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TMI Blog2020 (2) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... discharging the duty demand on that till October 2006. Hence they were themselves treating these goods as marketable contrary to the decision in the case of COLLECTOR OF C. EXCISE, PUNE VERSUS HINDUSTAN COCOA PRODUCTS LTD. [ 1996 (7) TMI 257 - CEGAT, NEW DELHI] - Once they themselves have been doing so, they cannot turn around and say that the product which was marketable till that date has become unmarketable. There is no dispute with regard to the shelf life of the product. Shelf life of the product is one of the determinant of the product being marketable. If some product is having no shelf life or a very short shelf life, then the same could not be held to be marketable as has been held in the decision of the Apex Court in the case of Moti Laminates. That is not the case here. Revenue neutrality - HELD THAT:- If the issue was revenue neutral, the respondent would have paid the duty and taken the credit whatsoever, if the same was admissible. Secondly revenue neutrality can never be ground for not demanding the duty on the excisable goods in the form and manner they are being cleared by the assessee. Thus, the goods in question viz. milk crumb is marketable and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 demanding duty amounting to ₹ 6,17,78,188/- for the period April 2007 to September 2007 was issued. Both the notices have been issued within the normal period of demand. 2.4 Both the show cause notices have been adjudicated by the Commissioner vide impugned order referred to in para 1 above. While dropping the demand, the Commissioner has in para 31 observed as follows:- 31. In the present case, the show cause notice relies on the fact of transfer of milk crumbs to the job worker as additional evidence to prove the marketability of the product. I find that marketability is not dependent on whether goods move to a job worker, but whether they are sold for a consideration and whether the Sale of Goods Act becomes applicable to such goods. There is no evidence in the show cause notice to prove that the transfer of goods to the job worker was a sale and that Sales Tax has been paid on such goods. Further, the show cause notice also relies on the web site of M/s. International Customs Product which offers milk crumb products for sale. As is evident, the product offered for sale is milk crumb products and not milk crumbs per se. The evidence, therefore, cited in the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;t apply. (v) The Commissioner has erred in admitting the said plea. The assessee manufactures Milk Crumbs and that literature relied also refer to Milk Crumbs only; there is no room to hold that both could be different products. The Central Excise Tariff Act, 1985 has been fully aligned with the International Tariff with .classification codes unevenly adopted therein, and also seeks HSN support, which is also globally accepted version of classification. Therefore, no restrictive meaning is permitted that abroad marketability does not apply within India. Such an interpretation is baseless and would mean that if somebody imports Milk crumb, it is taxable and if manufactures in India is non-taxable. This cannot co-exist. Marketability is qualitative term and should be construed accordingly without confining to any regional aspects. (vi) It is mentioned that in Polyester Industry, the basic monomer 'DEGT' is manufactured as intermediate product from chemicals DMT + MEG. The said monomer is polymerized to get Polyester chips, for use in polyester yarn and other articles such as PET bottles etc. DEGT, the said monomer was obtained and consumed in pipeline and not brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y supplying raw materials, including Milk Crumbs, may be free of cost, for conversion. The job worker is manufacturer within the meaning of Section 2(f) read with Notification No. 36/2001 CE(NT). Thus, it is transaction of removal of goods by one manufacturer to another for use as input by latter and even though removal does not constitute sale, yet taxable point does not escape. (xi) On the point of 'consideration' the job worker has considered the value of Milk Crumb, as informed by M/s. Cadbury, in the value of chocolate for payment of duty. Therefore, Consideration does include but not charged being manufacture of goods on behalf of assessee. In the circumstances even if there is no sale to job worker, but job worker being manufacturer consideration flows and gets adjusted in the transaction with each other. Therefore, test under section 2(d) and its explanation get satisfied. 3.1 We have heard Shri K.M. Mondal, Special Counsel for the Revenue and Shri V. Sridharan, Senior Advocate with Shri Rajesh Ostwal, Advocate, for the respondent. 3.2 Arguing for the Revenue, learned Special Counsel submitted that:- The respondent have themselves been clearing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach case. So long as the goods are marketable, they attract levy of excise duty. Similar view has been taken in the case of Indian Cable Co. Ltd. [1994 (74) ELT 22 (SC)]. As per this decision, marketability only means saleable or suitable for sale. In the case of T.N. State Transport Corpn. Ltd. [2004 (166) ELT 433 (SC)], similar view has been taken. In the case of Moti Laminates Pvt. Ltd. [1995 (76) ELT 241 (SC)], Hon ble Supreme Court has held that goods are excisable and dutiable if produced and manufactured by the assessee are having shelf life so that they are capable of being marketed. He also relied upon the decision of the Hon ble Supreme Court in the case of Dharampal Satyapal [2005 (183) ELT 