1996 (7) TMI 257 - AT - Central Excise

Summary

Issues Involved:
1. Whether "Milk Crumb" is excisable and dutiable under Tariff Item No. 68.
2. Whether "Milk Crumb" qualifies as "goods" under the Central Excise Law.
3. Marketability of "Milk Crumb".
4. Burden of proof regarding marketability.
5. Impact of inter-factory transfer on excisability.
6. Relevance of the product's shelf life to its marketability.

Detailed Analysis:

1. Whether "Milk Crumb" is excisable and dutiable under Tariff Item No. 68:
The appeal from the Revenue questioned whether "Milk Crumb" is excisable and dutiable under Tariff Item No. 68. The Collector had previously determined, relying on the Supreme Court judgment in Union Carbide India Ltd. - 1987 (24) E.L.T. 169 (SC), that "Milk Crumb" was not excisable as it could not be called 'goods' and was not marketable. The Revenue contended that the movement of "Milk Crumb" between factories made it excisable under Rules 9 and 49 of the Central Excise Rules.

2. Whether "Milk Crumb" qualifies as "goods" under the Central Excise Law:
The primary issue was whether "Milk Crumb" could be considered as "goods". The Collector's judgment, supported by the Supreme Court's decision in Union Carbide India Ltd., held that "Milk Crumb" was not "goods" as it was not marketable. The respondents argued that "Milk Crumb" was an intermediary product not sold or capable of being sold in the market.

3. Marketability of "Milk Crumb":
The Tribunal examined whether "Milk Crumb" was marketable. The respondents argued that the product was not marketable in India and provided an affidavit from P.K. Irani of Great Western Stores to support this claim. The Revenue failed to provide evidence that "Milk Crumb" was sold in the market, either domestically or internationally, as chocolate or any other product. The Tribunal upheld the Collector's belief that "Milk Crumb" was not marketable and thus not "goods".

4. Burden of proof regarding marketability:
The burden of proving marketability was on the Department. The Supreme Court in CCE v. Ambalal Sarabhai Industries - 1989 (43) E.L.T. 214 (SC) held that the Department must prove that the goods were marketable. The Tribunal found that the Department had not discharged this burden, as no evidence was provided to show that "Milk Crumb" was marketed.

5. Impact of inter-factory transfer on excisability:
The Revenue argued that the movement of "Milk Crumb" from one factory to another indicated its marketability. However, the respondents clarified that the units were not separate profit centers and that the transfers were inter-departmental, not commercial sales. The Tribunal agreed with the respondents, stating that inter-factory transfers did not establish marketability.

6. Relevance of the product's shelf life to its marketability:
The Revenue claimed that the long shelf life of "Milk Crumb" indicated its marketability. The Tribunal noted that while shelf life is a factor in determining marketability, it is not the sole criterion. The Kerala High Court in Superintendent of Central Excise v. Ancher Treads Pvt. Ltd. - 1993 (65) E.L.T. 480 (Ker.) held that even products with long shelf life, like masticated rubber, were not necessarily excisable.

Conclusion:
The Tribunal upheld the Collector's order, rejecting the appeal from Revenue. It concluded that "Milk Crumb" was not marketable and thus not "goods" under the Central Excise Law. Consequently, it could not be classified under Tariff Item No. 68, and the appeal from Revenue was dismissed.