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2024 (6) TMI 1007 - AT - Central ExciseClassification of goods - intermediate goods - marketable products or not - Polyester/ cotton rove twisted yarn and Nylon/ cotton rove twisted yarn - to be classified under Sub heading No.5608.00 or under sub heading 5607.90? - demand of duty and equal penalty. Marketability - HELD THAT - There is a clear finding that the goods are not available in the open market. If the appellant manufactures excess of the impugned products, they would not be able to sell these products in open market as there are no buyers to purchase the same. So, also in case they have shortage of these intermediate products, they would not be able to buy it from the market as it is not available in the market. It is very much clear that the goods are not marketable - In the case of CIMMCO BIRLA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2015 (8) TMI 582 - SC ORDER , the Hon ble Apex Court held that the goods would be exigible to excise duty only if it is proved that they are marketable. The burden lies on the department to demonstrate that the goods are marketable. The Tribunal in the case of M/S. NEEDLE INDUSTRIES (INDIA) PVT. LTD. VERSUS CCE, SALEM 2017 (4) TMI 1219 - CESTAT CHENNAI had occasion to consider a similar issue. The goods in question was Gold Potassium Cyanide solution and the issue considered was the marketability of this item. It was brought out from evidence that the said item is not only highly poisonous because of the presence of its cyanide molecule, but also unstable. The Tribunal held that the goods cannot be said to be marketable. The intermediate goods namely polyester / nylon / cotton rove twisted yarn are not marketable items. This issue is answered in favour of the assessee. Classification of intermediate products - HELD THAT - The issue of marketability is decided in favour of assessee. Only if the goods are marketable, they fall into the definition of excisable goods. The levy of excise duty is attracted only for manufacture of excisable goods. As we have already held that the goods are not marketable and therefore not excisable goods, the issue of classification is of no consequence and the demand of duty cannot sustain - the demand of duty confirmed in the impugned order is set aside. Penalty - HELD THAT - The adjudicating authority has imposed equal penalty under Section 11 AC of the Central Excise Act, 1994. Interestingly, there is no proposal in the show cause notice to impose penalty. Moreover, the appeals arise out of the finalization of assessment. The dispute being interpretation in nature and also with regard to classification of the impugned goods, the imposition of penalty is totally unwarranted. The impugned orders are set aside - Appeal allowed.
Issues Involved:
1. Marketability of intermediate products. 2. Classification of intermediate products. 3. Demand of duty and imposition of penalty. 4. Appropriation of sanctioned rebate amount. Summary: 1. Marketability of Intermediate Products: The primary issue was whether the intermediate products, namely polyester cotton rove twisted yarn and nylon cotton rove twisted yarn, were marketable. The Tribunal emphasized that the issue of classification would only be relevant if the goods were marketable. The adjudicating authority and Commissioner (Appeals) failed to provide evidence proving marketability, merely relying on various judgments. The appellant argued that these goods were never sold and were only used captively. The Tribunal concluded that the goods were not marketable, referencing several cases, including Cimmco Birla Ltd. Vs. Commissioner of Central Excise, Jaipur and Macro Print Engineers (India) P Ltd. Vs. Commissioner of C. Ex., & S.T., Coimbatore, which established that goods must meet the twin tests of manufacture and marketability to be excisable. 2. Classification of Intermediate Products: Given the finding that the goods were not marketable, the Tribunal held that the issue of classification was irrelevant. Since the goods were not marketable, they did not qualify as excisable goods, and thus, the demand for duty could not be sustained. 3. Demand of Duty and Imposition of Penalty: The demand for duty and the imposition of an equal penalty u/s 11 AC were set aside. The Tribunal noted that the show cause notice did not propose a penalty and that the dispute was interpretative in nature, relating to the classification of the goods. Consequently, the imposition of the penalty was deemed unwarranted. 4. Appropriation of Sanctioned Rebate Amount: The appellant's rebate claims, which were sanctioned but appropriated towards the pending arrears, were also addressed. Since the Tribunal set aside the demand of duty and penalty, the appropriation of the rebate amount was deemed unsustainable. Conclusion: The appeals were allowed with consequential reliefs, and the orders confirming the demand of duty, imposition of penalty, and appropriation of the rebate amount were set aside.
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