241 (SC)] and in the case of Nicholas Piramal India Ltd. [2010 (260) ELT 338 (SC)]. He submits that in the case of Hindustan Zinc Ltd. [2004 (166) ELT 145 (SC)], Hon ble Supreme Court while explaining the concept of marketability has in para 6 observed as under:- 6 . We have already noted the manufacturing process. The lead and aluminium sheets by themselves cannot and do not act as electrodes. They become electrodes only after the process mentioned above is undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be said to be marketable in the form in which it is cleared, as held by the Hon ble Supreme Court in Cadila Laboratories [2003 (152) ELT 262 (SC)]. Since the product is a proprietary product and cannot be used by any other manufacturer. The milk crumb is specifically made for manufacture of their own chocolates and cannot be used by any other chocolate manufacturer, the goods are not marketable. It has been held by the Hon ble Supreme Court in the case of Sonic Electrotherm [2002 (145) ELT 274 (SC)]. In the case of Board of Trustees [2007 (216) ELT 513 (SC), Hon ble Supreme Court has stated the law that the goods made to order which are harbor specific cannot be termed to be marketable. Merely because the goods have been transferred by them to other factories or the their job worker, cannot be the ground for holding that these goods are marketable as has been held by the Hon ble Supreme Court in Cipla Ltd. [2008 (225) ELT 403 (SC)] and Bata India Ltd. [2010 (252) ELT 492 (SC)]. Also, duty cannot be demanded as the respondent were themselves paying duty prior to October 2006, contrary to the decision of the Tribunal in the case of Hindustan Cocoa Products Ltd. [1996 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The dispute before the Hon ble Supreme Court in the said case was inclusion of certain expenses incurred in the factory producing final products in the value milk crumbs cleared by the respondent on payment of duty by determining the value as per Rule 6(b)(ii) of Central Excise Valuation Rules, 1988, as they existed then. This fact is very clearly evident from the decision of the Tribunal reported at [2001 (135) ELT 510 (T)]. Respondents herein had themselves not disputed the levy of excise duty on the ground of the product being not marketable. The Hon ble Supreme Court has in para 3 and 4, while framing the question, has observed as follows:- 3 .The question involved in these appeals is about the valuation of milk crumbs, refined milk chocolate and four other products manufactured by the respondent - M/s. Cadbury India Limited, in its factory at Induri, Pune and captively consumed in that factory and other factories of the respondent in the manufacture of chocolate. No part of these products are sold by the respondent. 4 .The respondent had sought valuation of these goods under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, which provides for basing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would show that milk crumb is either understood in common trade parlance in our country as chocolates or that it is marketed as chocolates. That milk crumb falls within the tariff item 1A. Thus, in the case of Colgate Palmolive (India) Ltd. v. Union of India and others reported in 1980 Excise Law Times p. 268 Lentin J. observed that if the department wants to classify a product under a particular tariff item, then it is for the department to establish that the said product is liable to duty under that particular tariff item and it is not for the manufacturer to establish a negative. I may also refer in this connection to my decision in Garware Nylons v. Union of India and others reported in 1980 (6) E.L.T. 249 when I was sitting in a Division Bench, to the same effect. The respondents have failed to discharge this burden. From the above para it is quite evident what Hon ble Bombay High Court was interpreting in the case before it was the classification of milk crumbs as chocolate as per the tariff entry No 1A of the erstwhile Central Excise Tariff as it existed then. Hon ble Bombay High Court has after examining the facts available found that no evidence has been adduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich exempted any dutiable goods when captively consumed in the manufacture of further dutiable goods. Against this order the Collector (Appeals) passed the impugned order. Significantly after the change over to the new Tariff, the respondents continued to file classification showing crumbs as falling under sub-heading 1804 and claiming benefit of the Notification No. 88 of 1986, dated 10-2-1986. 4.6 The term marketability has been interpreted by the Hon ble Supreme Court in decisions subsequent to the case of Hindustan Cocoa Products of Tribunal specifically in the case of Hindustan Zinc [2004 (166) ELT 145 (SC)], Dharampal Satyapal [2005 (183) ELT 241 (SC)]. In case of Dharam Pal Satyapal, Hon ble Apex Court has in para 18 and 19 observed as follows: 17. The main contention advanced on behalf of the assessee herein was that the compound (kimam) was neither a chewing tobacco nor a preparation for chewing tobacco under chapter sub-heading 2404.49 prior to 23-7-1996 and under 2404.40 w.e.f. 23-7-1996; it was neither edible nor consumable; it was made by the assessee from a secret formula and that the entire production was captively consumed by their three factories at Okhl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). Further, from time to time, the assessee herein bought from the market a similar compound (Lucknowi kimam) and used it in the manufacture of the final product which indicated that on blending of sada kimam with saffron, spices, menthol etc., the compound in question (kimam) which emerged was a distinct, identifiable product, known to the market as kimam. Hence, we do not find any infirmity in the impugned judgment of the tribunal which has held that the said compound (kimam) was marketable and classifiable as chewing tobacco or a preparation for chewing tobacco under chapter sub-heading 2404.49/2404.40. 