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TMI Blog1995 (1) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... oved without payment of duty for the manufacture of exempted Ingot Moulds and Bottom Stools. It is alleged that `Molten Iron is manufactured in Blast furnance and it is cleared without payment of Central Excise duty for steel making to their Steel Melting Shops and also to their Ingot Mould Foundry for the manufacture of Ingot Moulds and Bottom Stools and other iron castings. It is also cleared to General Foundry for the manufacture of iron castings and that some ingot moulds and Bottom stools are cleared on payment of duty as the effective rate. But, it is alleged that major portion of Ingot moulds and Bottom stools are cleared from Ingot Mould Foundry without payment of duty for use inside T.I.S.C.O. works in manufacture of steel ingots in terms of the Notification No. 205/83-C.E., dated 1-8-1983. 3. It is alleged that the appellant had submitted the Classification List No. 6/83 effective from 1-8-1983 valid upto 16-3-1985 showing molten iron against which effective rate of duty of Rs. 70/- PMT Basic Excise Duty and 10% SED is shown and with remarks Excise Duty is paid under later the better principle . It is stated that the remark merely indicates that the appellant wanted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a detailed written statement, besides making personal submissions before the lower authorities. However, the ld. Collector has rejected all their submissions and held the said molten iron to be goods and liable to discharge the duty. The plea of time bar has also been rejected. 8. In this appeal before us the appellants have submitted that the demands are time barred on the ground that details of the products had been mentioned in the RT-12 returns and this position was within the knowledge of the department for last several decades and, therefore, the question of any suppression or mis-declaration or clandestine manufacture and removal is unsustainable and, therefore, demand has to be quashed. It is their further contention that only 0.05% of the product goes to formation of the molten iron, which is in a highly unmarketable state, in as much as the iron is heated and is in a molten condition in a temperature of more than 1400oC and, therefore, the product in such a state is not in a position for removal from the factory and that there are no buyers and therefore, it cannot be said to be goods at all for the purpose of exigibility. The first and foremost aspect which the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preted. They state that if a correct interpretation of the said rule is given then no duty would be payable, as molten iron as a raw material, was consumed or utilised in the place of manufacture for steel ingots and other iron and steel products. 9. We have heard Sh. Ravinder Narain, ld. advocate for the appellants and Sh. S.K. Sharma, ld. JDR for the Revenue. Ld. advocate reiterating the grounds made out in the appeal memo has heavily relied on the rulings rendered by the Hon`ble Supreme Court of India in the case of Bhor Industries (supra) and vehemently argued that the state in which the molten iron exists does not make the said product marketable at all and that the department has not discharged their burden of excisability of the said product. He has also relied on several other rulings to emphasise his point that mere mention in the Tariff Schedule of the Central Excise Tariff by itself does not make a product as goods for exigiblity and dutiability. In this context, he has also relied on the rulings of the Tribunal in the case of Punjab National Fertilizer Corporation v. Collector of Central Excise, reported in 1991 (54) E.L.T. 115, wherein several judgments had been dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 989 (43) E.L.T. 214 (S.C.)] (iii) Union of India v. Delhi Cloth General Mills [1977 (1) E.L.T. (J 199) (S.C.)] (iv) South Bihar Sugar Mills Ltd. v. Union of India [1978 (2) E.L.T. (J 336) (S.C.)] (v) Union Carbide India Ltd. v. Union of India [1986 (24) E.L.T. 169 (S.C.)] The ld. Collector had held that these rules are distinguishable. With all due respect to the ld. Collector, we have to state that these rulings are not distinguishable but directly apply to the facts of the case. The ld. Collector should have first and foremost decided about the exigibility of the goods, and given a finding about the goods being known in the market and as to whether they are in a marketable state and whether it could be transported, even if it is in a state of high temperature of 1300oC to 1400oC. The ld. Collector has not dealt with this aspect of the matter and has merely stated that these rulings of the Hon ble Supreme Court are distinguishable. We are constrained to observe that the ld. Collector should have first applied his mind on these aspects of the matter and decided the case. We note hereinbelow crucial paragraphs Nos. 5 to 8 of the Bhor Industries case, which lay down the tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Schedule itself. It is also true, as held by the Supreme Court in a number of decisions namely - (i) U.O.I. v. D.C. General Mills Co. [1977 (1) E.L.T. (J199)] (ii) Union Carbide India Ltd. v. U.O.I. [1986 (24) E.L.T. (J169)] (iii) South Bihar Sugar Mills v. U.O.I. [1978 (2) E.L.T. (J336)] (iv) Bhor Industries Ltd. v. Collector [1989 (40) E.L.T. 280] (v) Collector v. Ambalal Sarabhai Enterprises [1989 (43) E.L.T. 214] that excisable goods should be marketable goods. `Goods which are not marketable cannot be excisable. 