TMI Blog1994 (6) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the factory for the coating of G.L.S. Lamps/F.L. Tubes and also of stamping ink and sent them to the Chemical Examiner for test. After testing the sample the Chemical Examiner gave the following findings : (i) Coating solution for G.L.S. Lamps. The sample is in the form of white liquid. It is composed of cel lulose derivative (other than Nitro Cellulose), Plasticizers, Inorganic Fluorescent pigments and volatile organic solvent. The content of volatile organic solvent is more than 53%. It gives track free adherent coating. As per the manufacturers description and intended use, the sample appears to have characteristics of cellulose lacquer. (ii) Coating solution/Compound for F.L. Tubes. The sample is in the form of white liquid. It is composed of cel lulose derivative (other than Nitro Cellulose), Plasticizers, Inorganic Fluorescent pigments and volatile organic solvents. The content of volatile organic is more than 53%. It gives track free adherent coating. As per the manufacturers description and intended use, the sample appears to have characteristics of cellulose lacquer. (iii) Stamping ink. The sample is in the form of Black co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad erred in holding on the basis of the Chemical Examiner s report that the solution in question was a cellulosic lacquer capable of giving track free coating on surfaces. He stated that on this basis the Collector had arrived at the incorrect finding that coating solution for fluorescent tubes was classifiable under Tariff Item 14-III prior to 28-2-1986 and under sub-heading 3208.30 after 1-3-1986. He added that for the purpose of coating tubes fluorescent powder dissolved in certain resins is used. He claimed that in order to avoid coagulation the coating solution is required to be constantly stirred and stated that the solution is applied to the inner surface of the tubes and thereafter the tubes are baked at high temperatures resulting in evaporation of chemicals and a coating of fluorescent powder being formed on the tubes. He submitted that even though the entire activity of coating of fluorescent tubes with the said solution from 1975 onwards was known to the Department, for the first time a show cause notice was issued on 17-3-1987 demanding duty on the solution in ques tion for the period 1-1-1982 to 28-2-1986. He referred to the declaration under Notification 201/79 dt. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 175 (S.C.); (ii) Collector of Central Excise v. Mafatlal Fine Spg. Wvg. Co. - 1989 (40) E.L.T. 176 (Tribunal) (iii) Padmini Products v. Collector of Central Excise - 1989 (43) E.L.T. 195 (S.C.); (iv) Collector of Central Excise v. Ambalal Sarabhai Enterprises - 1989 (43) E.L.T. 214 (S.C.); (v) Mahatha Petro Chemicals v. Collector of Central Excise - 1990 (45) E.L.T. 158; (vi) Bharat Forge Press Industries (P) Ltd. v. Collector of Central Excise - 1990 (45) E.L.T. 525 (S.C.) 4. On behalf of the respondents, Shri Sharad Bhansali, learned SDR stated that the Collector had correctly invoked the extended period under proviso to Section 11A on the grounds of suppression since the appellants had failed to declare the disputed coating solution in the Classification List in which both excisable and non-excisable goods are to be declared. He pointed out that in the letter dt. 19-2-1980 the appellants had only declared the various inputs including fluorescent powder for the purpose of claiming the benefit under Notification 201/79. He stated that in arriving at his finding that the disputed coating solution possessed the general composition of cellulosi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the manufacturers de scription and intended use, the sample appears to have characteristics of cellulose lacquer. 7. The appellants case is that coating solution in question could not be treated as cellulose lacquer since in any lacquer/paint the percentage of binder solids has necessarily to be between 20% and 30%, whereas the percentage of binder solids in the disputed product had been certified by experts as being 4.5%. They have also contended that the product in question could not be treated as lacquer also for the reason that it was not capable of giving a tack free adherent film or coating on surfaces. In this regard the appellants have contended that the Chemical Examiner had not tested the sample to determine whether the product was capable of giving decorative or protective coating. The appellants have also contended that the coating solution in question could not be deemed as an excisable product since it is not known in the market as a lacquer capable of being used for giving a protective coating and it is also not marketable. In support of their contentions the appellants have mainly placed reliance on the report of Dr. S.P. Potnis, Director, Department of Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule of Interpretation, viz., Rule 2(a), in support of this argument. It was, therefore, contended