1988 (2) TMI 217 - AT - Central Excise

Issues Involved:
1. Excisability of the goods (co-polymer beads).
2. Classification of the goods under the Central Excise Tariff.
3. Applicability of the limitation period for the demand of duty.

Detailed Analysis:

1. Excisability of the Goods:
The appellants manufactured Ion Exchange Resins, and during this process, co-polymer beads were produced as an intermediary product. The appellants initially paid duty on these beads but later stopped based on departmental advice. The key argument from the appellants was that the co-polymer beads were not marketable or capable of sale to consumers and were used for captive consumption only. They cited several case laws, including Union Carbide India Ltd. v. Union of India and Others [1986 (24) E.L.T. 169], to support their plea that the goods were not excisable as the department failed to prove their marketability.

The Tribunal observed that the co-polymer beads are a stable product, recognized in chemical technology, and capable of being stored and brought to the market for various uses. The Tribunal referenced the Condensed Chemical Dictionary by Gessner G. Hawley to establish the distinct nature of the product. It concluded that the co-polymer beads are excisable as they are recognized as a distinct product capable of being brought to the market, even if specialized and primarily for captive consumption.

2. Classification of the Goods:
The appellants contended that the co-polymer beads did not fall under Tariff Item 15A(1)(ii) as they were neither artificial resins nor plastic materials. They argued that the beads did not possess plasticity or resinuous properties. The Tribunal noted that for goods to fall under Item 15A(1)(ii), they must belong to the genre of artificial or synthetic resins and plastic materials. The Tribunal found no evidence or test results to confirm that the beads had the properties of plastic materials or resins. Thus, it held that the classification under 15A(1)(ii) was not established and directed the Collector (Appeals) to decide the case de novo considering these observations.

3. Applicability of the Limitation Period:
The appellants argued that the demand for duty from January 1979 to March 1981 was barred by limitation under Section 11A of the Central Excises and Salt Act, 1944, as the show-cause notice was issued on 10th September 1981. The Tribunal observed that the appellants had not suppressed any facts and had followed departmental advice regarding duty payment. Therefore, the extended limitation period under the proviso to Section 11A was not applicable. The Tribunal held that the duty could only be recovered for a period of six months preceding the date of the demand.

Separate Judgment by Vice-President (J):
The Vice-President (J) agreed with the limitation aspect but differed on the classification and excisability of the goods. He opined that the DVB beads answered the description under Tariff Item 15A(1)(ii) and upheld their classification under this item without further inquiry into their resinous or plastic properties. He relied on the Supreme Court decision in Dunlop India Ltd. and Madras Rubber Factory v. Union of India and Others 1983 (13) E.L.T. 1566 (S.C.), stating that once an article is classified under a distinct entry, the basis of classification is not open to question.

Conclusion:
The appeal was partially allowed, with the Tribunal holding that:
- Co-polymer beads are excisable goods.
- The classification under 15A(1)(ii) was not established and required further examination.
- The demand for duty was restricted to six months preceding the show-cause notice due to the limitation period.

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