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TMI Blog1992 (9) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Collector of Central Excise, Bombay-1 in his order No. 1/85, dated 6-6-1985. In Appeal No. 2014/85-D, by a show cause notice issued on 11-4-1984 an amount of duty Rs. 95,906.29 was demanded for the period 11-10-1983 to 10-4-1984. A penalty of Rs. 50,000/- was imposed on the appellants by the Additional Collector in his adjudication Order No. 3/85, dated 6-6-1985 while confirming the demand. In Appeal No. 2607/85-D, a show cause notice was issued on 6-4-1985 demanding duty of Rs. 82,636.14 for the period Nov., 1984 to 31-3-1985. The Additional Collector, by his adjudication order No. 6/85, dated 13-8-1985, confirmed the demand, also imposed a penalty of Rs. 40,000/-. Briefly, the facts relating to these appeals, which are common, except for the periods of demand are that during the course of a survey conducted by the Department, the Central Excise Officers noticed that loose cigarettes were found utilised for personal consumption within the factory on which no duty was paid. On 18-10-1982, the Superintendent of Central Excise, wrote to the appellants to clarify the matter to which they said that loose cigarettes are used for quality test purposes and not for personal consumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om bulk to retail packs or the adoption of any other treatment to render the product marketable to the consumer. In this case, the goods cannot be said to be marketable at the loose stage of cigarettes sticks. The ld. Counsel cited the Supreme Court decision in the case of Bhor Industries Ltd. v. Collector of Central Excise -1989 (40) E.L.T. 280 to say that the criterion for marketability is to be established for determining durability and cigarettes are capable of being sold only when packed in packets in the prescribed manner under Rule 93 of Central Excise Rules. The ld. Counsel also relied upon the Hyderabad Collectorate Trade Notice No. 138/83, dated 26-11-1983 which laid down that the RG-1 stage in respect of cigarettes is that they are packed in outers. The ld. Counsel also referred to the Departmental Instruction Manual on Cigarettes in this regard. She also relied upon the Delhi High Court decision in the case of Delhi Cloth Genl. Mills v. Union of India -1978 (2) E.L.T. 122 where the Court took note of the fact that in respect of calcium carbide, there is a statutory prohibition in selling it in loose form, for determining the marketability. Likewise in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h High Court to say that such bidies used for test are liable to duty. It was contended by the ld. Counsel that the Tribunal erred in relying upon the Andhra Pradesh High Court judgment because that judgment was based on the reasoning that bidies are excisable goods because they are included specifically in the Central Excise Tariff. But the ld. Counsel urged this criterion has not been accepted for deciding whether the goods are excisable goods by the Supreme Court in its decision in the case of Bhor Industries (supra) which, on the other hand, emphasised the criterion of marketability. Therefore, the Tribunal s conclusion is based on case law which is no more good law. The ld. Counsel, further, contended that in any event, the Department had no ground to invoke the longer period for demanding the duty under Sec. 11 A because in the first place the factory was under physical control with clearances taking place with the counter signatures of the officers. The fact that testing of the cigarettes within the factory is also known to the department since 1954 onwards. The ld. Counsel, in this connection, drew attention to their letter of 12th Oct., 1954 to the Assistant Collector inti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Collector of Central Excise - 1991 (51) E.L.T. 161 (S.C.) wherein the Supreme Court held that captive consumption of the product within the factory is not determinative nor their actual sale in the market for dutiability. The ld. D.R., further urged that the Tribunal in Jyoti Home Industries case had clearly held that bidies smoked for test purposes are chargeable to duty. As regards, the question of limitation, the ld. D.R. urged that the 1954 letter of the appellants did not disclose the fact of the empirical test being carried out. Therefore, there was suppression which justified invoking the longer period for demanding the duty as also imposing penalty on the appellants. 4. The submissions made by both the parties, herein, have been carefully considered. On the question whether cigarettes, which are in loose sticks, are excisable goods at all and whether such cigarettes consumed by actual smoking as an empirical test to test the quality of the cigarettes, the Tribunal had considered a similar situation in respect of bidies in its Jyoti Home Industries decision (supra). The Tribunal, therein, also considered a similar contention raised before it with reference to Rule 93 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications of Injection Moulding Machines for captive use and not for sale is also, in our view, untenable, as such use is not determinative of the question. If the goods are capable of being sold that would be enough. In Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay -1989 (40) E.L.T. 280 (S.C.) = (1989 1 SCC 602), the crude PVC films as produced by the appellants were not known in the market, nor could they be sold in the market. Sabyasachi Mukharji, J., as he then was, while considering the submission that it was only the goods as specified in the Schedule to the Act that could be subjected to the duty in para 6 observed: For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. That was necessary. The appellants themselves have called the goods Tie Bar Nuts and those are admittedly used for fixing platens at appropriate distances. It cannot be said that the Tie Bar Nuts after their manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments that in the light of Rule 93, the individual cigarette sticks are not excisable goods, cannot be accepted which conclusion will also follow from the decision of the Tribunal in similar circumstances with reference to the empirical test of bidies in its Jyoti Home Industries decision (supra). Therefore, the demand for duty in respect of cigarettes consumed captively, which is also made in terms of Rule 49 of the Central Excise Rules in the show cause notices, is sustainable and concessional rate can be availed of only if it is shown that the conditions, therefor, in the Exemption Notification are satisfied and not otherwise. As regards limitation, there is substance in the appellants plea that the demand beyond six months is barred by limitation as they cannot be said to have suppressed any facts. This is because of the admitted position that ever since 1-5-1979, the appellant unit was under physical control. The detailed system of supervision over manufacture and accounting of cigarettes prescribed in the Departmental Manual on Cigarettes also go to support the appellants claim that the Department could not have been kept in the dark regarding the testing carried out. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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