TMI Blog2022 (5) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... s from as many sources they desired and establish that these goods were marketable. Having not done so, in the appeal, revenue cannot default the enquiries conducted by the Commissioner. It is also settled legal position that burden to prove marketability is on the department and in the absence of any evidence being led in by the department to show that the goods in question are capable of being bought and sold, demand cannot be confirmed. Be that as it may be revenue has in the appeal sought to adduce the evidence from the numerous websites to show that the impugned goods have some possible use or are capable of being use, but they have not produced any evidence about the marketability of the said goods at the relevant time. Marketability is not synonymous with usability. Certain goods may be usable but just because they are usable, would determine the existence of the market for the said goods. The entire reliance placed by the revenue on the web material to establish marketability is devoid of any merits, and these web print outs cannot be relied in evidence at the stage of appeal or arguments as the marketability is not only a question of fact but is also very dynamic. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 12,63,09,812/- 7/02 to 12/02 Tata Electric 4 V/Adj/Ch-1/R- 1/Cr87/2003/Com mr 02.01.2004 2,08,07,41,217/- 12/02 to 3/03 Ahmedaba d Electric 5 V/Adj/Ch-1/R- 1/Cr180/2003/Com mr 27.02.2004 2,62,13,89,938/- 01/03 to 06/03 Tata Electric 6 V/Adj/Ch-1/R- 1/Cr94/2004/Com mr 27.02.2004 3,89,62,21,763/- 04/03 to 12/03 Ahmedaba d Electric 7 V/Adj/Ch-1/R- 1/C1138/2004/Co mmr 20.05.2004 3,84,92,08,384/- 07/03 to 02/04 Tata Electric 8 V/Adj./Ch-1/R- 1/CR14/BPCL/Com mr./04 05.04.2005 22,36,63,705/- 3/04 to 12/04 Tata Electric 9 V/Adj/ch-1/R- 1/Cr3/2005/Commr 03.02.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Rules 9(1), 52 A, 173 C, 173 F and 173 G(1) of the CER, 1944, thereby demanding the duty under the proviso to section 11 A (1). The notice also proposed confiscation under rule 173Q of the impugned goods meant for captive consumption in the manufacture of LSHS, recovery of interest under Section 11AB ibid on the duty not paid and penalty under section 11 AC/CEA and Rule 9(2) of CER, 1944. 2.6 Nine more show cause cum demand notices, listed at Sl. No. 2 to 10 in the table above, were issued for the subsequent period, demanding Central Excise duty for clearances made to M/s Tata Electric Co. and M/s Ahmedabad Electric upto May 2005. 2.7 These show cause notice have been adjudicated by the Commissioner by the impugned order dropping the entire proceedings. 2.8 Aggrieved by the order of Commissioner, revenue has filed this appeal. 3.1 Revenue has filed this appeal on the following grounds: The adjudicating authority erred in applying the principle of marketability since there was no mention of the same in the show cause notice. Further, the fact that the respondents were captively consuming LR RG in the manufacture of their final product itself shows that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tp://www.ceocfointerviews.com/index.html http://qinatusoil.tripod.com/id6.html http://enitecnologie.it/english/attivita strategie/en_downstr eam processes.htm http://www.shell-lubricants.com/learning center/refining.html, http://www.manturbo.com/en/400/400 processdetail.php?a ppscope=REFINERIES prod=REFINERY cid=168, http://www.uop.com/refining/1090.html,. http://www.dgmk.de/kohle/abstracts_velen6/Romey.pdf , http://Intenc.com/Intenc/services/power/ utility.jsp. http://www.energyinst.org.uk/education/refineries/st anlow. htm http://cheresources.com/refinery8.shtml, http://www.msc.com.my/today/default.asp?sec=B i d=68 link=fulltext,. http://www.energy.ca.gov/oil/refinery output/definitions.ht ml, http://www.intota.com/viewbio.asp?bioID=63760 p erID= 108062 strQuery=refinery-gas, These evidences clearly establish that these goods are marketable. Once the two impugned goods pass the multiple tests of marketability , saleability , of them being capable of being sold , the test of dutiability also succeeds, as has been held by various courts and authorities in catena of decisions as follows: Delhi Cloth Mills [ 1977 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct made out of those inputs is exempt . These observations are against the conditions specified in Notfn. no. 67/95. The said Notfn. no. 67/95 specifically excludes all the inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or are charged to NIL rate of duty. the adjudicating authority basically erred in treating the impugned goods i.e. Long Residue and Refinery Gases, as inputs , when the two impugned goods were actually final products which were manufactured during the refinery process. The adjudicating authority itself has held the two impugned goods to be excisable and classified Long Residue in Ch.S.H.No.2713.30 and Refinery Gases in Ch.S.H.No.2711.19 respectively. The correct terminology to treat the two impugned goods would be intermediate goods (since they were captively consumed for further manufacture of final exempted product LSHS ) and not inputs as interpreted by the adjudicating authority. Therefore, once the two impugned goods were intermediate goods , they also do not qualify as inputs and therefore are not eligible for the condition specified in Notfn. no. 67/95. