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TMI Blog1994 (9) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the said products were marketable commodities. The High Court judgment clearly states that the revisional authority did not deal with the question as to whether rough rolled flat forms were marketable commodities or not. The High Court also did not enter into the question whether the said products were marketable commodities or not in view of the decision of a Division Bench of the Allahabad High Court in Union of India v. Union Carbide India Ltd. reported in 1972 A.L.J. 451. We find that the said judgment of the Allahabad High Court has been reversed by this Court in Union Carbide India Ltd. v. Union of India Ors. (reported in 1986 (2) SCC 547). In these circumstances, we set aside the impugned order and remand the case to the Customs, Excise and Central Excise Gold (Control) and Appellate Tribunal (CEGAT) to examine the evidence on record and determine whether the products in question are marketable commodities. It is clarified that the Tribunal will determine this question on the basis of evidence already on record and neither party will be permitted to lead further evidence. 2. Tribunal is required to determine the marketability of rough rolled flat form of zinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Affidavit of Shri K. Sethi, Assistant Collector of Central Excise filed alongwith a miscellaneous application dated 24-10-1978 on the same day on which High Court of Allahabad heard the writ petition of the appellant herein and reserved judgment after hearing, without passing any order on the said miscellaneous application. He (SDR) submits that the Misc. Application is on `record of the High Court and therefore, Tribunal is bound to consider this as evidence in support of marketability of the `disputed goods as `zinc sheet . He relied on the definition of the word `record in Mukerjee s Law Lexicon 1989 Edition at page 539 which states as follows :- Anything entered on the rolls of the Court He also relies on 1992 (61) E.L.T. 521 (Mohan Lal Shamji Soni v. U.O.I. Relevant extracts from the affidavit dated 24th Oct. 1978 of Shri K. Sethi alongwith annexures thereto are reproduced below :- 1. That the deponent is the Assistant Collector, Central Excise, Allahabad and is as such well conversant with the facts of case deposed to below. 2. That one of the main points argued in the present writ petitions was as to whether the so-called rough rolled zinc sheets manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving heard them through their representative Shri R.P. Agarwal on 9-2-1973. I am of the view that M/s. Geep Flashlight Industries Ltd. Allahabad are actually manufacturing zinc sheets as defined under Tariff Item No. 28B (2) which reads as follows :- Manufactures, the following namely, plates, sheets, circles, strips and foils in any form or size . (ii) Appellate Collector As already mentioned above the rough zinc slabs received after they are melt are subjected to a process of rolling. These are rolled about 5 times to bring them to the proper dimensions. Under the circumstances it cannot be disputed that they undergo a process which is carried out for the manufacture of an excisable product. Sec. 3 of the Central Excises and Salt Act, 1944, prescribed that there shall be levied and collected in such manner as may be prescribed duties of excise of all excisable goods which are produced or manufactured in India at the rate set forth in the first schedule. Under item 26B of the Central Excise Tariff being the schedule of the Act under sub-item ( ), thereof excise duty is leviable on zinc manufactures namely plates, sheets, circles, strips and foils in any form or size. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and could not be accepted. Under the circumstances the appellants contention that the rough unfinished sheets/strips manufactured by them as an intermediate product which was not capable of being marketed did fall within the scope of tariff item 26B(2) of the Central Excise Tariff and has no force and the rolled zinc sheets/strips manufactured by them are liable to pay duty at the appropriate rate prescribed." (iii) Govt. of India Manufactures, the following namely, plates, sheets, circles, strips and foils in any form or size. The expression in any form or size is very wide and includes plates, sheets, strips etc. in any form or size. The petitioners contention that sheets manufactured by them are not sheets as per IS specification since these are not free from all defects is rejected on the ground that the Central Excise Tariff does not make any distinction between sheets which are free from all defects and others. Their contention that as BTN wrought products and semi-manufacture and should be treated as such for Central Excise Tariff is also rejected as the Tariff entry does not admit of any such presumption, manufactures in the Tariff entry does not have the same mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as used by the Central Excise Department. We are, however, of opinion that on the admission of the petitioner itself it is clear that the product described as flat form of `Zicee by the petitioner is one which is known as `Zinc sheet to a manufacturer of dry cell batteries and is a product which can be held to be known as `zinc sheet to the trade to which the petitioner belongs. It is not necessary for us, therefore, to go into the evidence adduced by the parties in these proceedings and thereafter to pronounce upon the question as to whether the product of the petitioner can be treated to be `zinc sheets or `strips as known to the general market." 