1996 (4) TMI 225 - AT - Central Excise

Summary

Issues Involved:
1. Marketability of Crude Sorbitol
2. Burden of Proof on Marketability
3. Classification of Crude Sorbitol
4. Time-barred Demand under Section 11A of the Central Excises & Salt Act, 1944

Detailed Analysis:

1. Marketability of Crude Sorbitol:
The primary issue was whether Crude Sorbitol, an intermediate product in the manufacture of Ascorbic Acid, is marketable and thus dutiable. The appellants argued that Crude Sorbitol is a transient product with impurities, limited shelf life, and not sold in the market. They provided affidavits from experts and letters from manufacturers and users to support their claim that Crude Sorbitol is not marketable. The respondent countered with a chemical examiner's report suggesting that Crude Sorbitol is a well-defined organic chemical with a shelf life of about two weeks, implying its potential marketability.

2. Burden of Proof on Marketability:
The appellants contended that the burden of proving marketability lies with the department, citing judgments from the Supreme Court in cases like M/s. Bhor Industries Ltd. and M/s. Ambalal Sarabhai Enterprises. The Tribunal agreed, noting that the department failed to provide evidence that Crude Sorbitol was brought to the market for sale. The Tribunal referenced multiple cases, including Union Carbide India Ltd. and Indian Cable Company Limited, to emphasize that marketability is a prerequisite for dutiability and that the department must prove that the product is marketable.

3. Classification of Crude Sorbitol:
The respondent argued that if Crude Sorbitol is not classifiable under Chapter Heading 29.05, it should be under Heading 38.23 of the Central Excise Tariff Act, 1985, aligning with the HSN Explanatory Notes. However, the Tribunal found that the department did not provide sufficient evidence to classify Crude Sorbitol as marketable goods. The Tribunal highlighted that the appellants had produced comprehensive technical literature and expert affidavits demonstrating that Crude Sorbitol is not a finished product but a transient one.

4. Time-barred Demand under Section 11A of the Central Excises & Salt Act, 1944:
The Collector had initially dropped the demand for duty on Crude Sorbitol, deeming it time-barred under Section 11A. The Tribunal did not delve deeply into this issue, as the primary focus was on the marketability and classification of Crude Sorbitol.

Conclusion:
The Tribunal concluded that Crude Sorbitol is not marketable and thus not dutiable. The department failed to discharge its burden of proving marketability, relying only on the chemical examiner's report and HSN Notes without providing evidence of actual market transactions. The Tribunal set aside the Collector's order that held Crude Sorbitol as goods and dutiable, allowing the appeal.