2022 (5) TMI 1393 - AT - Central Excise

Marketability/saleability/dutiability - manufacture of petroleum products and organic chemicals - Low Sulphur Heavy Stock (LSHS) - Long Residues (LR) - Refinery gases (RG) - captive consumption - eligibility for exemption under notification 67/95 - Whether the impugned goods are marketable and therefore dutiable? - HELD THAT - Undisputedly the test of manufacture as per section 2(f) of Central Excise Act, 1944 and excisablity as per Section 2(d) is satisfied. The whole issue that needs to be determined is vis a vis the marketability of the impugned goods. Show Cause Notice issued to respondent, were silent on this aspect of marketability, so Commissioner himself conducted enquiries from the independent sources and on the basis of the enquiries conducted concluded that the impugned goods are not marketable and hence not dutiable. Commissioner was not required to take such an exercise and it was the investigating authority or the authority who had issued the show cause notice who should have conducted such enquiries from as many sources they desired and establish that these goods were marketable. Having not done so, in the appeal, revenue cannot default the enquiries conducted by the Commissioner. It is also settled legal position that burden to prove marketability is on the department and in the absence of any evidence being led in by the department to show that the goods in question are capable of being bought and sold, demand cannot be confirmed. Be that as it may be revenue has in the appeal sought to adduce the evidence from the numerous websites to show that the impugned goods have some possible use or are capable of being use, but they have not produced any evidence about the marketability of the said goods at the relevant time. Marketability is not synonymous with usability. Certain goods may be usable but just because they are usable, would determine the existence of the market for the said goods. The entire reliance placed by the revenue on the web material to establish marketability is devoid of any merits, and these web print outs cannot be relied in evidence at the stage of appeal or arguments as the marketability is not only a question of fact but is also very dynamic. With emergence of new technologies, products which were never marketable earlier may become marketable subsequently or the products which are marketable today may go in oblivion on a later date. The marketability for the purpose of levy of excise duty needs to be determined at the relevant time and evidences to that effect need to be adduced. Web- material is only hypothetical and also dynamic. Reliance placed on the web material as late as of 2019, to establish marketability during the period 1996 to 2005 cannot be accepted as evidence in any judicial proceedings. Hence the web print outs of the subsequent date as the evidence to establish the marketability of the impugned goods, is not admitted. Revenue having failed to establish marketability of the impugned goods in the present ten show cause notice which have been adjudicated as per the impugned order cannot succeed on the leviability of duty of excise on the impugned goods. Since the appeal of revenue cannot succeed on this ground, the other issues and ground of admissibility of exemption under Notification No 67/95-CE etc. need not be considered. The appeal filed by the revenue is dismissed.

Summary

Issues Involved:

1. Marketability and dutiability of the impugned goods (Long Residue and Refinery Gas).
2. Admissibility of exemption under Notification No. 67/95-CE.

Issue-wise Detailed Analysis:

I. Marketability and Dutiability of the Impugned Goods:

The primary issue addressed in the judgment is whether Long Residue (LR) and Refinery Gas (RG) are marketable and, therefore, dutiable under the Central Excise Act, 1944. The Commissioner, in the order under appeal, emphasized that for goods to be dutiable, they must satisfy three tests: they must be excisable goods, produced or manufactured in India, and marketable.

1. Excisability and Manufacture:
- The Commissioner noted that LR and RG are classified under Chapter subheading 2713.30 and 2711.19, respectively, making them excisable goods as per Section 2(d) of the Central Excise Act, 1944.
- Both LR and RG emerge during the refining of crude oil, thus meeting the definition of manufacture under Section 2(f) of the Central Excise Act, 1944.

2. Marketability:
- The Commissioner found that the show cause notices did not assert or substantiate the marketability of LR and RG.
- Enquiries conducted from various refineries and customs authorities indicated that LR and RG were not being marketed or imported, leading to the conclusion that these goods were not marketable.
- The Commissioner relied on the Supreme Court's precedent that marketability means the goods should be capable of being sold in the market without further processing.

3. Burden of Proof:
- The burden to prove marketability lies with the department. The Commissioner concluded that the department failed to provide evidence of marketability, and thus, the goods could not be subjected to excise duty.

4. Revenue's Appeal:
- The Revenue's appeal argued that the Commissioner erred in not considering the marketability of LR and RG and relied on various web printouts to establish marketability. However, these printouts did not provide evidence of actual marketability at the relevant time.
- The Tribunal held that marketability must be established at the relevant time and that hypothetical possibilities or subsequent technological advancements could not be relied upon to prove marketability retrospectively.

5. Precedents and Legal Principles:
- The Tribunal cited several Supreme Court judgments emphasizing that marketability is a question of fact and must be established with concrete evidence.
- It reiterated that goods must be marketable in the condition they emerge and that mere usability does not equate to marketability.

II. Admissibility of Exemption under Notification No. 67/95-CE:

Given the conclusion that the impugned goods (LR and RG) were not marketable and, therefore, not dutiable, the Tribunal found it unnecessary to address the issue of exemption under Notification No. 67/95-CE. The appeal was dismissed on the grounds of non-marketability, rendering the discussion on exemption moot.

Conclusion:

The appeal filed by the Revenue was dismissed, with the Tribunal upholding the Commissioner's order that dropped the proceedings against the respondents. The Tribunal concluded that the Revenue failed to establish the marketability of the impugned goods, and thus, they were not liable to excise duty. The other issues, including the admissibility of exemption under Notification No. 67/95-CE, were not considered necessary to address due to the primary conclusion on marketability.