9911796707
TMI Blog1999 (4) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the main stream of production of plastic crayons. The process of plastic crayons is described in the statement of facts. In the year 1988, the appellants sent wax crayons for finishing on job work basis and that before adopting this procedure, the appellants approached excise authorities by their letter dated 6-6-1988 and applied for permission under Rule 56B for sending the same for job work. 3. The Excise authorities by their letter dated 12-8-1988 clarified that as the end product was exempted, the movement of wax crayons in an unfinished form from one factory to another needed no permission. From October, 1988 onwards production of plastic crayons was announced and a classification list No. 2/88-89, dated 28-1-1988 was filed. In 1991 again the appellants approached the Central Excise authorities for permission for sending the unfinished pencils from their Tarapur factory to job work. Again Excise authorities informed that no permission was required by its letter dated 19-9-1991. Thereafter they again sent the unfinished goods viz. Crayplas Compound for moulding to a nearby SSI unit on job work basis. It is vehemently stated by the appellants that from 1988 onwards the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table, and as such question of levy of duty on the product is not legal and tenable. They also contended that the decision of the Tribunal in Luxor Pen Co. s case - 1994 (70) E.L.T. 294 is not applicable to the facts of this case as the instant product in question does not have any marketability. The Assessing authority by the impugned order rejected the contentions of the appellants and held that the very fact that the identical product was imported for manufacture of crayons will indicate that such crayplas compound are held to have been marketed. The authority had held that letters produced by the assessee were from local dealers. It has been specifically held by the adjudicating authority that identical goods are being bought and sold in the international trade, it did not think it necessary to establish the marketability of the product further with reference to the domestic trade. If Luxor Pen Co. can import such compound from abroad, such compound can also be offered for sale provided they can be supplied by the manufacturers here. As far as the limitation is concerned, he relies on the statement of Shri Sathe, General Manager (Admn.). The authorities therefore, held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always is imported as it gives an opportunity to assessee to challenge at any time. In this connection he invited our attention to South India Viscose s case 1995 (78) E.L.T. page 737. In any event it is argued by the ld. Counsel that the decision of the Luxor Pen Co. s case dealt with only conflicting entries in Chapters 32 and 39 and other appropriate entry of Chapter 96 was not considered and therefore it should be considered as coming under Chapter Heading 96.09. In the event of coming under Chapter 96, rate is applicable only at nil rate of duty therefore entire demand is wrong in law. It is further argued that in any event the demand is barred by limitation as right from 1988 onwards the department was informed of what is happening in the factory viz. how the end product come out. Right from the date the process of manufacture is known to sending of the unfinished Crayplas compound to the job worker and seeking the exemption. 3. Ld. DR in answering the arguments of the ld. Counsel for the appellants, stated that the goods in the unfinished form when they were transferred from the manufacturer to the job worker, would itself showed the goods were marketable. Identical goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be resorted to. In any event, the CEGAT judgment in Luxor Pen s case (supra) clearly answers the case in issue. This production has to be treated either as a colour preparation or integrated for colouring preparation. The Madras High Court in Motor Industries case - 1992 (62) E.L.T. 13 had held that the goods which require major operations to arrive at the identity of another product cannot be said to have acquired the essential character of the product and does not fall in the ambit of Rule 2(A) of the Interpretative Rules. In the instant case Crayplas compound has to undergo process of extrusion and shaping process which will involve considerable operations. It is in any event the essential feature of the goods is also the shape and size of the goods. Being irregular in shape would not itself stop colouring targeted the product by the users. As far as time bar is concerned there is no intimation other than the classification list filed with the department for crayplas compound. For the period subsequent to filing the classification lists goods have to be treated as provisional as per the Supreme Court decision in Samrat Industries case - 1992 (58) E.L.T. 561 and Commissioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... square flats and lumps together to be marketable. They ordinarily come to the market for being bought and sold. As against this the department has invited our attention to the judgment of the Supreme Court in Moti Laminates case - 1995 (76) E.L.T. 241 especially para 6 to 10 thereof at page 246 it is held : 6. The duty of excise is leviable under Entry 84 of List I of the VIIth Schedule on goods manufactured, or produced. That is why the