that BMS , though it is an intermediate product, has all the essential characteristics of a finished product and is, therefore, exigible to duty under the Act as an organic compound. Relying on this Rule, it was also argued that it need not be proved by the Department that the goods are marketable or are actually bought and sold. 18. In the light of these arguments, it becomes necessary to go back to the earliest of the decisions of the Supreme Court in Union of India v. Delhi Cloth Mills [1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791]. The Supreme Court considered the connotation of the term, goods which is not defined in the Central Excise Act, vis-a-vis the meaning of the term, manufacture . It was held that excise duty is on the manufacture of the goods and not on the sale. Goods in the context of the levy of duty under the Central Excise Act, it was held, should be understood as an article or a new substance known to the market and which is bought and sold. 19. This test was applied and followed by the Supreme Court in the case of Union Carbide India v. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and determined attitude which the adjudicating authority has adopted in this case, no useful purpose would be served in remitting the matter to him again. The second respondent who is expected to exercise his quasi-judicial function in a judicious manner has failed to discharge his function as an adjudicating authority under the Act, applying the law as declared by the Supreme Court in the cases referred to before him and in the light of this Court s order in the previous writ petition. 25. Therefore, I proceed to decide the writ petition on the basis of the law laid down by the Supreme Court as applicable to the uncontroverted facts of this case. The well accepted position in law is that the time honoured test of marketability should be satisfied even in respect of transient item which is captively consumed in the manufacture of other finished products. This view is re iterated again in the two later decisions of the Supreme Court in : (i) Bhor Industries Ltd. v. Collector of Central Excise - 1989 (40) E.L.T. 280 (S.C.), and (ii) Ambalal Sarabhai Enterprises case reported in 1989 (43) E.L.T. 214 (S.C.). 26. It is relevant to notice that in particular, the Supreme Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a practical view on the basis of the available evidence, it was held that the revenue had failed to discharge its onus to prove that starch hydrolysate was dutiable. 11. In the case of Jagatjit Cotton Textile Mills Ltd. v. Collector of Central Excise reported in 1990 (50) E.L.T. 379, the Tribunal relying upon the Supreme Court judgment in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises reported in 1989 (43) E.L.T. 214 has held that the burden to prove that goods are marketable and hence liable to duty is on the Department. Para 6 of the said decision being relevant is reproduced below:- 6. We gave our anxious consideration to the arguments advanced on both sides and perused the records. It is evident from the record that both the author ities below have proceeded to determine the excisability of the product based on process of manufacturing activity, without considering the important point about marketability of the product in determining the goods for the purpose of levy of excise duty. The material which is sufficient for the purpose of holding that there is manufacturing activity and emergence of a separate product are not sufficient for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being marketed. No effort having been made at all by the Department to enquire into this essential requirement, we hold that the Collector s order in regard to the excisability and classification of the disputed goods is not sustainable since it is not reasoned and shows non-application of mind. 13. It is seen that by the impugned order the Collector has confirmed the demand issued on 17-3-1987 and demanded duty period 1-3-1982 to 28-2-1986 by invoking the extended period under proviso to Section 11A on the grounds of suppression of facts. In this regard, the Collector has observed that a stray letter written by the appellants to the Superintendent in some other context indicating the use of the disputed Coating Solution for their captive consumption could not be taken as the proper declaration in regard to the manufacture of the goods in question. He has held that classification list being the basic excise document for assessment, failure on the part of the appellants to declare the product in the classification list amounted to suppression. In this regard, the appellants case is that the Department was throughout aware about their activities. They have stated that they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer knew otherwise is required before it is saddled with any liability beyond the period of six months. Para 8 of the said judgment being relevant is reproduced below :- 8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
