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TMI Blog2011 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise and Service Tax Appellate Tribunal (CESTAT) (in short, The Tribunal ) in Appeal No. E/549 to E 551/2003-Mum, dated 3-12-2004 [2005 (183) E.L.T. 471 (Tribunal)]. By the impugned order, the Tribunal has confirmed the order passed by Commissioner of Customs and Central Excise, Valsad dated 30-12-2002. In this appeal, the appellant has raised the following question of law for our consideration and decision :- Whether Physician samples manufactured and distributed as free samples have to be assessed on the basis of cost of manufacture plus normal profits, if any, earned on the sale under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 (for short, Rules 1975 ) upto 1st July, 2000 and thereafter, on application of Rule 8 of Central Excise Valuation Rules, 2000 (for short, Rules 2000 ) i.e. on cost of manufacture plus 15% profit basis and not on pro-rata basis as has been done by the Revenue? 2. The Commissioner, while passing the order in Original No. 01/MP/Valsad/2002, dated 30-12-2002, has held that the value should be determined under Rule 4 of Rules 1975. In the appeal filed by the appellant, the Tribunal, following the judgment in the case of Mayo India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is provided that packing and labeling would amount to manufacture. Therefore, it is contended that the Physician Samples of Patent and proprietary Medicines become manufactured goods only when the same are packed and labeled. It is further contended that the physician samples of patent and proprietory medicines, at the time they are manufactured, are statutorily prohibited from being sold by virtue of Section 18 of the Drugs Act read with Rule 65(18) of the Drug Rules and the breach of the Drug Rules invites prosecution under Section 27(d) of the Drugs Act, and also invites penalty under Section 27(c) of the Drugs Act. It is further submitted that the two conditions that require to be satisfied for levy of excise duty are existence of manufacturing process and as a result of such process, goods are produced which are capable, in the ordinary course, of being taken to the market for being bought and sold. It is further submitted that the word excisable goods has been construed to mean not only goods specified in the Schedule to the Central Excise Tariff Act, 1985, but also goods which are capable of being sold i.e. marketable. In the present case, the Physician Samples are st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a duty on manufacture, duty is payable whether or not goods are sold. Therefore, sale is not necessary condition for charging excise duty. This Court in the case of Ramkrishna Ramnath Agarwal v. Secretary, Municipal Committee, 1950 SCR 15 = 1978 (2) E.L.T. (J284) (S.C.), has referred to the distinction made by the Federal Court between the duty of excise and a tax on sale in Province of Madras v. Boddu Paidanna and Sons, (1942) FCR 90 = 1978 (2) E.L.T. (J272) (F.C.), wherein it is observed : Plainly, a tax levied on the first sale must, in the nature of things, be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit... If the taxpayer who pays sales tax is also a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be overlapping in one sense, but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is, in theory, nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that in order to attract excise duty the article manufactured must be capable of sale to a consumer. Entry 84 of List I of Schedule VII to the Constitution specifically speaks of duties of excise on tobacco and other goods manufactured or produced in India.... , and it is now well accepted that excise duty is an indirect tax, in which the burden of the imposition is passed on to the ultimate consumer. In that context, the expression goods manufactured or produced must refer to articles which are capable of being sold to a consumer. In Union of India v. Delhi Cloth General Mills, AIR 1963 SC 791, this Court considered the meaning of the expression goods for the purposes of the Central Excises and Salt Act, 1944 and observed that to become goods an article must be something which can ordinarily come to the market to be brought and sold , a definition which was reiterated by this Court in South Bihar Sugar Mills Ltd. v. Union of India, AIR 1968 SC 922 . 11. In Bhor Industries Ltd. v. Collector of Central Excise, Bombay, (1989) 1 SCC 602 = 1989 (40) E.L.T. 280 (S.C.), it was held : Excise is a duty on goods as specified in the Schedule. The taxable event in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not in fact marketed is of no relevance. So long as the goods were marketable, they are goods for the purposes of Section 3. It is not also necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, it makes no difference so long as they are available for purchasers..... The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country. 14. In Indian Cable Company Ltd., Calcutta v. Collector of Central Excise and Others, (1994) 6 SCC 610 = 1994 (74) E.L.T. 22 (S.C.), this Court has stated : Marketability is a decisive test for dutiability. It only means saleable or suitable for sale . It need not be in fact marketed . The article should be capable of being sold or being sold, to consumers in the market, as it is ---- without anything more. 15. In Triveni Engineering Industries Ltd. v. CCE, (2000) 7 SCC 29 = 2000 (120) E.L.T. 273 (S.C.), this Court, while demonstrating the attributes of excisable goods under the excise law, has observed that : 13. The article in question should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of Rule 93 of the Rules, is done. Thus, we hold that sticks of cigarettes which are removed for the purpose of test in the quality control laboratory located within the factory premises of the appellant Company are liable to excise duty. 18. In the case of Cadila Laboratories (P) Ltd. v. CCE, Vadodara, (2003) 4 SCC 12 = 2003 (152) E.L.T. 262 (S.C.), this Court has held : 9. Thus the law is that in order to be excisable, not only goods must be manufactured i.e. some new product brought into existence, but the goods must be marketable. By marketable it does not mean that the goods must be actually bought and sold in the market. But the goods must be capable of being bought or sold in the market. The law also is that goods which are in the crude or unstable form and which require a further processing before they can be marketed, cannot be considered to be marketable