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TMI Blog1995 (4) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... e of wood pulp, man-made staple fibre, man-made filament yarn and Sulphuric Acid. With the introduction of the amendment to the Central Excise Tariff w.e.f. 1-3-1986, the jurisdictional Superintendent of Central Excise wrote to the appellants on 18-7-1986, calling upon them to furnish details of clearance of Calcium-bi-Sulphite liquor from 1-3-1986 and to pay Excise duty thereupon and also directing them to include the above mentioned item in their Classification list. 3. By reply dated 25-7-1986, the appellants informed the Superintendent of Central Excise that they had not included Calcium-bi-Sulphite in the Classification lists filed by them as it was unstable product which could not be sold or marketed and therefore, was not excisable. Thereafter, the Inspector of Central Excise attached to the factory of the appellants, called for details from the appellants with reference to Calcium-bi-Sulphite vide his letter dated 8-8-1986, to which the appellant replied on 9-8-1986 reiterating the contentions raised in their earlier reply of 25-7-1986. Notwithstanding this, a show cause notice dated 21-8-1986, was issued to the appellants proposing to recover duty on Calcium-bi-Sulphite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te solution. (iv) that the appellants in their letter dated 20-2-1990 have declared the quantum of Calcium-bi-Sulphite @ 700 tonnes per day. (v) that the appellants in another letter dated 28-12-1990 had stated that the production of Calcium-bi-Sulphite solution is 28,350 tons per month. Therefore, the appellants have suppressed the correct quantum of manufacture of Calcium-bi-Sulphite solution. (vi) that on the above erroneous view the Collector demanded duty on the differential quantity between 500 tons/day and 812 tons/day." 5. The show cause notice proposed recovery of differential duty of Rs. 3,24,91,945.43 P. on the total differential quantity of 4,16,496 MT of Calcium-bi-Sulphite alleged to have been manufactured and captively consumed by the appellants. This show cause notice dated 27-2-1991 sought to cancel the corrigendum dated 12-2-1991 issued by the Superintendent. 6. The appellants replied to the notice once again reiterating that Calcium-bi-Sulphite solution cannot be treated as goods for the purpose of Central Excises Salt Act, 1944 as it is an unstable solution and that once the temperature increases it decomposes and cannot be used. The appellants also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Liniments reported in 1989 (40) E.L.T. 276 (SC), Padmini Products v. CCE reported in 1989 (43) E.L.T. 195, Punjab National Fertilizers reported in 1991 (54) E.L.T. 115 (T), Tamil Nadu Housing Board v. CCE reported in 1994 (74) E.L.T. 9 (SC), Cosmic Dye Chemical v. CCE, Bombay reported in 1995 (75) E.L.T. 721. The learned Sr. Counsel next contends that the proceedings initiated by the Collector with the issue of the show cause notice dated 27-2-1991 and culminating in the impugned order confirming the demand for differential duty are void ab initio for the reason that there has been no original assessment holding that Calcium-bi-Sulphite Solution is excisable. He further submits that the Collector was acting without jurisdiction in seeking to cancel the corrigendum dated 12-2-1991 issued by the Superintendent of Central Excise to the show cause notice issued by the Supdt. for the period 1-3-1986 to 31-1-1990, by issue of the present show cause notice dated 27-2-1991. On the question of marketability of the disputed item, the learned Sr. Counsel submits that the appellants had all along been stating that the Calcium-bi-Sulphite Solution was very unstable; if kept at normal tempe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, there was a bona fide belief on the part of the assessees that the goods were not liable to duty. He submits that Padmini Products case does not come to the aid of the appellants as in that case, there was a scope for doubt that the goods were not dutiable because of certain trade notices. Similarly, in the case of Punjab National Fertilizers, there was some controversy which resulted in the proceedings being dragged on, while in the present case there is no controversy that the disputed item is excisable. Regarding the confirmation of the differential duty demand, learned SDR submits that there is no illegality in adoption of this procedure. On the aspect of marketability, learned SDR refers to paragraph 14 of the adjudication order and submits that the solution is marketable if kept under regulated temperature and in durable containers, that according to the Condensed Chemical Dictionary by Gessner Hawley, it has several uses such as antichlor in bleaching textiles, paper pulp (dissolving lignin); preservative, bleaching sponges; hydroxylamine salts; germicide; disinfectant; that it is governed by shipping regulations, points to its marketability. He submits that on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay excise duty immediately. The appellants replied to this letter on 25-7-1986 as follows : Letter No. E/Ref/85-87, dated 25-7-1986 addressed to the Asst. Collector of Central Excise, Coonoor Division, Coonoor