9911796707
TMI Blog2001 (12) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... product was captively used by the appellant in the manufacture of exempted footwear, the exemption under the provision of Notification No. 217/86-CE, dt. 2.4.1986 was not available. The demand has been raised only upto 6.12.1994 as a specific Notification No. 143/94, dt. 7.12.1994 granting exemption to rubberised textile fabrics falling under heading 59.05, if captively used for manufacture of exempted footwear was issued. 3. Shri S.K. Bagaria, learned Advocate appearing for the appellant submits that for the manufacture of rubber canvas footwear the appellant buys fully manufactured fabric rubbers and chemicals from the market. Rubbers and chemicals are mixed in mixtures. The mixture is warmed at a temperature of 700C to 800C immediately before use. This wormed and sticky mixture is put on to three brown calendaring machine where it passes through upper two rollers so as to facilitate its simultaneous spreading in between two layers of fabric. In this way the fabrics get sandwitched with the mixed material. According to the learned Advocate the product is never vulcanised and is in raw crude and elementary stage. In the said stage the fabrics and rubbers/chemicals are not firmly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that the appellant had produced a number of evidences in the shape of experts' opinion before the adjudicating authority to stress upon their plea that the product as emerging in their factory is not marketable. He drew the attention of the Bench to the following experts' opinion:-- (a) Certificate dt. 13.2.1994 from Footwear Design & Development Institute, Ministry of Commerce, Government of India. (b) Affidavit of well-known Rubber & Plastic Technologist, Mr. Somnath Chakravarty, M.Sc, Ph. D., FPRI, FICS FIC. (c) Affidavit of Mr. Parvati Pada Mukherjee. Rubber & Plastic Technologist and having experience of about 50 years in Rubber & Plastic Industry. (d) Affidavit of Mr. Maharaj Krishan Khanna, the appellant's Production Manager. Shri Bagaria submits that as against the above evidence adduced by the appellant, the department has not produced any evidence to show the marketability of the product in question. He submits that the appellant having taken a definite stand right from the beginning about the non-marketability of the product, the Revenue should have produced some evidence to counter the appellants' stand especially when the onus to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial, must go through the cycle of curing. The vulcanization is necessary to give the proper physical properties to the rubber compound. Curing, or vulcanizing, is generally accomplished by festooning in a dry heat chamber under specific conditions of time of temperature. These conditions are adjusted to the rubber compound and the specific requirements of the finished goods. (Pg. 5 of Suppl. P.B.) (b) Concise Encyclopedia of Polymer Science and Engineering: Useful rubber articles, such as tires and mechanical goods, cannot be made without vulcanisation. Unvulcanized rubber is generally not very strong, does not maintain its shape after large deformation, and can be very sticky; it has about the same consistency as chewing gum". (Pg. 7 of Suppl. P.B.) The term 'vulcanization' is generally applied to rubber or elastomeric materials. These materials forcibly retract approximately to their original shape after the large mechanically imposed deformation. Vulcanization can be defined as a process that increases the retractive force and reduces the amount of permanent deformation remaining after removal of the deforming force. Thus, vulcanization increases elasticity while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise authorities. 3.6 Shri Bagaria also relied upon the following judgments in support of his contention that the unvulcanised fabrics quoted with rubber compound emerging at an intermediate stage cannot be held to be dutiable. (i) National Insulated Cable Co. (I) Ltd.; (ii) BMF Beltings Ltd. v. Union of India, (iii) Brammer v. Link Belting (I) Ltd. v. ACCE; (iv) CCE v. Bharat Electronics & Plastics; (v) 2000 (39) RLT 895--CCE v. K.K. Rubber Co. Pvt. Ltd.; (vi) CCE v. United Phosphorus Ltd. (SC); (vii) Nirlon Synthetic Fibres & Chemicals v. CCE (SC); (viii) Moti Laminates Pvt. Ltd. v. CCE (SC); (ix) India Cable Co. Ltd. v. CCE (SC); (x) CCE v. Ambalal Sarabhai Enterprises (SC); (xi) 2000 (41) RLT 159--Freedom Rubber Ltd. v. CCE; (xii) Chloride Indus. Ltd. v. CCE; (xiii) Diamond Rubber Mills v. Suprnt. CE; (xiv) 1999 (33) RLT 143--CCE v. Asian Rubber & Plastics Indus.; (xv) 1999 (84) ECR 446--CCE v. Saghay Rubber Products. 3.7 Shri Bagaria also referred to a number of decisions to show that the burden to prove marketability and dutiability is on the Revenue and the said burden has not been discharged by them inspite of the appellants' having cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an affidavit of Shri M.K. Khana. In case of doubt, a request was made for re-testing of the samples. All these factors were ignored by the Commissioner. 