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading 2711.19 of the Central Excise Tariff Act, 1985, therefore, undisputedly excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944. both the impugned goods, namely, LR RG emerge in the course of refining of crude oil, it is thus manufacture within the meaning of Section 2 (f) of the Central Excise Act and that the assessee has not disputed the nature of the impugned goods being manufactured. Commissioner finding that in absence of known sale or purchase of the impugned goods leads to the inevitable conclusion that the impugned goods are not marketable and hence the impugned goods are not liable to excise duty. when the impugned goods are meant entirely for captive consumption, the question of their actual sale or purchase is not relevant and the Department is not required to prove their marketability. Respondent had been filing classification Declaration under rule 173 B of the Central Excise Rules, 1944. In that the assessee was showing 'Refinery Gas', one of the impugned goods classifiable under sub-heading 2711-19 for captive consumption under claim for exemption under Notification No. 67/95-C.E. Two of the classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for re- quantification of the demand. Commissioner has extended the benefit of exemption under Notification No. 67/95 C.E. dtd. 16/3/95. On a careful examination of the notification, it would be quite clear that the intermediate goods manufactured and used within the factory of production for manufacture of dutiable final products will be entitled to the benefit of this notification. However, as per proviso to this notification, this benefit will not be available to intermediate goods used in the manufacture of final products which are wholly exempt or are chargeable to nil rate of duty. As the intermediate goods, viz. Long residue and refinery gases have been manufactured and used in the manufacture of LSHS cleared by the assessee at nil rate of duty under various notifications from time to time. Therefore the benefit of the notification No.67/95-C.E. in respect of the long residues and refinery gases as per the proviso to the notification is not admissible. Respondents contend that the proviso to the notification is not applicable to their case. Its case is covered by the exception clause (vi) to the notification inasmuch as it has discharged the obligation prescribed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of exempted final products. On a careful reading of this decision, it is seen that the assessee manufactured, amongst others, two petroleum products, namely, Bombay High Gas Oil (BHGO) and Naphtha which emerged in the process of crude oil distillation. These two products were used as fuel in the captive power plant for generation of electricity. The electricity so generated in the captive power plant was used within the factory premises for manufacture of both dutiable and exempted goods. The Department was of the view that BHGO and Naphtha consumed in the captive power plant for generation of electricity are liable to excise duty, when such goods are used in the manufacture of exempted final products. Accordingly, show cause notices were issued demanding duty of excise covering the period December, 1998 to December, 2011. Duty demands were confirmed in adjudication. In appeal before the Tribunal, the Tribunal held that prior to 1/7/2001, duty demand would not sustain as the Refinery was deemed warehouse. However, after 1/7/2001, the appellant would be liable to pay excise duty and the benefit of Notification No.67/95-C.E. would be available to BHGO and Naphtha subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well within the normal period of limitation. 