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TMI Blog2000 (9) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ile fabrics falling under Heading 59.05 of the Tariff were not exempt from duty. Department, by show-cause notice (SCN) dated 14-1-1999, proposed to recover duty as above with interest under Section 11AB of the Central Excise Act and to impose mandatory penalty under Section 11AC of the Act. The SCN invoked the extended period of limitation under Section 11A(1) of the Act by alleging 'wilful suppression of facts with intent to defraud the Department of Central Excise duty'. The demand of duty in the SCN was based on the allegation that the RCC fabric was an "independent stable intermediate excisable product well-known to tyre-manufacturers traders all over the world, which had a shelf life and was transportable" and that it was chargeable to duty @ 10% ad valorem under Tariff sub-heading 5905.10 during the period of dispute. The appellants, in their reply to the SCN, denied all the allegations and submitted, inter alia, that the intermediate product in question was neither marketed nor marketable and here it was not dutiable. They relied on case law as also on CBEC's circulated dated 30-6-1999 [published in 1999 (111) E.L.T. (T-31)] 464/30/99-CX which clarified that certain interme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys. The earlier statement to this effect given in the appellants' letter dated 29-7-1998 to the Superintendent of Central Excise was retracted in the reply to the SCN. (vi) The appellants had been manufacturing and clearing cycle tyres at NIL rate of duty since 1991-92 and were not aware of the alleged fact that duty was chargeable on the intermediate product viz., 'RCC fabric', produced and captively consumed in such manufacture. On the other hand, Department was aware of such fact as also the fact that the exemption in respect of rubberised textile fabrics had been withdrawn w.e.f. 1-4-1994 as was evident from the Departmental proceedings against other tyre cord manufacturers in Ludhiana on identical set of facts. Therefore, the extended period of limitation was not invocable against the appellants. The SCN in the instant case was issued 4 to 5 years after the period of dispute and was time-barred. (vii) Neither any interest under Section 11AB nor any penalty under Section 11AC of the Act was chargeable/imposable since these provisions of law were not in force at the relevant time. (viii) The case law relied on by the adjudicating authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whether RCC fabric was marketable or not. He took the correct view that, for holding a product to be excisable, it was not necessary that the item must be actually sold or marketed and what required to be shown was only that the item was capable of being sold in the market as 'goods'. Ld. Commissioner then held the RCC fabrics to be marketable and hence excisable. This decision, we note, was based on findings on three aspects viz. (a) the appellants themselves had, in their letter dated 29-7-1998 to the Superintendent of Central Excise (Preventive), submitted that the fabric had a shelf life of two days and was stable; (b) the product was well-known to the commercial community and the persons who dealt with and consumed it; (c) the product was separately classified under TSH.5905.10. 6. As correctly understood by ld. Commissioner, the essential test for deciding the dutiability of any product is the test of marketability. Unless the product is 'goods' capable of being sold in market, it will not be exigible to duty under Section 3 of the Central Excise Act. The burden to prove that any product alleged to be chargeable to duty is marketable is on the Department as per settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp;In the instant case, the RCC fabrics appeared to fall under TSH 5905.10. But this fact by itself would not render the product chargeable to duty. It was incumbent on the Revenue prove that the product was marketable. 8.1 We note that the only material on the basis of which the Commissioner found the product to be marketable is the appellants' letter dated 29-7-1998 to the Superintendent of Central Excise. In that letter, the party had stated that the RCC fabric had a shelf life of 2 days. In the same letter, they had also given an account of the process of manufacture of cycle tyre involving captive use of the RCC fabric. In their statement given to the Department under Section 14 of the Act on 30-7-1998, they submitted, inter alia, that the material was strong and stable. They consumed the material captively and did not sell it. Department had also caused a study of the manufacturing process to be conducted by its officers by visiting the factory. 8.2 It was on the basis of the above information/materials that the SCN was issued to the appellants. In their reply to SCN, they, inter alia, submitted that ordinarily the RCC fabrics had a shelf life of a few hours only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 hours. 24 hours cannot be termed as a long shelf life so as to bring the product into the market for the purpose of buying and selling. The expert's opinion and the affidavits clearly showed that curing takes place even at room temperature and once the surface gets cured, it looses its binding character. Thus from these affidavits and the expert opinion, we can say that the shelf of the product is short so as to store the product and bring it to the market for the purpose of sale and purchase." The Tribunal, having found the product to be non-marketable, held the same to be non-excisable as 'goods' under Section 3 of the Act by following the apex Court's ruling in Moti Laminates (supra). 9.2 Though the intermediate product in question and the process of manufacture of tyres in the instant case appear to be identical, respectively, with those in the above case of Metro Tyres, it may not be safe to adopt the above finding of the Tribunal for deciding, in the instant case, the question whether a shelf life of two days is sufficient for marketability of the product. This is because it is not known as to whether the same set of Rubber Chemicals as used by Metro Tyres was used b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. (v) Inspection & Packing After curing, inspection & packing the goods are ready for despatch." The first stage of the process as understood by the Department shows that Rubber is mixed with Carbon Black, Zinc Oxide and other Rubber Chemicals in a proportion which is trade secret for each manufacturer and depends upon the quality of the final product to be made. It is the rubber-mixed preparation so obtained that is made to pass, simultaneously with cotton yarns in parallel length, through cord calendering machine in the second stage of the manufacturing process' wherefrom "rubberised cotton cord fabric" emerges, which is then used as ply in the manufacture of tyres. When the proportion of mixing in the first stage is dependent on the desired quality of the final product (tyre) and is also a trade secret, how can the RCC fabric (resulting from such mixing followed by calendering) attract buyers in the open market? No prudent man will think that a manufacturer who wants to manufacture cycle tyres of a particular quality of his choice will buy from the market RCC fabrics of another manufacturer who keeps trade secret of the formula for manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X
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