3.10 Shri Bagaria also assailed the order of the Commissioner on the point of limitation. He submits that the entire facts were known to the Revenue and there is no ground for invoking the longer period. He submits that the dispute about the fabric was going on before the various High Courts including the Hon'ble High Court of Calcutta who gave the verdicts in their favour and in such circumstances the Revenue cannot hold that the appellants suppressed any information from the department with an intention to evade duty. Reliance in this regard has been placed on number of decisions of the Hon'ble Supreme Court including the decision in the case of National Radio and Electronics Co. Ltd. 2000 (36) RLT 363. Imposition of penalty amount of ₹ 1 crore has also been challenged by the learned Advocate by submitting that the same was neither justified nor warranted. 4. Countering the arguments of the appellants Shri V.K. Chaturvedi, learned SDR submitted that the Commissioner has passed a detailed order based upon the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; "2.4 We have carefully considered the pleas advanced from both sides. We agree with the adjudicating authority that a product different from its inputs (Jute stick powder, bags and liquid oxygen), namely Liquid Oxygen Explosive (LOX) has come into existence. Therefore, manufacture of goods has taken place. The fact that the goods are actually being marketed as LOX is clearly on record in view of the invoices being issued by the appellants to that effect. In the face of this evidence, appellant's plea that the goods (LOX) have no shelf life is not material to the excisability of the goods. In the case of CEAT tyres, relied upon by the appellants, argument of 'dip solution' having no shelf-life was taken as indicative of non-marketable character of those goods i.e., 'dip solution' since there was no actual marketing of those goods and these were being used only captivity. In the present case, LOX is being marketed by the appellant. It cannot, therefore, be held that the goods are not marketable. We, therefore, hold that the goods are excisable under Tariff sub-heading 36.02. In another case in Collector of Central Excise Cochin v. Premier Tyre Ltd., reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question is admittedly taken out for job work outside the factory. The same after job work is brought back by the appellant for further use. That in itself is a good proof about the marketability of the product. In case a canvas shoe manufacturer does not have the machinery for manufacture of this double textured fabrics, it can always buy their product from Bata or any other manufacturer. In view of that marketability of the product is established. NATURAL JUSTICE Appellants have alleged denial of natural justice on account of certain manufacturing details of these goods as described by the Commissioner in his order. They have specifically objected to the finding that a rubber sheet/strip emerges in the process which is mechanically placed between the two fabrics layers as according to them nothing of this sort happens at all. However, the production of the said double textured fabrics i.e. the main issue of the case has not been challenged. These manufacturing details even if they happen to be slightly different are indeed not material and much ado should not be made on account of that. What is of prime importance is that double textured fabrics does emerge as a result of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Leisure land Pvt. Ltd. v. CCE. 5. In their rejoinder, the appellants submit that the issue is not about vulcanisation of rubber but is as to whether any rubberised textile fabrics can be manufactured or come into existence as a commodity without vulcanisation. They submit that it is clear from the various technical books that without vulcanisation the product is not stable. He submits that the affidavits of the technical experts were given after thorough examination of the sample and the Commissioner was the adjudicating authority and not a technical expert or rubber technologist. As such there could be no scope for the Commissioner to decide about dutiability or marketability after seeing the sample on the basis of his own personal notions. Relying upon the Supreme Court's decision in the case of Hindustan Ferodo Ltd. v. CCE 1997 (89) ELT 16, he submits that the Revenue has to establish marketability as a fact and the personal opinion of the Commissioner could not be made the basis for deciding the marketability. As regards the shelf life, he admits that the said intermediate material was being sent to the job-workers, but the same was for a very short period and within the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision