1995 (3) TMI 200 - AT - Central Excise

Summary

Issues Involved:
1. Classification of adhesives under Chapter Heading 3501.00 and 3505.90.
2. Marketability and dutiability of the adhesives.
3. Violation of principles of natural justice due to non-supply of the Chemical Examiner's report.
4. Burden of proof regarding marketability.

Issue-wise Detailed Analysis:

1. Classification of Adhesives:
The department issued show-cause notices demanding the classification of casein-based and starch-based adhesives under Chapter Heading 3501.00 and 3505.90, respectively. The appellants contested this classification, arguing that their products were not casein and did not fall under Chapter 35. They emphasized that the adhesives were prepared for immediate use and lacked marketability due to their limited shelf life.

2. Marketability and Dutiability:
The appellants argued that the adhesives were not marketable as they were not bought and sold in the market and lacked a shelf life. The department, however, maintained that the products were goods and thus dutiable. The Collector held that the burden of proving non-marketability lay with the appellants, asserting that the products were mentioned in the tariff heading and thus presumed to be goods.

The Tribunal, referring to several Supreme Court judgments, reiterated that the burden to prove marketability and dutiability lies with the revenue. It was emphasized that simply being listed in the tariff schedule does not inherently make a product dutiable unless its marketability is established (Bhor Industries Ltd. v. Collector of Central Excise, 1989 (40) E.L.T. 280 (S.C.)).

3. Violation of Principles of Natural Justice:
The appellants claimed a denial of natural justice as the Chemical Examiner's report was not provided to them. The Vice President noted that the non-supply of the report justified the appellants' plea of violation of natural justice. Consequently, the Vice President set aside the impugned orders and remanded the matter for de novo consideration, directing the adjudicating authority to provide the Chemical Examiner's report and grant a personal hearing.

4. Burden of Proof Regarding Marketability:
The Tribunal held that the burden of proving marketability lies with the revenue, not the assessee. The Tribunal noted that the department failed to provide evidence of the adhesives' marketability. Consequently, the department's case remained unsubstantiated, and the appeal was allowed.

Separate Judgments Delivered:

Vice President's View:
The Vice President agreed with the departmental view that the onus to prove non-marketability shifts to the assessee if the product is specified in the tariff schedule. However, he acknowledged the denial of natural justice due to the non-supply of the Chemical Examiner's report and remanded the matter for de novo consideration.

Third Member's Opinion:
The third Member concurred with the Judicial Member, emphasizing that the burden of proving marketability lies with the department. Since the department failed to provide evidence of marketability, the appeal was allowed, and the impugned order was set aside.

Final Order:
In view of the majority opinion, the department's case was deemed unsubstantiated. The impugned order was set aside, and the appeal was allowed.