1990 (2) TMI 200 - AT - Central Excise

Summary

Issues Involved:
- Whether the activity of heating duty-paid oleum to obtain SO3 amounts to manufacturing activity.
- Whether SO3 in gaseous form obtained during the continuous and integrated process of manufacturing Organic Surface Active Agents (OSAA) is commercially known as SO3.
- Whether duty of excise can be levied on an article admitted to be not marketable.
- Whether the extended period of limitation under Section 11A of the Act is applicable.

Detailed Analysis:

1. Whether the activity of heating duty-paid oleum to obtain SO3 amounts to manufacturing activity:
The appellants argued that heating oleum to release SO3, which is then used in the manufacture of OSAA, does not constitute a manufacturing activity. They contended that the process merely involves heating oleum to release SO3, which is then transferred to the sulphonator. This activity, according to the appellants, does not create a new product but simply releases an already existing component (SO3) from oleum. The Assistant Collector, however, held that the process does constitute manufacturing as it results in the production of SO3, a distinct product from oleum. The Tribunal agreed with the Assistant Collector, noting that the process of heating oleum to obtain SO3 was a manufacturing activity, as it resulted in the creation of a distinct and different article.

2. Whether SO3 in gaseous form obtained during the continuous and integrated process of manufacturing OSAA is commercially known as SO3:
The appellants argued that the SO3 obtained in gaseous form during the manufacturing process was not known to the trade and was not marketable. They supported their argument with affidavits from technical experts, which were not rebutted by the Department. The Tribunal noted that the burden of proof to establish marketability lies with the Revenue. The Tribunal found that the SO3 in gaseous form was not known to commerce or technology as Sulphuric anhydride and thus was not marketable. The Tribunal relied on the decision in Tata Oil Mills Co. Ltd. v. Collector of Central Excise, which held that SO3 in gaseous form was not marketable and, therefore, not excisable.

3. Whether duty of excise can be levied on an article admitted to be not marketable:
The Tribunal reiterated that for an article to be excisable, it must be marketable. Since the SO3 in gaseous form was not marketable, it could not be subjected to excise duty. The Tribunal cited several decisions, including Bhor Industries Ltd. v. Collector of Central Excise and Union Carbide India Ltd. v. Union of India, which established that non-marketable intermediate products are not liable for excise duty.

4. Whether the extended period of limitation under Section 11A of the Act is applicable:
The appellants contended that the extended period of limitation under Section 11A could not be invoked as the facts were within the knowledge of the Department, and the goods were manufactured and used under the control of the authorities. The Tribunal did not find it necessary to address this issue in detail, as it held that the SO3 in gaseous form was not excisable and thus the question of limitation did not arise.

Conclusion:
The Tribunal set aside the impugned orders and allowed both appeals, granting consequential relief to the appellants. The Tribunal concluded that the process of heating oleum to obtain SO3 was a manufacturing activity, but the SO3 in gaseous form was not marketable and, therefore, not excisable. Consequently, the extended period of limitation under Section 11A was not applicable.