of the Calcutta High Court that though the observations as contained in the said judgment were against M/s. Bata India Ltd., the operative portion of the said decision rejected the appeal filed by the Revenue. Vide para 32 of the said judgment, the Hon'ble High Court has held that the three types of sheets are liable to levy of duty but in para 33 of the said judgment it was held--"accordingly the appeal fails". It may be clarified here that the appeal was filed by Union of India. The learned Commissioner in his impugned order has observed that M/s. Bala India Ltd. filed an appeal against the above order which was dismissed by the Hon'ble Supreme Court, as reported in Volume 68 of Excise Law Times at page A-158. The said report only reports about the dismissal of Special Leave Petition filed by M/s. Bata India Ltd., by the Hon'ble Supreme Court. However, a copy of the said dismissal order of the Hon'ble Supreme Court has been placed on record by the appellants. The same reads as follows:-- In view of the fact that the operative part of the impugned judgment is in favour of the petitioner, we consider it unnecessary in this case to examine the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fabric in question after the mixture is spread on the same is not vulcanised, whereas the Commissioner has observed that the rubber mixture, before being spread on the fabric was vulcanised. Apart from the fact that this allegation was never made in the show cause notice so as to give an opportunity to the appellant to rebut the same, we find that the same is based upon the personal opinion of the adjudicating authority without the support of any technical literature or expert opinion as against the technical literature produced by the appellant and a definite stand taken by them that vulcanisation only takes place at the final stage of the complete footwear. It is seen that it is not the excisability of the rubber, which is in question. On the other hand, the product which is being sought to be charged to excise duty is the fabric duly sandwitched with the rubber compound. There is nothing on record to show that the vulcanisation of the sandwitched fabric has taken place. The appellants' contention that the vulcanisation only takes place of the complete footwear, when the same are heated at a high temperature and high pressure has not been countered by the Revenue. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te product in the course of manufacture of friction tapes obtained by quoting of grey cotton fabrics with rubber, but without any vulcanisation process, are not liable to duty being not marketable. 16. To the same effect is the decision of Eastern Bench of the Tribunal in the case of Chloride Indus. Ltd. v. CCE, Calcutta MANU/CK/0044/1996. By taking note of the various decisions of the Supreme Court that the burden to prove marketability of the goods is on the Revenue. The Tribunal has observed that there was utter lack of evidence from the department about the marketability of the goods on which the Revenue wants to levy the duty. 17. We find that the Hon'ble Allahabad High Court in the case of Diamond Rubber Ltd. v. Suprt. of Central Excise and Ors. MANU/UP/0226/1985has held that vulcanised sheets (rubberised cotton fabrics) are not independently excisable at intermediate stage inasmuch as the same are generally not marketable. The Hon'ble High Court observed that it is now settled law that before excise duty can be levied, the goods brought into existence must be goods which may be bought and sold in the market. In this case since the vulcanised sheets sought to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof is on the taxing authorities to show that a particular item is taxable in the manner claimed by them. Mere assertion is of no avail. Taxing authorities to lay evidence especially when claim of the assessee supported by trade enquiries and the affidavits of the persons dealing with the subject goods. The gist of the decisions of the Hon'ble Supreme Court referred supra is that the capability of the product to be marketed is essential pre-condition of levying the same to duty of excise and the onus to prove so lies upon the Revenue. The appellants' definite stand right from the beginning has been that the said product on account of its short shelf life is not marketable. The Revenue has not produced any concrete and positive evidence to rebut the above stand of the appellant by showing that the product is capable of being sold through the market shelves. The mere factum of the appellant sending the same to their job-workers and bringing it back within the short shelf life of the fabric cannot lay credence to the Revenue's stand that the marketability of the same stands proved. An examination of the various other decisions detailed above show that the Revenue in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt about the applicability of the