9911796707
TMI Blog1989 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the erstwhile Central Excise Tariff. There was a visit to the factory premises of the respondent by the Central Excise Officers on February 26, 1985. It was alleged that it was found that the respondent manufactured and captively consumed starch hydrolysate but the respondent had failed to take out a licence with reference to the said manufacture of starch hydrolysate and had been removing the same without, according to the appellant, payment of duty and without observing the necessary central excise formalities. It was the view of the Revenue that starch hydrolysate was glucose and, therefore, fell under Item No. 1E of the Central Excise Tariff which covered glucose in whatever form including liquid glucose. Aceordingly, a show cause notice was issued to the respondent. A reply was filed on behalf of the respondent contending that starch hydrolysate was not " goods " since the same was not marketable and, therefore, no excise duty would be payable on the same. In those circumstances, it was submitted that the proposed adjudication by the Collector following the aforesaid notice was without jurisdiction in view of section 11A of the Act. It was urged that starch hydrolysate is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully satisfied with the evidence on record to determine whether starch hydrolysate was goods in the sense of being marketable, then the Tribunal should have, in the facts and circumstances of the case and in the interest of justice, remanded the matter for appraisement and examination in the light of the true principle or the Tribunal should have examined or called for fresh evidence to determine this question. The Tribunal not having done so, has failed to render justice and, as such, the order of the Tribunal is bad, according to Shri Ganguly. Shri Ganguly further submitted that, in starch hydrolysate, the percentage of dissolved solids present is 64. It was submitted that the criterion laid down in the Indian Standards Specification for liquid glucose or glucose syrup, the two terms are being used synonymously by the Indian Standards Institution, was not satisfied in this case. The Indian Standards Specification defines liquid glucose or glucose syrup as " a refined and concentrated. non-crystallizable aqueous solution of D-glucose, maltose and other polymers of D-glucose, obtained by controlled hydrolysis of starch containing material ". The United States Pharmacopoeia XIX de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, nitrogen, oxygen and a small quantity of carbon monoxide. The gas thus produced was thereafter compressed so as to achieve pressure exceeding atmospheric pressure and then passed through a tank containing sugarcane juice so as to remove impurities from it and to refine the juice. For that process of refining it was only the carbon dioxide in the gas which was used and the other gases, i.e., nitrogen, oxygen and carbon monoxide escaped into the atmosphere by a vent provided for the purpose. The carbon dioxide content in this mixture of gases ranged from 27 to 36.5%. Similarly, another company manufactured soda ash by the Solvay ammonia soda process for which also carbon dioxide was required and this was produced by the petitioner therein by burning lime-stone with coke in a kiln in the same manner as the appellant sugar manufacturing companies employing the carbonation process. The respondents therein regarded all the companies as manufacturers of compressed carbon dioxide and levied excise duty on them under item No. 14H in Schedule I to the Act. Writ petitions were filed in the High Court challenging the validity of the excise duty but the petitions were dismissed. It was cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olysate was " goods " or not, it is necessary to determine whether there was application of any process to the raw materials and whether as a result of that application, there emerged a new and different article having a distinctive name, character or use and the resultant product being goods in the sense of being marketable or marketed. In this connection, Shri Soli Sorabjee referred us to the observations of this court in Union Carbide India Ltd. v. Union of India [1987] 165 ITR 1. There, this court reiterated that, in order to attract excise duty, the article manufactured must be capable of being sold to a consumer. Entry 84 of List I of Schedule VII to the Constitution specifically speaks of " duty 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. This court held in that context that the expression " goods manufactured or produced " must refer to articles which are capable of being sold to a consumer. To become " goods ", an article must be something which can ordinarily come to the market to be bought and sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, in order to be goods as specified in the entry, it was essential that, as a result of manufacture, goods must come into existence. For articles to be goods, these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale is not necessary. User in captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. It is, therefore, necessary to find out whether these are goods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Marketability, therefore, is an essential ingredient in order to be dutiable under the Schedule to the Central Excise Tariff Act, 1985. In that case, the court found that crude PVC films as produced by the appellant were not known in the market and could not be sold in the market and were not capable of being marketable. The court further reiterated that it was the duty of the Revenue to adduce evidence or proof that the articles in question were goods. The Tribunal went wrong, it was held, in not applying the test of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out by the Revenue that, even according to the respondent, it stored starch hydrolysate in tanks before transporting it through pipes but, according to the appellant, the storage of starch hydrolysate was only for a period of a few hours as a step in the process of transfer thereof to sorbitol. It, therefore, appears to us that there was substantial evidence that having regard to the nature of the goods, it was unlikely that the goods in question were marketable. This should be judged in the background of the evidence that the goods have not been marketed in a pragmatic manner. All this again would have to be judged in the light of the fact that the Revenue has not adduced any evidence whatsoever, though asked to do so. It was pointed out that, if the Department was to charge duty of excise on this starch hydrolysate as one form of glucose, it would be a burden on the Department to establish that starch hydrolysate was not merely marketable but was being marketed as glucose in some form. This would be so since what is liable for duty under item No. 1E is glucose in any form and, therefore, in order to demand duty under that section, the Department must establish that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal came to a different conclusion. But, the Tribunal in that case relied on the decision of the Allahabad High Court in the case of Union of India v. Union Carbide India Ltd. [1978] ELT 1. There, the Allahabad High Court held that things would be nevertheless goods even if these did not have a general market where they can be easily bought and sold. The High Court held that the fact that products might not be known to the general public or to the traders in general would not change the position and, therefore, the test did not appear to be sound. This decision of the Allahabad High Court which was relied upon by the Tribunal was set aside by this court in appeal in the case of Union Carbide India Ltd. v. Union of India [1987] 165 ITR 1. In view of the test laid down and in view of the evidence discussed, it is difficult to sustain the order of the Tribunal. In this connection, it appears that there was no market enquiry by the Revenue. Reference may be made to the cross-examination of Shri Shukla, Superintendent (Central Excise), by Shri Nanawati as appears at pages 235-237 of the present paper book. In view of the fact that there was positive evidence that starch hydrolysate w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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