TMI Blog1989 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... BYASACHI MUKHERJEE., B. C. RAY JJ. A.K. Ganguli, Senior Advocate (T.V.S.N. Chari, P. Parmeswaran and Sushma Suri, Advocates, with him), for the appellant. Soli J. Sorabjee, Senior Advocate (R. Narain, Kamal Mehta, P.K. Ram and D.N. Misra, Advocates, with him), for the respondent. JUDGMENT The judgment of the court was delivered by SABYASACHI MUKHARJI J. -- This is an appeal under section 35L(b) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act ). The appeal is directed against the order dated November 2, 1987, passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as the Tribunal ). The respondent, viz., Ambalal Sarabhai Enterprises, manufacture sorbitol falling under item No. 68 of the erstwhile Central Excise Tariff. There was a visit to the factory premises of the respondent by the Central Excise Officers on February 26, 1985. It was alleged that it was found that the respondent manufactured and captively consumed starch hydrolysate but the respondent had failed to take out a licence with reference to the said manufacture of starch hydrolysate and had been removing the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly contended that the Tribunal misdirected itself in applying the proper test for the determination of the question. He urged that the true test to determine, in a matter of this nature, was to consider not only whether starch hydrolysate was actually marketable but also to consider whether, conceptually, the said goods in question were capable of being marketable. It was urged by Shri Ganguly that the Tribunal had misdirected itself in not appreciating this aspect of the matter and did not as such examine or view the evidence on record in the proper perspective. He urged that, in the aforesaid light and in view of the findings made by the Collector, there was no ground for the Tribunal to interfere with the order of the Collector. He further submitted that, in any event, if the Tribunal was not fully satisfied with the evidence on record to determine whether starch hydrolysate was goods in the sense of being marketable, then the Tribunal should have, in the facts and circumstances of the case and in the interest of justice, remanded the matter for appraisement and examination in the light of the true principle or the Tribunal should have examined or called for fresh evidence to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, for non-payment of duty, there has been no negligence or failure on the part of the respondent and as such section 11A of the Act was not applicable. In this connection, it would be instructive to refer to, and it would be necessary to rely on, the principles laid down by this court in South Bihar Sugar Mills Ltd. v. Union of India [1968] 3 SCR 21. There, the appellant companies manufactured sugar by carbonation process and paid excise duty on sugar manufactured by them under item No. 1 of Schedule I to the Act. According to one affidavit filed on behalf of the respondents filed in those proceedings, these manufacturers employed a process of burning lime-stone with coke in a lime kiln with a regulated amount of air whereby a mixture of gases was generated consisting of carbon dioxide, nitrogen, oxygen and a small quantity of carbon monoxide. The gas thus produced was thereafter compressed so as to achieve pressure exceeding atmospheric pressure and then passed through a tank containing sugarcane juice so as to remove impurities from it and to refine the juice. For that process of refining it was only the carbon dioxide in the gas which was used and the other gases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinct name, character or use. Duty is levied on goods . As the Act does not define goods , the Legislature must be taken to have used that word in its ordinary dictionary meaning. The dictionary meaning of the expression is that to become goods, it must be something which can ordinarily come to the market to be bought and sold and is known to the market. It would be such an article which would attract duty under the Act. This court referred to the previous decision in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. [1963] Suppl. 1 SCH 586. Therefore, in this instant appeal, in order to determine whether starch hydrolysate was goods or not, it is necessary to determine whether there was application of any process to the raw materials and whether as a result of that application, there emerged a new and different article having a distinctive name, character or use and the resultant product being goods in the sense of being marketable or marketed. In this connection, Shri Soli Sorabjee referred us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luminium cans were produced by the appellants were subsequently developed by it into a completed and perfected component for being employed as flashlight cans. In those circumstances, the aluminium cans produced by the appellants were not liable to excise duty under section 3 of the Act read with item No. 27 of the Central Excise Tariff. In the case of Bhor Industries Ltd. v. Collector of Central Excise [1990] 184 ITR 129, this court had to deal with the liability to duty on intermediate products and it was reiterated that liability to excise duty arises only when there is manufacture of goods which are marketable or capable of being marketed. It was held that excise is a duty on goods as specified in the Schedule. The taxable event in the case of excise duty is the manufacture of goods. Under the Act, in order to be goods as specified in the entry, it was essential that, as a result of manufacture, goods must come into existence. For articles to be goods, these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale is not necessary. User in captive consumption is not determinative but the articles must be capable of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practical approach. The assessee produced evidence in the form of an affidavit. One Shri Khandor who filed an affidavit in support of the case of the respondent had stated in his affidavit that completely hydrolysed starch would start fermenting and decomposing and, at higher concentration, it would start crystallizing within two or three days. This is evidence indicating the propensity of its not being marketed. It is good evidence to come to this conclusion that it would be unlikely to be marketable as it was highly unstable. There was evidence as noted by the Tribunal that it has not been marketed by anyone. There is also an admission of the Superintendent of the appellant that no enquiry whatsoever was conducted by the Department as to whether starch hydrolysate was ever marketed by anybody. It was pointed out by the Revenue that, even according to the respondent, it stored starch hydrolysate in tanks before transporting it through pipes but, according to the appellant, the storage of starch hydrolysate was only for a period of a few hours as a step in the process of transfer thereof to sorbitol. It, therefore, appears to us that there was substantial evidence that having regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking the process of hydrolysing starch either to purchase completely hydrolysed starch from the market or sell or undertake the process of hydrolysing starch for the purpose of sale in the market, because at lower concentration, starch which is completely hydrolysed would start fermenting and decomposing. At higher concentrations, it would start crystallising within two or three days. This affidavit evidence remains uncontradicted. Shri Ganguly, however, drew our attention to an order of the Tribunal in Anil Starch Products Ltd. v. Collector of Central Excise, being Appeal No. ED(SB)(T) 1534/81D arising out of Revision Order No. 820 of 1981. He referred to the observations at page 117 of the paper book which dealt with the evidence of one Shri Khabholja, where, according to Shri Ganguly, the Tribunal came to a different conclusion. But, the Tribunal in that case relied on the decision of the Allahabad High Court in the case of Union of India v. Union Carbide India Ltd. [1978] ELT 1. There, the Allahabad High Court held that things would be nevertheless goods even if these did not have a general market where they can be easily bought and sold. The High Court held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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