earlier decisions of the Tribunal or of the various High Courts as regards the excisability of the friction cloth arose in our minds. However, we find that Subsequently the said decision in the case of Punjab Rubber & Allied Indus, was taken note of by the Hon'ble Supreme Court in another appeal of the Revenue in the case of CCE, Delhi v. K.K. Rubber Co. Pvt. Ltd. 2000 (120) ELT 28 (SC). It was observed by the Court that the decision of Punjab & Haryana High Court in the case of Punjab Rubber and Allied Indus., was reversed on the technical ground, namely, that in that case the High Court disposing the writ petition has wrongly assumed that no contention was raised by the department as to the marketability of the commodity and it was on that count the Supreme Court allowed the appeal. Para 3 of the said judgment reads as follows:-- 3. "It is true that in the judgment of this Court in Union of India v. Punjab Rubber and Allied Industries that Court held that the High Court in that case went on the wrong assumption that the question of marketability of the commodity was not in issue. This Court pointed out that the High Court overlooked the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics in running length so as to obtain laminated/combined fabric which are simultaneously stuck together in the same machine resulting in a thin layer of rubber mixture sandwitched between the two fabrics", (refer page 114 of the paper book). 26. It was described that the above process generated tensile strength, elasticity, waterproofness and abrasion resistance to the product. It was for making the uppers for canvas shoes. The product so obtained was cut into required shape and sizes which were stitched to obtain the uppers (refer page 115 of the paper book). 27. About shelf life, the Manager--Supply & Transport had stated as under-- The said upper material is stable enough to have a shelf life of maximum four weeks", (refer page 115 of the paper book). 28. The material so obtained after passing through the process as described above, was cut in desired shape and size to make out uppers for the canvas shoes. Cut uppers made out of the said processed material were used as parts of canvas shoes in the factory of the appellants after stitching. Such cut uppers were also sent to outside job workers for stitching. The expected duration of processing/manufacturing has been shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pend upon the shelf life of a given product alone. The marketability depends upon the fact whether there could be a market for a particular product. If the goods could be brought to the market and could be dealt with in the market, then it could not be argued that such goods were not marketable. In the present case, it has been admitted that depending upon the weather conditions, the goods in question could be stored and kept for use for a period of 10 days, (refer page 156 of the paper book) to 4 weeks (refer page 201 of the paper book). The goods were sent to outside job workers for stitching and return. They were capable of being stored, transported and used over a period of time. As uppers, they had both national and international market. After cutting into specific shape and size without involving any process of manufacture, the goods in question are made into uppers. Certification by a manufacturer or the general observations in a case law without regard to the nature of the particular product could not form the basis to arrive at the conclusion that a particular type of goods were not marketable. Each case has to be examined and decided on the basis of the facts peculiar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is classifiable under Heading 59.05 in terms of Note 3(A) to Chapter 59 and also satisfies the description laid down in the notification is extended the benefit of the notification. The matter may be finalised accordingly. [M.F. (D.R. & 1) Letter No. 59/1/87-CX. 1, dated 2.6.1987] Reference may also be made to the Tribunal's decision in the case of Falcon Tyres Ltd. v. CCE, Bangalore MANU/CE/0580/1996, and MRF Ltd. v. CCE, Goa & Chennai MANU/CC/0136/1998 33. There is no relevancy of vulcanization in these operations-neither in the process of manufacture of rubberised textile fabrics nor its conversion into UPPERS'. Vulcanization, according to the Webster's Ninth New Collegiate Dictionary (page 1323) is the process of treating crude or synthetic rubber or similar plastic material chemically to give it useful properties (as elasticity, strength, and stability). According to the Condensed Chemical Dictionary, Ninth Edition revised by Gessner G. Hawley (page 922) Vulcanization is a physicochemical change resulting from cross-linking of the unsaturated hydrocarbon chain of polyisoprene (rubber) with sulfur, usually with application of heat. Its overall effect is to conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per square metre; and (d) Plates, sheets or strip, of cellular rubber; combined with textile fabric, where the textile fabric is more than mere reinforcement, other than quilted textile products The definition is wide enough to cover the goods under consideration. 