goods merely because they fall within the Schedule to the Excise Act. 19. In Hindustan Zinc Ltd. v. CCE, (2005) 2 SCC 662 = 2005 (181) E.L.T. 170 (S.C.), this Court observed : 5. Excise duty is levied under Section 3 on goods manufactured or produced in India. Thus, before excise duty is levied on an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of drugs in order to maintain the standard or quality of drugs for sale and distribution as a drug. This Court in State of Bihar v. Shree Baidyanath Ayurved Bhawan (P) Ltd., (2005) 2 SCC 762 = 2005 (191) E.L.T. 3 (S.C.), has held : 14. The object of the Drugs Act is to maintain the quality of drugs as drugs. Its use as any other commodity in the hands of the consumer is not regulated. Hence, the Drugs Act is relatable to Entry 19 of List III, which deals with drugs and poisons, subject to Entry 59 of List I regarding opium. Lastly, the said Act regulates the manufacture of drug for sale and distribution as a drug. 24. Therefore, any requirement or condition imposed by the Drugs Act and Rules made thereunder, is in furtherance of its above stated object of regulating and maintaining the quality of Drugs. 25. The primary object of the Act is to raise revenue by imposing duty on goods that are manufactured as mentioned above [see Kedia Agglomerated Marbles Ltd. v. CCE, (2003) 2 SCC 494 = 2003 (152) E.L.T. 22 (S.C.)]. In other words, the scope of the Act extends to the event of manufacture of goods, for the levy of excise duty. These two Statutes and the Rules made there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the appellant, that the manufacture of patent and proprietary drugs is completed only after the labelling is completed, for the purpose of levy of excise duty. However, on a perusal of the labelling provisions in the Drug Rules, we find that they deal with the name of drug, contents of the drug, name and address of manufacturer, a distinctive batch number (details of manufacture of drug is recorded and available for inspection as a particular batch), preparation of drug, date of manufacture and date of expiry of drug, its storage conditions, etc., which are in aid of the object of the Act, viz. promoting the use of good quality drugs, and ensuring that drugs that do not live upto quality do not find their way into the market. Rule 96(1)(ix) of the Drug Rules on which Shri Ganesh heavily relies in support of his submission, states that while complying with the labelling provisions under clauses (i) to (viii) of Rule 96(1), the manufacturer must further overprint on the label Physician s Sample - Not to be Sold , in case they are to be distributed free of cost as physicians samples. Further, the bare perusal of Rule 96 shows that its heading bears Manner of Labelling an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court, while passing the aforementioned order, has relied on the judgment and order passed in the case of Bharat Heavy Electricals Ltd. v. Commissioner of Customs Central Excise, (2003) 9 SCC 185 = 2003 (154) E.L.T. 10 (S.C.) [referred to as Civil Appeal No. 3643-44 of 1999], in which this Court held : 4. It is next submitted that the value of an assessable goods can be zero. It is submitted that when a part is replaced under a warranty to the assessee the value is zero. It is submitted that as the value is zero, no excise duty should be payable on that part. We are unable to accept this submission also. In order to promote sales manufacturers and dealers very often offer incentives e.g. supply of free TV or some other equipment or goods. One of the incentives offered, is a warranty to replace a part within a particular period. Merely because manufacturers and dealers choose to offer such incentives does not mean that goods which are otherwise excisable, should be exempted from paying excise duty. When offering the incentive, the manufacturer or dealer is choosing to take upon himself the cost of those goods. So far as the Revenue is concerned, those goods remain excisable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e merits of the order put in issue before it though it may be inclined to affirm the same, it is customary with this Court to grant leave to appeal and thereafter dismiss the appeal itself (and not merely the petition for special leave) though at times the orders granting leave to appeal and dismissing the appeal are contained in the same order and at times the orders are quite brief. Nevertheless, the order shows the exercise of appellate jurisdiction and therein the merits of the order impugned having been subjected to judicial scrutiny of this Court. 42. To merge means to sink or disappear in something else; to become absorbed or extinguished; to be combined or be swallowed up. Merger in law is defined as the absorption of a thing of lesser importance by a greater, whereby the lesser ceases to exist, but the greater is not increased; an absorption or swallowing up so as to involve a loss of identity and individuality. (See Corpus Juris Secundum, Vol. LVII, pp. 1067-68.) 34. It is settled law that this Court should follow an earlier decision that has withstood the changes in time, irrespective of the rationale of the view taken. It was held by a Constitution Bench in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise, 2002 (146) E.L.T. 477, the question before the Tribunal was, whether excise duty is leviable on Sugar syrup manufactured by the assessee for use in the manufacture by it for cough syrup. The Tribunal, while answering the issue, has stated that since the sale of Sugar Syrup containing artificial sweetener sodium saccharin would contravene the provisions of Prevention of Food Adulteration Rules, the Goods cannot be considered as marketable. 38. In Hindustan Petroleum Corporation Ltd. v. CCE, 2007 (210) E.L.T. 407 (CESTAT), it was a case where assessee manufactured diesel stem by refining the sour crude for captive consumption and sale in the market. The sale of diesel stem containing high sulphur content was prohibited by Ministry of Petroleum and Natural Gas in the light of the notification issued by Ministry of Environment and Forest for preventing environmental pollution caused by emission due to burning of sulphur along with fuel. In the light of the notification issued by Ministry of Environment Forest, the diesel stem in its high content of sulphur is incapacitated from being sold in the market. In other words, this inherent incapability in the ingredients of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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