Sub : Revised Classification list submitted for approval Ref : Sector office letter OG/No. 196/86, dated 24-7-1986 We are submitting herewith a revised classification list incorporating the latest changes for your kind approval. We have not included in the classification list the following items since these are unstable items and cannot be sold as it is. To our knowledge there is no such sale of these items in the market. This is only an intermediate product in the manufacture of wood pulp and Rayon and PSF in unfinished form which cannot attract market. These are prepared entirely for our captive consumption and these are not capable of being sold in the market and, therefore, cannot be described as goods for the purpose of Central Excises and Salt Act, 1944 : 1.Calcium-bi-Sulphite Solution 2.Chlorine-di-Oxide 3.SO2 dissolved in water (Acid water) We also enclose herewith a copy of the recent Supreme Court Judgment in support of our stand and requiest y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p completely from Excise purview. Further the Asst. Collector has already approved the classification list as submitted by us. Under the circumstances we feel the demand for duty is not correct. We request you to do the needful. We are also willing to appear for a personal hearing if the Asst. Collector so desires." The appellants have been consistently maintaining the same stand in the replies to the other show cause notices also. Now, turning to the letters dated 20-2-1990 and 28-12-1990 which have admittedly been sent after the impugned period and been relied upon by the Dept. as constituting the basis for the allegation of suppression of actual production, we find that there is nothing in these letters to justify applying the enhanced quantum retrospectively from 1-3-1986. These two letters were sent in response to the letters of the Supdt. dated 3-2-1990 and 13-12-1990. In the letter dated 20-2-1990, the appellants have informed the Department that the quantum of Calcium-bi-Sulphite solution produced and removed per day is about 700 MTs. In the letter dated 13-12-1990 issued by the Superintendent of Central Excise, the Department notes that the appellants have recentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department should not have allowed the controversy to drag on and in such circumstances the extended period of limitation cannot be invoked by the Department. The Tribunal also held that impugned product i.e. the mixture of chemicals containing sodium-bi-carbonate arising at the intermediate stage is not liable to duty as sodium-bi-carbonate under T.I. 14AA. In the present appeal also the fact of presentation of Calcium-bi-Sulphite Solution was admittedly known to the Department in 1986 itself and the Department proceeded on the basis of production of 500 MTs per day and also issued half-yearly show cause notices which later has been taken at the higher figure of 812 MTs per day allegedly on the basis of the figures supplied subsequently by the appellants in their letters 20-2-1990 and 28-12-1990 which, as we have noted, cannot be taken to mean that the higher production figure was applicable throughout the period in dispute. 10.3 In the case of Tamil Nadu Housing Board v. CCE, Madras reported in 1994 (74) E.L.T. 9 (SC) has set out the circumstances in which the extended period of limitation can be invoked by the Department. The Court has held as under : A bare reading of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epared by the appellants in the manufacture of wood-pulp and captively consumed. The process of preparation of the Solution is as follows : Sulphur-di-Oxide is absorbed in Calcium Carbonate powder with chilled water around 8o to 10o centigrade which is then passed into milk of lime which is used in the manufacture of wood pulp. The wood consists of cellulose and lignin, the latter soluable in boiling bisulphite solution. The Cellulose is left, and then used for making Rayon Grade Pulp. We find that at the very threshold of the controversy and as early as on 16-2-1987, the appellants had pointed out to the Department that Calcium-bi-Sulphite solution cannot be termed as goods. In support of this contention, it was stated that once the temperature of the solution prepared by them varies, Sulphur-di-oxide escapes and the solution cannot be used for further process. It was also pointed out that the material is not at all stable and cannot be sold and the same is made and immediately used for their internal requirements. It was also stated that the solution cannot be transported either by containers or by pipelines since it loses its strength. This stand taken by the appellants wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted very dilute solution specifically manufactured to suit our captive consumption only. It can be manufactured at very high concentration and purity like sulphuric acid but it will not suit for our specific purpose namely pulping technology. From the enclosed Chemical market price list taken from Chemical Weekly and Chemical Product Finder it can be seen that it is not marketed since its application is limited only to pulping technology and all the mills produce their own cooking liquor at source itself since it is unstable and could not be