1999 (9) TMI 159 - AT - Central Excise

Summary

Issues Involved:
1. Excisability of intermediate products.
2. Marketability of intermediate products.
3. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Excisability of Intermediate Products:
The primary issue in both appeals was the excisability of intermediate products (Chloro Acetyl Chloride, 2,6 Diethyl Chloro Acetanilide (DECA), and Chloro Methyl Butyl Ether (CMBE)) generated during the manufacturing process of 'Butachlor.' The Collector, Central Excise, concluded that these products were excisable based on several points:
- As per Note 1(a) to Chapter 29, the products were covered under Chapter 29 even if crude or containing impurities.
- The products were independent and identifiable, supported by ex-factory cost submissions.
- Statements and evidence indicated that intermediate products were isolated, stored, and samples were drawn, implying their potential marketability.
- Chemical Examiner's reports classified DECA and CMBE as organic chemicals.
- The manufacturing process flow charts showed distinct preparation and isolation vessels for these products.
- Correspondence from M/s. Gharda Chemicals suggested potential marketability for these intermediates.

2. Marketability of Intermediate Products:
The Collector (Appeals) set aside the initial adjudication order, arguing that marketability was not established. The Appellant Company contended that the products were incomplete, unstable, and not marketable. They relied on affidavits and statements asserting that the products were in crude form, unstable, and hazardous. The company emphasized that the burden of proving marketability lay with the Revenue, citing several legal precedents.

The Tribunal found that the manufacturing company did not provide sufficient evidence to prove instability or unmarketability. The Chemical Examiner's report, which was not challenged, indicated that the products were stable and had adequate shelf life. The Tribunal also noted that the products' stability at specific temperatures did not preclude marketability. The Tribunal concluded that the products were marketable, even if not actually marketed, as they were suitable for sale and could be sold if another manufacturer adopted similar technology. The letter from M/s. Gharda Chemicals did not explicitly state that the products were unmarketable but rather that the technology had not been commercialized elsewhere.

3. Invocation of the Extended Period of Limitation:
The Tribunal agreed with the Appellant Company that the extended period of limitation was not applicable. The company had disclosed the manufacturing process and intermediate products when applying for a license. The Range Superintendent was aware of the intermediate excisable goods and had requested the company to observe Central Excise formalities. The Tribunal held that the company had not suppressed any facts, and the demand was time-barred as it exceeded the six-month limit specified in the Central Excise Act.

Conclusion:
The appeal filed by the Revenue was allowed, confirming the excisability and marketability of the intermediate products. However, the appeal by M/s. Gujarat Narmada Valley Fertilizers Co. Ltd. was also allowed on the grounds of the demand being time-barred. The Tribunal emphasized that marketability is a decisive test for dutiability, and actual sale is not necessary to establish marketability. The decision highlighted the importance of stability, shelf life, and potential marketability in determining excisability.