2009 (4) TMI 321 - AT - Central Excise

Compounded rubber Marketability of a product manufactured in the process of manufacture of another product - The appellant disputed the claim of the Department while contending that preparation of compounded rubber was not manufacturing activity which can be subjected to excise duty, and it was non-marketable. - The decision is in the matter of Ralson (India) Ltd. v. C.C.E, Chandigarh-I wherein, after considering the various contentions and the relevant aspects of the matter as well as the test reports, it was held that a crucial evidence of chemical test report coupled with oral evidence of the Assistant Chemical Examiner and the assessee s admission of transporation and transportability of the product in question clearly distinguish the same from the rubberised fabric, besides that compounded rubber has much longer shelf life and even can be transported from one unit to another Hence, the point that the compounded rubber is a marketable and therefore, excisable is well settled - The question of seeking exemption can arise only after the product is admitted to be excisable one and thereupon the assessee can avail the benefit under an exemption notification. The question of exemption from liability of excise duty can arise only in case of excisable goods. In other words, the question of claiming exemption can arise only in the case of excisable goods which are specifically exempted from the duty liability under a notification. Fact that appellants claimed for exemption proves that they were considering compounded rubber to be excisable product Demand is sustainable

Summary

Issues:
1. Interpretation of Notification No. 152/87-C.E. and Notification No. 64/94-C.E.
2. Classification of compounded rubber as an excisable product.
3. Marketability of compounded rubber.
4. Consideration of exemption from excise duty.
5. Applicability of previous judicial decisions on marketability.

Detailed Analysis:
1. The appeal involved the interpretation of Notification No. 152/87-C.E. and Notification No. 64/94-C.E. The appellant, engaged in manufacturing rubber tyres and tubes, availed exemption under Notification No. 152/87 until February 1994. Subsequently, Notification No. 64/94 rescinded the earlier exemption, subjecting compounded rubber to excise duty from 1-3-94. However, a subsequent notification restored the exemption from 17-3-94. The issue was whether the compounded rubber was liable for excise duty during the interim period.

2. The main contention was the classification of compounded rubber as an excisable product. The appellant argued that compounded rubber was not marketable and, therefore, not subject to excise duty. The Commissioner (Appeals) reduced the duty amount based on comparative cost prices but did not address the marketability issue. The Tribunal referenced a previous decision (Ralson (India) Ltd. case) establishing that compounded rubber was marketable and excisable, based on chemical test reports and transportability evidence.

3. The crucial issue was the marketability of compounded rubber. The Tribunal held that marketability depends on factors like mobility and utility, rejecting the appellant's argument that compounded rubber, manufactured during a continuous process, was non-marketable. The decision in Ralson (India) Ltd. case confirmed that compounded rubber was marketable and excisable, distinguishing it from non-marketable products.

4. The consideration of exemption from excise duty was pivotal. The appellant's claim for exemption implied acceptance of compounded rubber as excisable. The Tribunal noted that the exemption could only apply to excisable goods specifically exempted. The appellant's postulation on marketability post-exemption gaps was deemed an afterthought, as there was no qualitative change in the product. The Tribunal emphasized that exemption claims are valid only for excisable products.

5. The Tribunal also referenced the Everest Rubber Works case, affirming that marketability is a crucial factor in classifying a product as excisable. Previous judicial decisions like Ralson (India) Ltd. and Everest Rubber Works cases supported the marketability and excisability of compounded rubber. The Tribunal concluded that compounded rubber was marketable, justifying the duty demand for the period without exemption. The appeal was dismissed based on the marketability and excisability of the product.