9911796707
TMI Blog2007 (5) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... pter 71. It was noticed, that during the refining of precious metal out of spent products of such precious metal, the appellant manufactured certain compounds of precious metal at the intermediate stage and consumed the same in the manufacture of precious metals and various products and these intermediate compounds are liable to payment of Central Excise duty in view of the fact that they were captively consumed for the manufacture of exempted goods. The Revenue officers recorded various statements of the persons and on conclusion of investigation issued a show cause notice directing the appellants to show cause as to why duty should not be demanded from them on the ground that the compounds of the precious metal arising at the intermediate stage is liable to payment of duty as the final products manufactured out of these are exempted and why penalties be not imposed on them. The appellants resisted the show cause notice on merits and also on limitation. The adjudicating authority in his order-in-original on merits held as under :- "They had argued that the impugned goods in slurry form were emerged in continuous process which were not dried, ground, sieved and packed and hence, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of comparable goods for the purpose of reliance. The goods under consideration are a much specialized one which is in fact marketed world wide in the similarly placed industries as per the requirements of buyers. In all other case, where M/s. HPL relied upon, pertain to various kinds of waste and scrap which are not the case in hand." The adjudicating authority also brushed aside the ground of limitation stating that the appellants had not given the declaration that intermediate products emerged in the factory and hence bar of limitation does not apply in this case. On such findings, the adjudicating authority confirmed the demands and imposed penalties, hence these appeals. 3. The ld. Advocate appearing on behalf of the appellants assails the order on merits as well as on limitation. It is his submission that the intermediate product arise during the course of manufacturing of the precious metal sponge are not marketable as such. He submits that no evidence is given regarding the marketability of the said product in the form in which they arise. He also submits that the appellants had discharged the duty liability on the final products when manufactured out of these int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, arises during the course of manufacture they would be dutiable if consumed for the manufacture of products which are exempt. He relies upon decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Jaipur v. Hindustan Zinc Ltd. [2004 (166) E.L.T. 145] for this proposition. 5. Considered the submissions made at length by both sides and perused the records. It can be seen from the above-reproduced portion of the order-in-original (in Paragraph 2) that adjudicating authority has come to the conclusion that the products of the appellants are marketable if they are complete and identifiable. It is undisputed that the Revenue is trying to tax the intermediate products which arise during the course of manufacturing of the final products in the appellant's factory. On going through the entire process of manufacture as recorded by the authorities in the show cause notice and as submitted by the appellants in their reply to the show cause notice, we find that the Revenue is trying to impose duty on the intermediate products, which are arising in the appellant's factory in liquid stage. The marketability of the products in the state in which it arises as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindustan Zinc Ltd. as reported at [2005 (181) E.L.T. 170 (S.C.)] held as under :- "Thus, marketability is essentially a question of fact. In the show cause notice it is stated as follows : "As per market enquiry conducted revealed that silver chloride (75%) was being sold ex-factory @ Rs. 1000/- per 100 Gms. i.e. Rs. 10,000/- per Kg. The silver chloride manufactured by M/s. Hindustan Zinc Ltd. Debari containing 53.7% silver its assessable value of the comparable goods under the provisions of Rule 6(b)(i) of Central Excise (Valuation) Rules, 1975 works out to be Rs. 7160/- per Kg.". This seems to suggest that some market enquiry was made. However, it could not be sown to us what that market enquiry was. The above statement also shows that silver chloride sold in the market had 75% silver content. In the present case, the department has made no efforts to ascertain whether silver chloride emerging from the treatment adopted in the assessee's factory, having 50% to 53% silver content, had a market. Mathematical ratio between total quantity of silver chloride and silver content cannot establish marketability. The burden was on the department to prove such marketability. In the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made marketable." 9. The Hon'ble Supreme Court in the case of Hindustan Ferodo Ltd. (supra) has set aside the order of the Tribunal on an identical issue by observing as under :- "The Tribunal referred, in the order under appeal, to process drawings and came to the conclusion that the duty was sought to be levied at the fourth stage of manufacture in the appellants' factory. The samples of the said rings, which were shown to the Tribunal, arose after this stage. They were in a finished form. There was nothing elementary or crude about them. As asbestos products, there were fully manufactured. Nothing further was required to be done to make them fully manufactured asbestos products. The appellants' contention that the said rings were brittle and fragile articles and hence not marketable "was simply not true. We examined the sample of the rings very carefully. Asbestos fibre is a very strong material. If the ring is allowed to fall on the floor, nothing would happen to it. We found it neither brittle nor fragile. It was perfectly capable of being handled and transported for marketing". In so far as the aforementioned affidavits were concerned, the Tribunal observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tribunal makes for better appreciation of the record, but not its substitution. The Revenue sought to make the said rings dutiable as asbestos articles. The affidavit evidence of a dealer in asbestos was of some relevance. So was the affidavit evidence that explained the character and use of the said rings. It was wrong of the Tribunal to find that the deponents of these affidavits were "not the right persons to give opinion on the type of the products" with which it was concerned. Regretably, the Tribunal's order under appeal shows that it was not fully conscious of the dispassionate judicial function it was expected to perform, and it must be quashed." 10. It can be seen from the ratio of the decisions of the Hon'ble Supreme Court as reproduced above, that the marketability of the product in the form it is sought to be taxed is important for levying tax. In the absence of any evidence, the product cannot be taxed by the Revenue authorities, is the clear ratio, that has been settled by the Hon'ble Supreme Court. In the present appeal before us, the Revenue has not produced any concrete evidence as to the marketability of the intermediate products captively consume ..... 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