35. The learned Member (Judicial) had concluded that the Revenue has failed to produce any evidence about the marketability of the product in question. The Departmental Representative has submitted that the product in question was admittedly taken out for job work outside the factory. The same after job work was brought back by the appellants for further use. He has also submitted that the canvas stripes manufacturers who did not have the machinery for manufacture of the double textured fabric, had to procure the same from outside. It is also seen that for stitching the goods in question, they were sent to outside factories and the expected duration of processing/manufacturing had been shown in the challans for movement of excisable goods under Rule 57-F(2) as three to four weeks. It is thus seen that the appellants themselves were treating these goods as excisable. They were availing the benefit of Rule 57-F which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheets or such sheets are only used in their shoes to the exclusion of all other manufacturers. If these sheets are a common component for manufacture of the type of shoes the respondent manufactures the sheets would definitely be vendible. It is just this one circumstance which in our opinion is crucial to the determination of the matter. It may be, in this connection, mentioned that the respondent in their contentions before the Trial Court did not altogether rule out the possibility of marketing the sheets. The respondent never made the claim that they have monopoly in the manufacture of shoe with such sheet as re-enforcement material for the shoe-uppers. So, similar type of shoes wherein such sheets are embodied have to be as a necessary implication assumed to be manufactured by other shoe manufacturers. In this context, the assertion of the respondent that the manufacture of shoe is a guarded secret of the respondent actually goes as evidence against the respondent. It goes to enhance the vendibility of the sheets, other shoe manufactures not being in possession of the technical know how to manufacture as efficacious as the respondent's product shall be more drawn to buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utta High Court stands and has the force of law. 38. The various schemes of exemptions relating to the product has been discussed in the impugned order and I agree with the same. 39. As regards the limitation, the appellants' unit was working under self-removal procedure. The manufacturer was an organised sector company. The view of the Calcutta High Court was not in favour of the appellants and in the facts and circumstances of the case, I agree with the view taken by the adjudicating authority that the extended period of limitation has been correctly invoked in these proceedings. 40. Similarly, with regards to the penalty, the appellants' unit was in the organised sector and the contraventions of the provisions of the law are established against them and thus in the facts and circumstances of the case, the imposition of penalty as determined by the adjudicating authority was fully justified. 41. In the case law discussed in the order recorded by the learned Member (Judicial), the products were different. In the present case, the goods were not intermediate products in the process of manufacture of footwear. They were independent products having their own name and iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cotton fabrics coated with rubber solution still wet stage, when unwrapped around cable, is not marketable, rubberized cotton fabric nor cotton fabrics subjected to process of rubberising. The Tribunal also held in the said case that "the process of the cotton fabric will end only when it is vulcanised". Further in BMP Beltings Ltd. v. Union of India MANU/AP/0138/1990, it was held that unvulcanised fabric-obtained by applying rubberising component to cotton fabric and then captively used in fan belts and V belt could not be subjected to any Central Excise duty the same was not marketable. The learned Advocate submitted that the relevance of transported and used over a period of time and as 'uppers' they have both national and international market; that in absence of any evidence adduced by the Department, the learned Member (Tech) was not correct or justified in making his own suppositions; that in any case, the dispute in the present matter does not at all relate to any shoe uppers, as it relates to the so called rubber textile fabrics which is an intermediate in-process material prepared at their factory for manufacture of footwear and which remains only in unvulcani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definite stand of the appellant