15. In the D.C.M. s case, supra, tariff entry was `refined V.N.E. Oil . Goods under dispute were `refined V.N.E. Oil but not deodorised. On the strength of evidence on record, it was found by the Apex Court that `refined V.N.E. Oil as known to the market was not only required to be `refined but also deodorised. Since the subject V.N.E. Oil was admittedly not deodorised, it was held that the subject V.N.E. Oil was not a `refined V.N.E. Oil in terms of the tariff entry. 15.1 In South Bihar Sugar Mills, it was held by the Supreme Court that `Kiln gas - the subject of dispute - though containing a substantial amount of `carbon dioxide was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguished those cases with reference to the specific tariff description of Tariff Item 26A(2) in HUF Ramlal s case and Tariff Item 16B in Oriental Timber. In this connection, paras 20 and 21 of Oriental Timber s report are reproduced below :- * * ** * * * 21. Question of marketability again came up for consideration in the case of Indian Aluminium Cables v. UOI [1985 (21) E.L.T. 3 (SC)]. In that case the Apex Court was examining the Tariff Entry 27(a)(ii) vis-a-vis tariff entry 68 - the residuary entry. Aluminium - (a)(ii) wire bars, wire rods and castings, not otherwise specified." In this connection, we reproduce below paras 12 and 13 of the said Report regarding excisability vis-a-vis marketability. We may note at this stage that the Court has noticed D.C. General Cloth Mills case (supra) - first judgment in a Central Excise case on the question of marketability : - * * * * * * 22. Learned advocate has contended that Bhor Industries and Ambalal Sarabhai Enterprises, (supra) are later in point of time than HUF Ramlal, Oriental Timber and Indian Aluminium Cable and therefore, greater weight should be attached to the question of marketability of goods before they ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngredient of excisability of goods would not be a relevant criterion. To make marketability sine qua non in the foregoing facts and circumstances is to render the tariff entry itself nugatory and thereby defeat the legislative intention of levying duty on `molten iron . 23A. Let me now examine the other pleas of the appellants. Learned advocate has submitted that duty has been demanded on `molten iron used in manufacture of ingot moulds and bottom stools which stand exempted by Notification 205/83. Reason for demand of duty is that `molten iron is one commodity under Tariff Item 25 which is chargeable to duty in its own right. Since it is used in the same factory in manufacture of exempted products - ingot moulds and bottom stools - under Notification 205/83, dated 1-8-1983, benefit of non-levy of duty on `molten iron in terms of proviso to Rule 9 of the Central Excise Rules cannot be extended. Learned advocate has submitted Notification 205/83 is peculiarly worded. I reproduce it, for proper appreciation of his arguments : - Exemption to ingot moulds, bottom stools, stirring/poking rods, splash plates and troughs if used within the factory for manufacture of steel in- got. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld also be avoided and, therefore, Rule 56A would not be applicable. Purpose of Rule 56A is to avoid duty on inputs if specified final product is dutiable under the same item. This avoidance of duty on inputs is made through the procedure of credit of duty paid on inputs and utilisation thereof for payment of duty on the final product. In other words, Rule 56A ensures that duty either at the input stage or the final product stage at least is paid. Duty does not get totally avoided at all stages, unless there are specific exemptions to that effect. In the instant case, in view of the peculiar condition of Notification 205/83, such a state of total avoidance of duty both on the final product stage and the inputs stage does not arise. As rightly pointed out by the learned advocate, no quantity of `molten iron escapes excise duty because of the condition of Notification 205/83. To demand duty, as the Revenue seeks to do, would be to demand duty repeatedly on the same goods `molten iron . This is plainly impermissible. Hence, I allow both the appeals. 