4.3 Arguing for the respondent, learned counsel submits: The Committee on Disputes in their meeting held on 10.5.2007 (page 1 of Vol. III) had declined permission to CBEC to pursue appeal before the CESTAT in the present matter. Additional evidence on marketability cannot be placed on record without filing application under Rule 23 of CESTAT (Procedure) Rules, 1982. Kay Iron Works Pvt. Ltd[ 2008 (232) ELT 412 (Bom.)] City Lubricants Pvt. Ltd. [2009 (239) ELT 70 (T)] Industrial Security Service [2007 (8) STR 178 (T)] Prakash Pipes Industries Ltd. [1993 (68) ELT 779 (T)] Revenue has not filed any application before this Hon'ble Tribunal for placing any additional evidence on record. In the absence of proper procedure being followed, the additional evidence in the form of website printouts submitted by the Revenue along with the appeal / synopsis (across the bar) is liable to be rejected. Application for placing additional evidence on marketability on record, if any, is liable to be dismissed for want of sufficient cause. Respondents in their reply dated 19.10.1996 to the audit obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and declarations filed under Rule 173B of the erstwhile Rules to contend that LR RG are marketable goods. There is no estoppel in law against a party in taxation matters as held by the Apex Court in Dunlop India Ltd. Madras Rubber Factory Ltd. Vs. UOI Others 1983 (13) ELT 1566 (SC). Demand for the period prior to 1.7.2001 is not sustainable as the same has not been disputed by the Revenue in its grounds of appeal. In any case, for the period prior to 1.7.2001, LR RG are not liable to excise duty in view of the warehousing provisions settled legal position. For the period after 1.7.2001, LR RG are not liable to excise duty in view of Notification No.67/95-CE dated 16.3.1995. Respondents have not availed CENVAT Credit in respect of the inputs used in the manufacture of LSHS cleared by them under exemption. Therefore as per the ratio of the decisions as follows, they benefit under Notification 67/95 is admissible to them. Hindustan Petroleum Corporation Ltd. [2013 (287) ELT 102 (T)] Ambuja Cement Ltd. [2015 (326) ELT 13 (SC)] Godavari Sugar Mills Ltd. [2007 (212) ELT 234 (T)] Affirmed in 2015 (319) ELT A69 (Kar.) Sakthi Sugars Ltd. [2008 (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) CEA defines 'excisable goods' as goods specified in the First Schedule to the Central Excise Tariff Act 1985 as being subject to duty of excise. Between the impugned goods, LR fell during the relevant period under Chapter subheading 2713.30 and RG under 2711.19 of the Tariff. This classification was clearly spelt out in the show cause notices and the noticee has not disputed it. The impugned goods are, therefore, undisputedly excisable goods within the meaning of Section 2(d) of CEA. 14. Section 2(1) of CEA defines manufacture to include inter alia any process incidental or ancillary to the completion of a manufactured product. Both the impugned goods, viz. LR and RG, emerge in the course of refining of crude oil, into several products falling under Chapter 27 and 29 of the Tariff. Refining is the principal process that brings into existence all these products including the impugned goods. As this process leads to the emergence completion of the impugned goods, it is a manufacture within the meaning of Section 2(f) CEA. It is noteworthy that the noticee has not disputed the nature of impugned goods being manufactured. 15. What the noticee has, however, dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Mumbai Custom House prima facie indicated that the impugned goods were not being marketed. Although as per the observations of the apex court actual marketing of goods was not essential to judge their marketability, their saleability or suitability of sale was. Yet actual sale and purchase was a clear indicator of saleability for in Camplin Ltd. vs. Commissioner (2005 (180) ELT 308(SC) and Okay Play (India) vs. Commissioner of Central Excise (2005 (180) ELT 291(SC)}, it had been held that marketability was a question of fact and any actual sale / purchase or import/export was enough to establish marketability. 20. The noticee's claim that the impugned goods were not marketable, further buttressed by absence of known sale / purchase on ground and the total silence of the show cause notices on the issue lead in the absence of any other evidence to the contrary, only to one inevitable conclusion that the impugned goods are not marketable. 