charge under Section 3 of the Act is on all, `Excisable goods , `produced or manufactured . The expression `excisable goods has been defined by clause (d) of Section 2 to mean, `goods specified in the Schedule. The scheme in the Schedule is to divide the goods in two broad categories - one, for which rates are mentioned under different entry and other the residuary. By this method all goods are excisable either under the specific or the residuary entry. The word `goods has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was excisable goods within meaning of the Act and the Tribunal was justified in levying duty on it. The learned Counsel submitted that marketing capability depends on nature of goods. The test of [marketability and capable of being marketed could not be applied to such] goods as resol and, therefore, the submission of the learned Counsel for appellants that the resin or resol could be subjected to duty only if it was found that from raw materials some new substance was brought out and it was known as such was not correct as once the intermediate goods produced by the appellants was found to be resols and it having been mentioned in Item No. 15A the burden of the Department stood discharged. 9. Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc. is linked with marketability. An article does not become goods in the common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. In Union of India Anr. v. Delhi Cloth General Mills Co. Ltd., 1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791, a Constitution Bench of this Court while construing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts before us that there are only two manufacturers of flashlights in India, the appellant being one of them. It appears also that the aluminium cans prepared by the appellant are employed entirely by it in the manufacture of flashlights, and are not sold as aluminium cans in the market. The record discloses that the aluminium cans, at the point at which excise duty has been levied, exist in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans have sharp uneven edges and in order to use them as a component in making flashlight cases the cans have to undergo various processes such as trimming, threading and redrawing. After the cans are trimmed, threaded and redrawn they are reeded, beaded and anodised or painted. It is at that point only that they become a distinct and complete component, capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case. We find it difficult to believe that the elementary and unfinished form in which they exist immediately after extrusion suffices to attract a market . It was explained in Bhor Industries Ltd. v. C.C. E., 1989 (40) E.L.T. 280 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o duty. But when the Rules were amended a fiction was created that any article produced or manufactured if captively consumed was statutorily presumed to satisfy the test of marketability. But this presumption can be rebutted if it is established that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed. In Bhor Industries (supra) crude PVC films manufactured by the appellants as intermediate product used for captive consumption in manufacture of leather cloth, jute matting and PVC tapes were held not to be excisable goods on the test of marketability. In Collector of Central Excise v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 the manufacturers produced starch hydrolysate which was captively consumed and fell under Item 1E of the Central Excise Tariff. It was held to be goods, no doubt, but it was observed that from a practical point of view it was apparent that the goods were not marketable consequently they were not exigible to duty." 7. We shall consider these rival contentions. In the statement made before the Central Excise Officers, it has been specifically stated by Shri Anil Rajasekharan Nair at Question No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being used as a flashlight case for housing battery cells and having a bulb fitted to the case. We find it difficult to believe that the elementary and unfinished form in which they exist immediately after extrusion suffices to attract a market. The appellant has averred in affidavit that aluminium cans in that form are unknown in the market. No satisfactory material to the contrary has been placed by the respondents before us. Reference has been made by the respondents to the instance when aluminium cans were ordered by the appellant from Messrs. Krupp Group of Industries. This took place, however, in 1966 as a solitary instance, and what happened was that aluminium slugs were provided by the appellant to Messrs. Krupp Group of Industries for extrusion into aluminium cans. The facts show that the transaction was a works contract and nothing more. Apparently, the appellant made use of the requisite machinery owned by that firm for extruding aluminium cans. Not a single instance has been provided by the respondents demonstrating that such aluminium cans have a market. The record discloses that whatever aluminium cans are produced by the appellant are subsequently developed by it int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also appears that the aluminium cans prepared by the appellant ... are not sold as aluminium cans in the market and can in a crude elementary and unfinished form incapable of being employed at that stage as a component in a flashlight. The court held specifically that elementary and unfinished form in which they existed immediately, after extrusion suffices to attract the market. Assessee in that case averred in affidavit that aluminium cans in that form as unknown in the market and no satisfactory material to the contrary has been placed by the respondents to the instance when aluminium cans were ordered by the appellant from Messrs. Krupp Group of Industries for extrusion into aluminium cans. This was rejected by the Supreme Court. 