TMI Blog2000 (9) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... le fabrics falling under Heading 59.05 of the Tariff were not exempt from duty. Department, by show-cause notice (SCN) dated 14-1-1999, proposed to recover duty as above with interest under Section 11AB of the Central Excise Act and to impose mandatory penalty under Section 11AC of the Act. The SCN invoked the extended period of limitation under Section 11A(1) of the Act by alleging wilful suppression of facts with intent to defraud the Department of Central Excise duty . The demand of duty in the SCN was based on the allegation that the RCC fabric was an independent stable intermediate excisable product well-known to tyre-manufacturers traders all over the world, which had a shelf life and was transportable and that it was chargeable to duty @ 10% ad valorem under Tariff sub-heading 5905.10 during the period of dispute. The appellants, in their reply to the SCN, denied all the allegations and submitted, inter alia, that the intermediate product in question was neither marketed nor marketable and here it was not dutiable. They relied on case law as also on CBEC s circulated dated 30-6-1999 [published in 1999 (111) E.L.T. (T-31)] 464/30/99-CX which clarified that certain intermed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Superintendent of Central Excise was retracted in the reply to the SCN. (vi) The appellants had been manufacturing and clearing cycle tyres at NIL rate of duty since 1991-92 and were not aware of the alleged fact that duty was chargeable on the intermediate product viz., RCC fabric , produced and captively consumed in such manufacture. On the other hand, Department was aware of such fact as also the fact that the exemption in respect of rubberised textile fabrics had been withdrawn w.e.f. 1-4-1994 as was evident from the Departmental proceedings against other tyre cord manufacturers in Ludhiana on identical set of facts. Therefore, the extended period of limitation was not invocable against the appellants. The SCN in the instant case was issued 4 to 5 years after the period of dispute and was time-barred. (vii) Neither any interest under Section 11AB nor any penalty under Section 11AC of the Act was chargeable/imposable since these provisions of law were not in force at the relevant time. (viii) The case law relied on by the adjudicating authority would not support the Revenue s case. Ld. advocate also cited the following decisions in support of the above poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was only that the item was capable of being sold in the market as goods . Ld. Commissioner then held the RCC fabrics to be marketable and hence excisable. This decision, we note, was based on findings on three aspects viz. (a) the appellants themselves had, in their letter dated 29-7-1998 to the Superintendent of Central Excise (Preventive), submitted that the fabric had a shelf life of two days and was stable; (b) the product was well-known to the commercial community and the persons who dealt with and consumed it; (c) the product was separately classified under TSH.5905.10. 6. As correctly understood by ld. Commissioner, the essential test for deciding the dutiability of any product is the test of marketability. Unless the product is goods capable of being sold in market, it will not be exigible to duty under Section 3 of the Central Excise Act. The burden to prove that any product alleged to be chargeable to duty is marketable is on the Department as per settled law, which position has not been disputed before us. Since the burden to prove that the RCC fabrics produced and consumed captively in the manufacture of cycle tyres in the appellants factory were marketable was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We note that the only material on the basis of which the Commissioner found the product to be marketable is the appellants letter dated 29-7-1998 to the Superintendent of Central Excise. In that letter, the party had stated that the RCC fabric had a shelf life of 2 days. In the same letter, they had also given an account of the process of manufacture of cycle tyre involving captive use of the RCC fabric. In their statement given to the Department under Section 14 of the Act on 30-7-1998, they submitted, inter alia, that the material was strong and stable. They consumed the material captively and did not sell it. Department had also caused a study of the manufacturing process to be conducted by its officers by visiting the factory. 8.2 It was on the basis of the above information/materials that the SCN was issued to the appellants. In their reply to SCN, they, inter alia, submitted that ordinarily the RCC fabrics had a shelf life of a few hours only. This submission, we note, amounted to retraction of their earlier statement (in letter dated 29-7-1998) that the shelf life was two days and was, in our view, a substantial shift on the part of the assessees in the pleading of a mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and once the surface gets cured, it looses its binding character. Thus from these affidavits and the expert opinion, we can say that the shelf of the product is short so as to store the product and bring it to the market for the purpose of sale and purchase. The Tribunal, having found the product to be non-marketable, held the same to be non-excisable as goods under Section 3 of the Act by following the apex Court s ruling in Moti Laminates (supra). 9.2 Though the intermediate product in question and the process of manufacture of tyres in the instant case appear to be identical, respectively, with those in the above case of Metro Tyres, it may not be safe to adopt the above finding of the Tribunal for deciding, in the instant case, the question whether a shelf life of two days is sufficient for marketability of the product. This is because it is not known as to whether the same set of Rubber Chemicals as used by Metro Tyres was used by the present appellants and, if so, whether the same formula (proportion of mixing) was used in the mixing stage of the process of manufacture. Whether curing (vulcanisation of rubber) will take place at room temperature and, if so, how mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depends upon the quality of the final product to be made. It is the rubber-mixed preparation so obtained that is made to pass, simultaneously with cotton yarns in parallel length, through cord calendering machine in the second stage of the manufacturing process wherefrom rubberised cotton cord fabric emerges, which is then used as ply in the manufacture of tyres. When the proportion of mixing in the first stage is dependent on the desired quality of the final product (tyre) and is also a trade secret, how can the RCC fabric (resulting from such mixing followed by calendering) attract buyers in the open market? No prudent man will think that a manufacturer who wants to manufacture cycle tyres of a particular quality of his choice will buy from the market RCC fabrics of another manufacturer who keeps trade secret of the formula for manufacture of such rubberised fabrics. This aspect, which was disclosed to the Department by their own study of the manufacturing process, was also explained to the Commissioner by the appellants in their reply to SCN. They said : .... product cannot be considered to be marketable as each manufacturer mixes the ingredients according to his own formul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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