4.1 The appellant has relied upon the following evidences, regarding non-marketability of the disputed product as `zinc sheets (a) Affidavit dated 7-3-1975 of Dinshaw Sorabji Relevant extracts are reproduced below :- ............................................................................................................................ . 6. That the process of manufacture of zinc cans for dry cell battery in the aforesaid factory of the above-named company is as below : Imported zinc in the form of ingot of specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey come out of the rolling press, without any trimming or finishing process, and without bringing them into any standard shape and size. (e) For these reasons, some of the callots punched out from these rough rolled flat-forms varied in thickness and consequently CONTAINED VARYING QUANTITY OF THE METAL. (f) The cans varied in length to some extent from one another, and this varying length of cans is due to varying thickness of callots, which in its turn, is due to corresponding varying thickness in the surface of the rough rolled flat-forms, both (a) in respect of each flat-forms and (b) in respect of one flat-form as compared to another. (g) Out of the rough rolled flat-forms produced in this manner that 10 pieces at random were picked up by the deponent (being Engineer-in-Charge of Zinc Section) and their variations, inter se, had been furnished in the statement. 8. That the deponent asserts that the ten sample pieces of rough rolled flat-forms of zinc picked up at random on 7/8th April, 1973 referred to above, were checked and the various dimensions were measured by the deponent personally, and the dimensions found on checking, were correctly recorded in the statement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market as zinc sheets , and can only be dealt/disposed of as `zinc . (c) the aforesaid rough rolled flat-forms of zinc constitute only a transitory and intermediary steps or in process material in the course of manufacture of zinc cans for dry cell battery which is the ultimate finished manufactured product, or a semi-manufacture , but not in any case a manufacture of zinc sheet in commercial or technical sense or within the meaning of Item 26B(2) of the Central Excise Tariff. Dated 7-3-1975 Sd/- DEPONENT I, the above-named deponent, do hereby verify that the contents of paragraphs 1 to 12 are true to my personal knowledge, which I believe to be true, that no part of this affidavit is false and nothing material has been concealed herein. So help me God. Dated 7-3-1975 Sd/- DEPONENT [Emphasis supplied by the ld. Advocate] (b) Affidavit dated 5th April, 1978 of Natarajan Sreenivasan son of P. Natrajan Relevant extracts are reproduced below :- 5. I have been connected with the said factory of Metals and Ores Company in various capacities since its inception in 1956. In the course of my association with the said factory, I have been responsible for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther rolled with the aid of more precise machinery called finish rolling, thereafter the material successively passes through slitting, shearing, levelling, trimming and polishing operations, depending upon the end- product, to ensure that the finish product known as zinc sheet/strips meets the exact specifications/standards and tolerances. Without these additional steps after rough rolling, the rough rolled zinc does not reach the stage of zinc sheets/strips known and bought and sold in the market. 11. I say that the rough rolled zinc as such having jagged, uneven edges and varying widths is not known to the market and is not bought and sold in the market as a recognised independent commodity as zinc sheet/strip. It has no distinctive use except as in process material in the manufacture of other intermediate products for ultimate manufacture of dry batteries." Emphasis supplied by the ld. Advocate] (c) Letter dated 27th December, 1974 from Indian Non-Ferrous Metals Manufacturers (INFMMA) Association. It is set out below. Sub- Rough Rolled Zinc Flat Forms. This has reference to your letter No. EX. APL (21)/7753 dated Nil. We have also received the drawings of the Zinc f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, findings of all authorities and any observations whatsoever by any authority below the Supreme Court in the proceedings on this subject matter get aside. (ii) Allahabad High Court has fallen into the same error of making a distinction between `general marketability and `special or limited marketability in this case which it had committed in its judgment in the case of marketability of aluminium cans in the matter of UOI v. Union Carbide India Ltd. - 1978 (24) E.L.T. (J 1) (All.) resulting in over-ruling of its opinion by the Apex Court [1986 (2.) E.L.T. 169 (SC)] in Civil Appeal filed by the Union Carbide India Ltd. It is this error which has impelled the Appex Court to send the matter to the Tribunal for determining the question of fact, namely, marketability of the disputed product as `zinc sheet . 