4.6 Now examining the various evidences led in the present case, the first and the foremost being that the respondents themselves have been treating this goods as excisable and were discharging the duty demand on that till October 2006. Hence they were themselves treating these goods as marketable contrary to the decision in the case of Hindustan Cocoa Products Ltd. Once they themselves have been doing so, they cannot turn around and say that the product which was marketable till that dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual fact of these goods being bought and sold by the respondent in the market is immaterial for determination of the marketability of this product. 4.8 Relying on the decision of Hon ble Gujarat High Court in case of Lupin Limited respondents have argued that reliance placed by the revenue on the United State Patent during the course of argument is misplaced. In their submission these patents are process patent and not the product patent, hence do not establish the marketability of the goods in question. In case of Lupin, Hon ble High Court has stated as follows: 34 . With respect to patent issued by the U.S. Office, there are several reasons why such ground is not germane. Firstly, the petitioners have pointed out that such patent is not the product patent, but a process patent. Secondly, the patent is issued with respect to the final drug and not intermediate chemical. These two significant aspects which the petitioners have brought about in the rejoinder affidavit have not been seriously contested by the respondents though detailed sur-rejoinder affidavit has been filed. Additionally, the petitioners have also produced the disclosure statement made by the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es this requirement. The test of product formulation and associated secrecy has been specifically rejected by the Hon ble Apex Court in case of Dharampal Satyapal referred above. 4.10 Certain other judgments relied upon by the respondent with regard to holding that the product is not marketable just because the same was transferred to the units of the same manufacturer or to the job worker. We do not find that these judgments support the case of the respondent. In the case of Cadila Laboratories referred by the learned Senior Counsel, the Hon ble Supreme Court has observed that The product produced must be a distinct commodity known in common parlance to the commercial trade for the purpose of buying and selling. In the present case when we have recorded the finding that the product is having a distinct commercial identity, then the case of Cadila Laboratories is distinguishable and not applicable to the present set of case. Similarly, in the case of Bata India Ltd., the Hon ble Supreme Court has decided the matter that the goods viz. unvulcanised sandwiched fabric was since it was not commercially known or since no evidence had been led in that case with regard to the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is capable of being marketed. The facts that the appellants have chosen not to sell the product in question does not mean that the same is not capable of being marketed. The matter can be looked from another angle. There is also no dispute that the said product in question is used in the manufacture of the animal feed supplement sold by the Appellant. Had the Appellant not used the product in question, they would have had to buy the same from the market to manufacture and sell the Animal Feed Supplement. This clearly shows that a marketable product emerges. 4.12 Section 2(d) of the Central Excise Act specifically defines the excisable goods and the Explanation appended to the said rule specifically reads For the purposes of this clause, goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. This Explanation confirms what has been stated by the Hon ble Supreme Court in various decisions referred earlier. Any product which is capable of being bought and sold for a consideration are deemed to be marketable. 4.13 There is no dispute with regard to the shelf life of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not entitled to Cenvat Credit on the inputs used in the manufacture of milk crumbs during the period and the same would have to be reversed/paid in terms of the Cenvat Rules, 2002/4. The finding recorded by the Commissioner in respect of revenue neutrality which cannot be justified for the reason that credit of duty paid in respect of the milk crumbs would be available to some other unit or its job worker, is contrary to the decision of the Larger Bench of the Tribunal in the case of Jay Yushin Ltd. [2000 (119) ELT 718 (T-LB)] and the Hon ble Supreme Court in the case of Star Industries [2015 (324) ELT 656 (SC)]. The Hon ble Supreme Court has in para 35 has observed as follows:- 35 . It was submitted by the learned counsel for the assessee that the entire exercise is Revenue neutral because of the reason that the assessee would, in any case, get Cenvat credit of the duty paid. If that is so, this argument in the instant case rather goes against the assessee. Since the assessee is in appeal and if the exercise is Revenue neutral, then there was no need even to file the appeal. Be that as it may, if that is so, it is always open to the assessee to claim such a credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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