are captively consumed in the manufacturing process, marketability need not be insisted upon for levying excise duty. The Supreme Court emphasized that for goods to be excisable, they must be capable of being bought and sold in the market, establishing marketability as an essential factor. The burden of proving marketability lies with the excise authorities, and in this case, no evidence was presented to demonstrate that 'glass lumps' were marketable. As a result, the Court set aside the order of the CEGAT and allowed the appeal.

Issue 2: Validity of demand notice without a show cause notice
The connected appeal dealt with the validity of a demand notice issued for excise duty without being preceded by a show cause notice. The appellant challenged the notice, arguing that it was not sustainable in law. However, since the decision in the connected appeal depended on the main appeal, and the main appeal was allowed in favor of the appellant based on the classification issue, the question of the validity of the demand notice became infructuous. Consequently, the Court dismissed the connected appeal as it no longer survived in light of the decision in the main appeal.

In conclusion, the Supreme Court clarified the importance of marketability in determining excisability of goods and highlighted the necessity for excise authorities to prove marketability. The judgment emphasized that goods must be capable of being bought and sold in the market to attract excise duty, and without evidence of marketability, the imposition of excise duty cannot be justified.