8. In Bhor Industries Case (supra) at paragraph 7 the Court held that - articles as known in the market as a separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Further in the case of C.C.E., v. Ambalal Sarabhai Enterprises - 1989 (43) E.L.T. 214 the Court held : We are concerned in this appeal with starch hydrolysate and, therefore, if the process or activity of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which we have to refer is Moti Laminates P. Ltd. s case 1975 (76) E.L.T. 241 at paragraphs 6 and 7 the court held as follows : 6. The duty of excise is leviable under Entry 84 of List I of the VII the Schedule on goods manufactured, or produced. That is why the charge under Section 3 of the Act is on all, Excisable goods , produced or manufactured . The expression excisable goods has been defined by Clause (d) of Section 2 to mean, goods specified in the Schedule. The scheme in the Schedule is to divide the goods in two broad categories - one, for which rates are mentioned under different entry and other the residuary. By this method goods has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods are specified in the Schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the person on whom duty is proposed to be levied. The expression produced or manufactured has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said case reported in 1995 (76) E.L.T. 241 at 249 the court held that : But when the Rules were amended a fiction was created that any article produced or manufactured if captively consumed was statutorily presumed to satisfy the test of marketability. But this presumption can be rebutted if it is established that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed. The duty is attracted not by captive consumption of any article but it must be a goods within the meaning of the Act which part from having a distinctive name and known as such must be marketable or capable of being marketed. 11. The ld. DR, emphasised mainly the sentences in para 10 with the words when the rules were amended to the words known as marketable and marketed. In this case, if we look into facts of the case, it is admitted the fact that Luxor Pen Co. has similar product by way of importation. In fact in the impugned order, it has been held as follows : Having established that identical goods have been bought and sold in the international trade, I do not think it is necessary to establish the marketability of the product further with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and manufactured and have marketed. 12. As far as the marketability is concerned, the Supreme Court in C.E., v. DCM Co. Ltd. - 1997 (92) E.L.T. 350 has held that marketability is an important one. This has been referred to in para 4 of the judgment. The court held the views of the same court made in Moti Laminates case regarding test of marketability. We feel that having gone through the judgment we are of the view that department has discharged its burden viz. the existence of the import by the competitor of the appellant. This was the marketability. It has been rightly held that the Department has discharged its burden. 13. As far as the classification is concerned, it is the contention of the appellant that it is classifiable under sub-heading 96.07 and not under 32.04. It is also contended by the appellant that Luxor Pen Co. s case is not applicable to the facts of this case because that was the case of the product coming either in Chapter 32 or Chapter 39. The appropriate entries of Chapter 96 was not considered by the lower authority as it was pointed out by both sides. Further it was also contended by the appellant that the goods which they have obtained essential cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... synthetic resin) 32.7 to 50% and colouring matter 11 to 18%. According to the Oxford Advanced Dictionary by A.S. Hornby, the expression preparation" means: kind of medicine, food, etc. specially prepared. The imported goods which have evidently been produced by mixing of polyethylene with other materials viz. organic and inorganic colouring matters, wax and fillers are undeniably preparations which are excluded from the scope of Chapter 39 in terms of the General notes under Heading 3901.10 of the HSN read with Note 3 of Chapter 32 of HSN in terms of which preparations used for colouring preparations fall under Headings 32.03 to 32.06. Further, the Notes (C) and (E) under Heading 32.04 also provide that the heading covers preparations based on synthetic organic colouring matter of a kind used for colouring any material or used as an ingredient in the manufacture of colouring preparations. The imported material based on synthetic organic colouring matter was admittedly meant to be used in the manufacture of Crayon which is a preparation for imparting colour to paper. For these reasons, in our view, in terms of note (C) to Heading 32.04 the material composed mainly of polyet ..... 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