that the impugned in-process materials were not at all marketable no evidence was adduced by the Department either in the show cause notice or in the impugned order that it has been held by the Supreme Court in the case of Hindustan Ferodo Ltd, v. CCE Bombay 1997 (89) ELT 16 (SC); that when no evidence is adduced by the Department, Tribunal cannot make suppositions that tantamount to evidence; that learned Member (Technical) has made number of suppositions such as shoe uppers are known commodity and traded in the National/International Markets; the uppers are regularly imported in the Country for a number of well known foreign brand; they were capable of being stored, be sent out for carrying out other operations necessary for manufacture of final products and they were sending out the partial processed fabrics to the nearby workers for stitching purposes within their short shelf life of 10 days to 4 weeks; that final products were footwears and not the in-process material sent to job workers; that it is settled law that unless the test of marketability is satisfied, no duty can be levied. Reliance was placed on the decision in the case of Bhor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Raja Batteries Ltd. v. CCE MANU/CC/0067/1997, wherein it was held that lead oxide, capable of being kept in silos for about three weeks, is goods and, therefore, excisable. He further submitted that as a new product emerges manufacture has taken place and as the product in question is taken out to job workers outside the factory, marketability is established; that canvas shoe manufacturer, who does not have machinery for manufacture of the impugned product, can always buy the same from the appellants or any other manufacturer. That this is a fit case for invoking the extended period of limitation as the appellants neither declared about manufacture of rubberized fabrics nor maintained any record. Finally, he submitted that the product is classifiable under heading 5905.10 of the Schedule to the Central Excise Tariff Act. 48. We have considered the submissions of both the sides. As per provisions of section 3 of the Central Excise Act, Central Excise duty is leviable on the goods manufactured in the country. The process of manufacture given by the learned Advocate shows that rubbers, chemicals, solvents etc., are mixed in mixer and this mixture in warm and sticky condition is pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at because of short shelf life, the product is not marketable, a number of products in the market has to be held to be non-marketable, for example Sweets which are perishable by nature having very short shelf life inasmuch as some sweets have only shelf life of a few hours. Numbers of other goods are marketed in the controlled conditions. The short shelf life does not mean that the product is not marketable. In the case of Indian Oxygen Ltd. (supra), the Tribunal held the view that no shelf life was not material to the excisability of goods in view of the fact that the goods were actually being marketed. Same is the situation in the present matter as the impugned goods move from the premises of the appellants to the premises of the job workers who worked on the same and returned the same to the appellants. Similar views were held by the Tribunal in the case of Amara Raja Batteries case wherein three weeks shelf life was held to be sufficient to hold the goods liable to excise duty. In the said case, even the fact that the appellants were not selling them was held to be of no consequence so long as it could be shown the goods to have shelf life. Moreover, Division Bench of the Calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver be marketed, held as under:-- We are not in disagreement with the submissions made on behalf of the respondent-plaintiff that unless vendible no product can be subject to the levy of the duty. Therefore, it is a matter of evidence whether end product i.e. the sheets which are solely consumed by its manufacturer for its ultimate product, footwear, could have a market. Apparently they should, because according to the respondent's own assertion respondent have special expertise to the manufacture of these sheets, which are essential component of the shoes as the strengthening materials for the toes and heels. That being so, the other manufacturers of shoes specially the small manufacturers who cannot afford to have a large plant exclusively engaged in the production of these sheets shall be induced to buy such sheets. 50. I am of the view that ratio of this decision is squarely applicable to the facts of the present matter and the impugned order is capable of being marketed and as such is liable to Central Excise duty. In view of the Calcutta High Court decision in the appellants' own case, the decisions, relied upon by the learned Advocate for the appellant in support o ..... 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