5.3. On merits the learned advocate for the appellant has argued that it is not denied that the disputed product is in a crude form of uneven thickness, of cut and broken edges and is taken to the process of punching callots out of it while it is still hot in a continuous process. At such a stage it cannot be considered to be marketable as `sheet in view of the expert affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered to be on record of High Court of Allahabad and therefore, the Tribunal cannot consider the same in these proceedings in view of the prohibition placed by the Apex Court in its direction dated 13-11-1992 regarding consideration of fresh evidence by the Tribunal. 7.2 I am also inclined to agree with the submissions of the learned advocate, Shri V. Sridharan as set out above regarding the findings of Allahabad High Court on `marketability of the disputed product. If the findings of Allahabad High Court on the question of marketability of the disputed product had been considered adequate, Hon ble Supreme Court would not have directed the Tribunal to determine this question over and above the High Court. Supreme Court, itself, would have determined that question. In fact the Supreme Court has already observed that High Court and other concerned authorities have not examined that question. 7.3 It is well settled that Central Excises and Salt Act is an enactment for levy of excise duty on manufacture of goods specified in the First Schedule to the Act (as applicable in this case). Meanings to various provisions and expressions therein albeit to `goods specified in the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be manufactured without these cans. This product may not be known to the general public or to the traders in general it is known and used by that trade which makes torches." This judgment of Allahabad High Court was reversed by Supreme Court in 1986 (24) E.L.T. 169 (SC), (supra) on analogous evidence namely crude aluminium cans, admission by the manufacturer, limited marketability to Torchlight manufacturers, as in the instant case. Reliance placed by the learned SDR on HUF Ramlal Mansukhrai and Oriental Timber, (supra) have no relevance because question of `manufacture was involved in those cases and not the question of `marketability . Although I have held that K. Sethi s affidavit dated 24-10-1978 cannot be considered, even if it is taken into consideration, it only proves the limited marketability of the disputed product to dry battery cell manufacturers and not to general market of zinc sheets or strips. 8. In view of the foregoing discussion, I hold that the disputed product is not marketable as `zinc sheet or strip and therefore, it is not liable to duty under Item 26B of the Central Excise Tariff as zinc sheets or strips . Appeal is thus allowed with consequentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the appellants written to the department by which they have referred to the impugned goods as zinc sheets or plates. They are as follows : (i) Letter dated 19-9-1974 written by the Secretary of the Petitioner Company to the Superintendent of Central Excise, Allahabad in which the petitioner had itself acknowledged that it had sent zinc slabs produced immediately after the melting stage to a rolling mill and got them rolled into zinc sheets there for use in the factory for production of zinc callots. This letter had been produced by Shri Sethi, Asstt. Collector of Central Excise alongwith his counter affidavit before the Hon ble Allahabad High Court. The Hon ble Allahabad High Court has reproduced the said letter at page 20/21 of its judgment. The letter is reproduced herein below : Geep Flashlight Industries Limited Regd. Office : 28, South Road, Allahabad (U.P.) The Superintendent, S.R.P.I., Central Excise, Allahabad. URGENT EX : ZST/4716 dated 19-9-1974 Sub : Rough rolled zinc (zinc sheet) - permission to bring duty paid goods in the factory. Dear Sir, Our rolling mill producing zinc sheets is in the state of break down since 13-9-1974 and it is feared t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture of callots either by Union Carbide or by assessee or by any other battery manufacturer. (vii) In the affidavit of Shri Dinshaw Sorabji, it is admitted that the rough rolled flat-forms are produced after five successive rollings on the rolling press and a different product is obtained with different name and having a different use. The only assertion that it does not satisfy ISI vide IS : 2258 : 1977. However, the ld. Collector (Appeals) has given a detail finding as to how the ISI Specification is not necessary. However, the ld. Collector has also referred to the ISI specification and nomenclature, Chapter 79 under the Brussels para 79.03 and given finding on this aspect of the matter. (viii) The affidavit of Shri Mutki, Accounts Officer at pages (334-335) of the paper book, Assessee admits that the sample is an intermediate product. (ix) The letter of Indian Non-Ferrous Metals Manufacturers Association at page 339 admit that the impugned product arise at an intermediate stage of operation between zinc ingots and zinc sheets. Further, they state this product is used by manufacturers in the manufacture of other inter-mediate products in their own factories. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as zinc sheets or not. The assessee has attempted to show that product does not satisfy the ISI specifications. Further, it is noticed as per the findings of the Collector (Appeals) that the size of the zinc sheets manufactured by the assessee are more or less similar to ISI standards. The assessee has not produced any certificate from ISI to show that this product is not satisfying to its specifications. Moreover, in the case of Wetoco v. Collector of Central Excise - 1992 (62) E.L.T. 584 relying on earlier Supreme Court judgment, it has been held that ISI specification is meant for ensuring quality control and is not relevant for determining classification of goods and the classification of goods have to be done according to popular or commercial meaning. The fact that the product are being capitively consumed shows that they are goods as has been held in the case of Bhor Industries Ltd. v. Collector of Central Excise, 1989 (40) E.L.T. 280 as 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 none in the market as goods. Therefore, there is no doubt that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t yarn or multi-filament yarn captively consumed by the assessee was dutiable under Item 18-11(1)(a) of erstwhile duty. In this case also the assessee contended that they were not selling the goods. The Bench held that the propensity of the goods being marketed is determinable factor and on various other grounds held it to be dutiable. 15. Therefore, it follows that the appellant having captively consumed these items and the fact that the item is being used by the dry battery cell manufacturers clearly indicated that the same can come within the category of zinc sheets in all forms or size . It is not necessary that the zinc sheets should be in the form in which it is sold in the market. The Department has proved that they are goods and they come within the Tariff Item 26B(2) of the erstwhile Tariff and hence in the light of my findings, I reject the appeal. Dated : 13-8-1993 Sd/- (S.L. Peeran) Member (J) 16. In view of difference of opinion between two members, the matter may be referred by Hon ble President to the third Member to resolve the following difference of opinion : 1. whether the impugned goods fall within the description of Tariff Entry 26B(2) of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used against the appellants because this letter has been referred to by the High Court whose order has now been set aside by the Supreme Court. The rough rolled zinc called by the Department as zinc sheet is the description used in their Central Excise Licence and classification list. Therefore the reference to zinc sheet in this letter is only a term used by the Department. The question to be decided is whether the condition in which the goods emerged in their factory whether the goods are marketable in that condition. The contents of their letter of 19-9-1974 does not at all help in answering this question. The learned Counsel submitted that in fact the work as proposed in the letter was never got done because no rolling mill was found capable of taking of the job. The learned Counsel submitted that the Assistant Collector of Central Excise not being the person familiar with the trade, his affidavit cannot be relied upon for which he cited the case of South Bihar Sugar Mills Ltd. and Another Etc. v. Union of India and Another Etc., reported in 1978 E.L.T. (J 336). The appellants have also denied the Assistant Collector s averment. It has been clearly brought out in the affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26B(2) of Central Excise Tariff. The learned Senior Departmental Representative argued that their letter of 19-9-1974 is crucial evidence indicating the capability of the goods to be marketed. It shows clearly that there are rolling mills which can produce the goods and that these sheets after rolling are excisable goods on which duty is to be paid. The Senior Departmental Representative contended that in this context that the fact that the appellants did not actually send the material to the other rolling mills is irrelevant for the purposes of determining excisability. It also shows that their own understanding of the material as excisable goods. The learned Senior Departmental Representative relied upon the Calcutta High Court judgment Union of India v. Bata India, reported in 1993 (68) E.L.T. 756. The High Court held that the criterion of marketability was satisfied in the case of components used only in the shoes manufactured at a intermediate stage and that these components are excisable goods even though used at the intermediate stage in the process of manufacture of a final product. Therefore, the learned Senior Departmental Representative argued that the criterion is as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all questions will be decided on the basis of the affidavits. In the affidavit filed by Shri Sethi, there is clear evidence that the rough rolled zinc sheets produced by the appellants is marketable. This has been obtained on a specific enquiry made in this regard. On the classification of the goods, the learned Senior Departmental Representative submitted that Sub Item (2) of Item 26B Central Excise Tariff covers sheets, strips, foils in any form or size. The description of the product in the present case and the process of manufacture available in the records would show that the goods answer the description in the Tariff Item. ISI specification, the learned Senior Departmental Representative pleaded is only for