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TMI Blog1995 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the product manufactured by the appellants answered the chemical description of the product under Tariff Item 15A it was assessable to duty whether it was marketable or not was thus not well founded.In the result, these appeals succeed and are allowed. The question of law raised by the appellants is decided by saying that resin at `A' stage which are chemically known as `resols' could not be subjected to duty. In favour of assessee. - 80 of 1988 - - - Dated:- 14-2-1995 - R.M. Sahai, N.P. Singh K.S. Paripoornan, JJ. [Judgment per : R.M. Sahai, J.]. - The question of law, the adjudication of which ultimately shall be decisive of the issues arising in these appeals filed under Section 35L of the Central Excises Salt Act, 1944 (in brief `the Act'), is whether various goods mentioned in the Schedule of Excise Tariff are dutiable as such or they would be, 'excisable goods' as defined in the Act, only when they are marketable or capable of being marketed. 2. Law on this issue appears to be fairly settled. Recently a Three Judge bench of this Court speaking through one of us (Hon'ble K.S Paripoornan, J.) in Indian Cable Co. Ltd. v. Collector of Central Excise, Calcutta, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of laminated sheets." From the process of manufacture, narrated above, it is apparent that what emerged was solution as a result of continuous reaction and was taken out from the vessel in its semi-processed condition and was used without further processing in manufacture of laminated sheets. Since it was not marketed or sold by the appellants and the solution was captively consumed only, the Department did not levy any duty on it. In 1979, Rules 9, 49 and 173(1) of the Central Excise Rules, 1944 were amended the result of which was that even captively consumed goods produced or manufactured became dutiable. Consequently the Superintendent of Central Excise issued Notice that in view of the amendments in Rules phenol, formaldehyde and melamine formaldehyde were liable to duty. The appellants contested the notice. It was claimed that the reacting mixtures were not only unstable having short life but they were not marketable in the form they were obtained in intermediate stage in a continuous process. The appellants claimed that the reacting mixture in manufacture went on and it was complete on formation of laminated sheets by application of heat and pressure to these good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required to be taken into immediate use or otherwise it would have been rendered useless or it would cease to be a resin" it was held that the product even though capable of, "further condensation or polymerization" had reached, a definite stage of manufacture for a definite end-use and, therefore, "had to be held to be goods". Reason for this finding was concession of the appellants' counsel that the resins obtained by the appellants could, "be kept for as long as 15 days". 5. What arises for determination, therefore, in the first instance, is whether resin or resol produced by the appellants can be considered to be goods for purposes of levy under the Act. Even though the Department did not claim either in the notice issued to the appellants or at any stage before the appeals were heard by the Tribunal that resins produced by the appellants were nothing else than what is chemically known as 'resols' but the necessity to examine its correctness is obviated as Sri Dave, the learned counsel for the appellants fairly did not assail the findings rather accepted it. Resols is specifically mentioned as one of the items in Entry No. 15A of the Tariff Schedule. The main entry and Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a solution obtained during process which by itself could not be used unless some stabiliser was added to it. It was not disputed that its life, according to appellants, was for two or three days. But even assuming what was stated by the counsel before the Tribunal that its life was for 15 days, it could survive only if regulated and controlled temperature was maintained. Otherwise, as has been observed by the Chemical Examiner it gets itself converted into a jelly which was incapable of any use. Therefore, it is very doubtful if on the facts found by the Assistant Collector, affirmed by the Collector and not differed by the Tribunal, the resin or resols obtained during the course of manufacture by the appellants could be held to be goods. 6. The duty of excise is leviable under Entry 84 of List I of the VIIth Schedule on goods manufactured, or produced. That is why the charge under Section 3 of the Act is on all, `Excisable goods', `produced or manufactured'. The expression `excisable goods' has been defined by clause (d) of Section 2 to mean, `goods' specified in the Schedule. The scheme in the Schedule is to divide the goods in two broad categories - one, for which rates ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intermediate goods produced by the appellants were resols then it was exigible to duty and it could not further be required to satisfy the common parlance test specially because this was a chemical and not a product which is commonly bought and sold in the market. The learned counsel urged that once it was found that it was manufactured or produced then it should be deemed to have satisfied the test of marketability and consequently it was excisable goods within meaning of the Act and the Tribunal was justified in levying duty on it. The learned counsel submitted that marketing capability depends on nature of goods. The test of marketability and capable of being marketed could not be applied to such goods as resol and, therefore, the submission of the learned counsel for appellants that the resin or resol could be subjected to duty only if it was found that from raw materials some new substance was brought out and it was known as such was not correct as once the intermediate goods produced by the appellants was found to be resols and it having been mentioned in Item No. 15A the burden of the Department stood discharged. 9. Although the duty of excise is on manufacture or prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Union of India Ors., 1986 (24) E.L.T. 169 and it was held that, "in order to attract `excise duty the article manufactured must be capable of sale to a consumer'." The question that arose was whether aluminium cans produced by the appellants for the flashlights manufactured by it were goods. It was held : "The question here is whether the aluminium cans manufactured by the appellant are capable of sale to a consumer. It appears on the facts before us that there are only two manufacturers of flashlights in India, the appellant being one of them. It appears also that the aluminium cans prepared by the appellant are employed entirely by it in the manufacture of flashlights, and are not sold as aluminium cans in the market. The record discloses that the aluminium cans, at the point at which excise duty has been levied, exist in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans have sharp uneven edges and in order to use them as a component in making flashlight cases the cans have to undergo various processes such as trimming, threading and redrawing. After the cans are trimmed, threaded and redrawn they are ree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less they are marketable or capable of being marketed, we may now examine the dutiability of goods captively consumed. Prior to 1979 no duty was levied on such goods. But, as stated earlier, after amendment of Rules 9 and 49 captively consumed goods become exigible to duty. The rationale for not treating such goods as excisable was same that since such goods were not brought to the market for buying and selling they could not be subjected to duty. But when the Rules were amended a fiction was created that any article produced or manufactured if captively consumed was statutorily presumed to satisfy the test of marketability. But this presumption can be rebutted if it is established that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed. The duty is attracted not by captive consumption of any article but it must be a goods within the meaning of the Act which apart from having a distinctive name and known as such must be marketable or capable of being marketed. In Bhor Industries (supra) crude PVC films manufactured by the appellants as intermediate product used for captive consumption in manufacture of leather cloth, jute matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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