transported. The very name Sulphite Pulping Cooking Liquor stands for its specificity and its limited use in cooking wood for pulping. South India Viscose is the only Unit in India producing Rayon Grade pulp via Sulphite Pulping technology based on Calcium base." The first Annexure to the said note is an extract from General and Inorganic Chemistry for University Students by J.R. Partington and at page 757 of the said Text, the Author has observed as follows : Calcium Sulphite is formed as a white precipitate by passing Sulphur-di-oxide into a fairly large volume of a lime water, or by mixing solutions of Sodium Sulphite and Calcium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving held that there has been no admission, we now proceed to examine the issue on merits. The appellants have produced enough material to show that the solution prepared by them is not excisable, whereas the Department has not rebutted the evidences produced by them. The Department has failed to discharge the onus cast on it to prove marketability. Not a single instance of sale of the goods has been brought on record nor has it been shown that the subject goods are capable of being marketed. Appart from coming to the erroneous conclusion that if the goods are stored at 15oC and transported in durable containers, they would be marketable, the Department has not produced any material. Even this erroneous negative conclusion appears to have been culled out from the stand taken by the appellant that the goods have to be kept below 15oC and cannot be transported in conventional tankers. The stand taken by the appellants in this regard was a positive stand against marketability and did not suggest that the goods were otherwise transportable if maintained at a regulated temperature and in durable containers. 11.5 The learned Sr. Departmental Representative supporting the Collector s fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. Therefore, the essential ingredient is that there should be manufacture of goods, goods being articles which are known to those who are dealing in the market having their identity as such. Section 3 of the Act enjoins that these shall be levied and collected in such manner as may be prescribed, duties of excise, on all excisable goods other than salt which are produced or `manufactured in India. `Excisable goods under Section 2(d) of the Act means goods specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt. Therefore, it is necessary, in a case like this, to find out whether there are goods, that is to say, articles known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not `goods known to the market. Marketability, therefore, is an essential ingredient in order to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the duty of excise is on manufacture or production of goods but entire concept of bringing out new commodity, etc. is linked to its marketability. After setting out the entire case law on the subject, the Court held at paragraph 11 that even assuming that such solution lasts for 15 days as found by the Tribunal that would not help the Department unless it is further found that it was a produce which was marketable or capable of being marketed . No such finding has been arrived at in this case which would preclude the Dept. from levying duty on the goods. 12.6 The Tribunal in Krishna International v. Collector of Central Excise, Meerut reported in 1994 (71) E.L.T. 694 has held that the burden of proving that the product is marketable and that they are goods, is on the Department and held that in this case there is no evidence to show that these eight parts have been marketed by the appellants. Even if they emerge in the intermediate stage the Department has to show that the product emerging at that stage is independent goods which are marketable and duty is imposable thereon. This burden has not been discharged by the Department. It is for the Department to have shown that in T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Moti Laminates P.Ltd. and others v. C.C.E., Ahmedabad reported in 1995 (76) E.L.T. 241 (S.C.) = [1995 (7) RLT 1 SC] wherein the Court held that since the test of marketability applies even to those goods which are mentioned in Tariff Item, the intermediate resin being not marketable or capable of being marketed, would not be exigible to duty. In the present appeal there is no material on record to show that Calcium-bi-Sulphite solution is marketable or capable of being marketed. Hence, the Dunlop India judgment will not advance the case of the Department. 12.9 In the case of CCE, Cochin v. Travancore Electro Chemical Industries Ltd. reported in 1994 (74) E.L.T. 936 (which was decided only upon hearing the DR and in the absence of reporesentation by the respondents), the Tribunal was called upon to determine the excisability and classification of Acetylene gas produced by the appellants and consumed captively in their plant for manufacture of Acetylene Black. The Tribunal found that the technical literature showed that such Acetylene is capable of being transported and marketed and is actually so transported and marketed for industrial application and other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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