24. Before parting, I would, however, like to agree on the question of time bar with my learned Brother. But a finding on this questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article if not goods known to the market. He stated that in the case of Hindustan Polymers v. Collector of Central Excise reported in 1989 (43) E.L.T. 165, the Supreme Court had referred to the earlier judgments in the case of Union of India v. Delhi Cloth and General Mills Ltd., South Bihar Sugar Mills Ltd. v. Union of India and Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay and held once again that for articles to be goods, they must be known in the market as such and they must be capable of being sold or being sold in the market as such. He added that even in regard to Sales Tax, the Supreme Court has stressed on marketability aspect since in the case of State of Tamilnadu v. Pyare Lal Malhotra reported in AIR 1976 SC 800, it has been held that while in the law dealing with the Sales Tax, the taxable event is the sale and the manufacture of goods, nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event in the sales tax law, it may also be necessary to consider whether a manufacturing process which has altered the identity of the commercial commodity has taken place and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Properzi process are both aluminium wire rods. On these considerations, the court held that Properzi wire rods were classifiable under Tariff Entry 27(a)(ii) which covered inter alia Aluminium wire rods . He reiterated his stand that in all the judgments, cited by the ld. Member (Technical), the issue to be decided related to classification and the question of marketability was not raised by any of the concerned parties. 27. On behalf of the respondents Shri B.K. Singh, the ld. SDR stated that in the judgments quoted by ld. Member (Judicial) the dispute was regarding the excisability of products such as Kiln gas , PVC Film with rough edges , aluminium cans or torch bodies in crude form which were not specifically covered by any entry or heading of the relevant Tariff. He contended that it follows by the judgments of the Supreme Court cited by the ld. Member (Judicial) that in respect of products which are specifically covered by an entry or heading of the tariff, their marketability would not be an essential criteria for their excisability. He stated that in the case of Safari Industries (I) Pvt. Ltd. v. Collector of Central Excise reported in 1991 (54) E.L.T. 308, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries Ltd. v. Collector of Central Excise being relevant is reproduced below : - * * * * * * On a plain reading of the para extracted above it is evident that even if an article falls within the Schedule or is specified therein, in order that it may be dutiable, its marketability would be an essential ingredient. Hence, I am of the view that there is no force at all in the contention of the Ld. SDR that the principle of marketability as an essential ingredient would not apply in respect of articles which are specifically covered by any entry in the Tariff Schedule. For these reasons I am inclined to agree with the Ld. counsel for the appellants that in each of the three judgments cited by the Learned Member (Technical) the only issue that arose for consideration was whether having regard to the nature and the form of the product in question, it could be deemed as covered by a particular entry in the Tariff Schedule. I also find that the Ld. counsel has rightly pointed that these cases while deciding the classification of the products in question mainly on the basis of the wording of the relevant tariff item, the Supreme Court had also taken into account how the product was know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial parlance. Both sides have placed reliance on the judgment of the Calcutta High Court in the case of Union of India v. Bata India Ltd. (supra). It is seen that the High Court has held that if the goods find a place as an item in the Schedule to the Act it will only raise a presumption that they are excisable but shall cease to be excisable if they have no market. It is evident that the High Court held marketability of the goods as an essential ingredient in order to render them dutiable under the Schedule, since while holding the disputed product as excisable the Court observed that the assertion of the respondent as regards non-excisability lacked corroboration and no evidence had been adduced that the goods were not marketable. In this regard it would be relevant to refer to para 30 of the judgment which is reproduced below : - * * * * * * In this regard it would also be pertinent to note that in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises reported in 1989 (43) E.L.T. 214 the Hon ble Supreme Court has held that if the department was to charge duty on an article and such levy is disputed by the assessee on the grounds that the goods were no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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