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TMI Blog1989 (1) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... e PVC films are manufactured by the appellant in a continuous process in the factory premises of the appellant which are licensed premises under the Act. The appellant filed classification list No. XIV/75 dated 20th November, 1975 in respect of crude PVC films used for lamination with jute and for tapes claiming that the PVC films were non-excisable on the ground that the same were non-marketable intermediate products used exclusively for captive consumption. The said classification was approved by the Assistant Collector, Central Excise on 9th December, 1977. 2. There was an order passed by the Appellate Collector on 14th June, 1974 holding that crude PVC films were not marketable and were not liable to excise duty. It is necessary to refer to the Tariff Entry involved in this case. Tariff Item 15A(2) of the Central Excise Tariff reads as follows :- "Articles made of plastics, all sorts including tubes, rods, sheets, foils, sticks, other rectangular or profile shapes, whether laminated or not, and whether rigid or flexible, including levy flat tubings and polyvinyl chloride sheets, not otherwise specified." The same crude PVC films which have been manufactured by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets inasmuch as the tensile strength of crude PVC sheets is much lower than t hat of marketable PVC sheets. He further held that :- "This is so because marketable PVC sheets are passed through the calender at very high temperature and at a slow speed to that gelation, curing fusion takes place while in the case of crude PVC sheets, the same are passed through the calender at very fast speed and lower temperature with the result that gelation fusion in the course of heating and ageing is not formed resulting in lower tensile strength. When these crude PVC sheets are coated with textile fabrics, the two layers are passed through the rollers at slow speed and at high temperature and it is only at this stage that the GEL is properly formed and resin particles become swollen by diffusion of plasticizer into them that they touch each other. As heating progresses, the swollen particles begin to weld together, resulting in the required degree of strength." 3. Thereafter, the Classification List was filed in respect of crude PVC films manufactured for use in adhesive tapes on 9th December, 1975 and the said list was approved by the Assistant Collector of Central Excise after m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was rejected by the Appellate Collector of Central Excise. On 6th February, 1980 a revision application was preferred by the appellant to the Joint Secretary, Government of India. That was transferred to the Tribunal and by the impugned order, the Tribunal has rejected the appeal under challenge. 4. The Tribunal in the order has set out the contentions and observed that the question for determination was whether crude PVC film fell for classification under Item 15A(2) of the Central Excise Tariff or not. A submission was made that the Appellate Collector had held that the crude PVC sheets were not marketable and had not acquired the character and status of PVC films as known to the market. It was contended on behalf of the appellant that only marketable PVC film would fall within the said item. On the other hand, the Department's contention was that there was nothing to show that the film/sheet was crude and the test of marketability was not relevant. According to the Tribunal, the crude PVC films/sheets would fall under the Tariff Item. The Tribunal was of the view that the tariff entry did not spell out whether it covered only finished film/sheet or whether it covered also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of 'refined oil' from raw oil which according to them fell within the description of "vegetable non-essential oils, all sorts, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power". The common case made by the respondents in their petition under Article 226 of the Constitution challenging the imposition was that for the purpose of manufacturing Vanaspati they purchased groundnut and til oil from the market and subjected them to different processes before applying hydrogenation to produce Vanaspati and that nothing that they produced at any stage was covered by that item. Affidavits by experts were filed by both the parties and the High Court found in favour of the respondents and allowed the petitions. The Union of India appealed. It was urged on its behalf before this Court that before finally producing Vanaspati the respondents produced at an intermediate stage what was known as 'refined oil' in the market and although they might not sell it and although Vanaspati, when produced, was liable to excise duty under another item, that could not affect their liability. It was held that excise duty being leviable on the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d carbon dioxide known as such to the commercial community and could not attract duty under Item 14-H of the First Schedule. It was held by this Court that the duty being on the manufacture and not on the sale, the mere fact that kiln gas generated by those concerns was not actually sold did not make any difference if what they generated and used in their manufacturing process was carbon dioxide. Justice Shelat speaking for the Court at page 31 of the report observed :- "The Act charges duty on manufacture of goods. The word "manufacture" implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. (Emphasis supplied). That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth & General Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the aforesaid observations of the Judicial Committee reiterated that taxable event in the case of duties of excises is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. Therefore, the essential ingredient is that there should be manufacture of goods. The goods being articles which are known to those who are dealing in the market having their identity as such. Section 3 of the Act enjoins that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or 'manufactured' in India. "Excisable goods" under Section 2(d) of the Act means goods specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt. Therefore, it is necessary, in a case like this, to find out whether there 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. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not "goods" known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant factors in order to achieve the minimum standard of tensile strength of the sheets. Gelation, i.e., the change of the state from the liquid to the solid condition that occurs during the heating and/or ageing, when the plasticizer has been absorbed by the resin to an extent resulting in a dry but weak and crumbly mass, and thereafter within normal proportions of resin and plasticizer, this state is attained when the resin particles have become so swollen by diffusion of plasticizer into them that they touch each other, is an important process in the case of PVC sheets which are marketed as such. As heating progresses the swollen particles begin to weld together, resulting in some degree of strength. After the GEL is formed in such PVC sheets and resins get fused with plasticizer, they are further subjected to the processing of finishing, embossing/printing. On the other hand, crude PVC sheets manufactured by the appellants for production of leather cloth in their factory are passed through the rollers at a temperature of 130o - 140o (280oF) and the speed of the roller is, therefore, faster. Due to low temperature and faster speed of the rollers fusion is not completed in su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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