5.4 The threefold test to determine the dutiability of the goods that Commissioner has referred in his order cannot be disputed as these have been laid down by the Hon ble Apex Court since ages. These are the basic tests before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned affidavits were concerned, the Tribunal observed that the deponents were not the right persons to give opinion on the type of the products with which we are concerned in this case. The disputed products are industrial goods. Only industrialists engaged in the manufacture of brake linings and clutch facings would be interested in them and not a dealer who sells commonly used asbestos products in the market . The Tribunal went on to state, Any small scale or medium scale manufacturer of brake linings and clutch facings would be interested in buying the asbestos rings and asbestos fabrics as his starting materials, if he does not have the resources to start from the stage one (the asbestos fibre stage).......... The fact that the appellants do not sell their asbestos rings and asbestos fabrics is immaterial......... The material point is that their asbestos rings and fabrics are marketable products, though marketable to a particular section of the industry only......... The articles in dispute before us are high value finished asbestos products and if the terms offered are right the smaller manufacturers of brake linings and clutch facings would certainly be interested in buyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gories - one, for which rates are mentioned under different entry and other the residuary. By this method all goods are excisable either under the specific or the residuary entry. The word 'goods' has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods are specified in the Schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the person on whom duty is proposed to be levied. The expression `produced or manufactured' has further been explained by this Court to mean that the goods so produced must satisfy the test of marketablity. Consequently it is always open to an assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled that merely because the product is mentioned in one of the entries in the Central Excise Tariff Act or finds place in the notification issued for the purpose of claiming duty drawback under the customs law, by itself would not be conclusive of the fact that such produce is either marketable or that, therefore, it is exigible to excise duty. 26. In case of Bata India Ltd. v. Commissioner of Central Excise, New Delhi (supra), the Apex Court observed as under : 18. Revenue in this case has not succeeded in establishing that the product in question was either marketed or was capable of being marketed. The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. No evidence has been produced by the Revenue to show the product unvulcanized sandwiched fabric as such as is capable of being marketed, without further processing. The question is not whether there is an hypothetical possibility of a purchase and sale of the commodity but whether there is sufficient proof that the product is commercially known. The mere fact that the product in question was entrusted outside for some job work such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributes. The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase the plastic body of EMR of the respondents either for replacement or otherwise one cannot get it in the market because at present it is not a commercially known product. For these reasons, the plastic body, which is a part of EMR of the respondents, is not goods so as to be liable to duty as parts of EMR under para 5(f) of the said exemption notification. 29 . In case of Cadila Laboratories Pvt. Ltd. v. Commissioner of Central Excise, Vadodara (supra), the Apex Court referred to several decisions and observed as under : 9. Thus, the law is that in order to be excisable, not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product being identical, should be held exigible to excise. Other than these two factors, we find virtually no further evidence collected by the Department to subject the petitioners to fresh round of litigation. We may deal with these two questions presently. 33 . Insofar as the opinion of the chemical examiner that the product is stable, that by itself as held by the Apex Court in the case of Cadila Laboratories Pvt. Ltd. (supra), would not be conclusive. What is required to be ascertained was whether such product is marketable. In other words, the product was known in the market and that it was possible to be bought and sold in the market. Mere hypothetical possibility of some availability in the market by itself would not be sufficient . The Department s stand, therefore, that merely because chemically the product is found to be stable, in our view, cannot be stated to be new or sufficient material to enable the Department to hold the view that such product is marketable. 5.8 Revenue has vehemently relied upon the web printout which do not establish the marketability of the impugned goods but only establish that the impugned goods are capable of being used i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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