the purposes of quality control. It is also well-settled with reference to Supreme Court judgment in the case of South Bihar Sugar Mills Ltd. and another etc. (supra) that even defective and sub-standard goods can be classified as excisable goods provided they are covered by the tariff description. Therefore, that the rough rolled zinc sheets in this case are rough and irregular sizes will not be material. The order of the Allahabad High Court in the present case also cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as evidence on record. Elaborate arguments have been addressed by both sides on this issue. Examining this issue, it is seen that in the proceedings before the High Court, there is some indication as to the procedure by which the High Court allows additional evidence to be taken on record. It is found in respect of an application dated 17-4-1978 for taking on record the affidavit of Natarajan Sreenivasan a specific application was moved, notice was given to the other side, the other side filed a counter affidavit and thereafter the High Court passed a specific order on 6-10-1978 taking the affidavit on record. In the face of such procedure, having been followed by the High Court it will be difficult to assume that the application filed on the day when the High Court closed the case for orders should be taken as evidence on record by the mere fact that it was presented before the Bench and numbered and when the procedure of notice to the other party on the application which the High Court had followed in the very same proceeding had not been adhered to. This has also to be looked in the context of the High Court Rules whereby the evidence in Writ proceedings is by way of affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontents or the authenticity of the letter, but has attempted to explain that the term zinc sheet" used therein was a loose repetition of the description of the product as used by the Central Excise Department. We are however, of opinion that on the admission of the petitioner itself it is clear that the product described as flatform of by the petitioner is one which is known as `zinc sheets to a manufacturer of dry cell batteries and is a product which can be held to be known as `zinc sheet to the trade to which petitioner belongs." The above analysis clearly brings out that having regard to the nature of the goods these are likely to be marketed. In other words the goods have propensity for being marketed. No doubt the goods rough rolled forms for punching out callots are of use only to dry cell battery manufacturers and such goods may not be considered zinc sheets for commercial or domestic purposes, but that is not a criteria for deciding marketability, as it is now well settled that it is not necessary that the goods in question should be generally available in the market and it is also well-settled by now that even if there is only one purchaser of the article, it must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 169 (SC) = 1986 (7) ECR 217 (SC) 4. Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay - 1989 (40) E.L.T. 280 (SC) = 1989 (21) ECR 273 (SC) 5. Collector of Central Excise, Baroda v. Ambalal Sarabhai Enterprises - 1989 (43) E.L.T. 214 (SC) = 1989 (24) ECR 433 (SC) Paras 9 and 10 of the Supreme Court are important. The following observations have been made in the later part of para-9 :- This Court observed that while even transient items of articles can also be goods, one has to take a practical approach and decide on the basis of material before the Court whether the particular goods were marketable. After referring to the characteristics of the said product (starch hydrolysate), the Court came to the conclusion that it would be unlikely to be marketable as it was highly unstable". The test, therefore, is the marketability ; this test has to be applied and the matter decided in a pragmatic and practical sense." Again in Para-10, the following observations of the Supreme Court occurring in that para are also significant :- The marketability" is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have already arranged to get the zinc slabs rolled into sheets from another rolling mill, get them back on payment of duty and thereafter to store the sheets for subsequent issue for punching callots. Surely, the appellants would not have made all these arrangements without first examining the technical feasibility thereof for which they do have sufficient expertise. This also brings out the propensity to the goods for being marketed. Having come to this conclusion, the description of Tariff Item 26B(2) Central Excise has to be seen which covers manufactures, the following, namely, plats, sheets, circles, strips and foils in any form or size. The arguments that the zinc sheets which are meant for commercial and household purposes are required to have a high finish, will not make the rough rolled flat form for zinc fall outside the purview of the item in view of the wording of the tariff item which is in wide terms to include zinc plate, sheets etc. in any form or size. In this context, the observation of the Larger Bench of the Supreme Court in the case of Collector of Central Excise, Hyderabad v. Fenoplast (P) Ltd., reported in 1994 (72) E.L.T. 513 (SC) is significant. Para-9 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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