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TMI Blog1995 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture" within the meaning of Section 2(f) of the Act", therefore, it "was to be charged with excise duty" held, "the provisions of the Act mandate that a finding that the goods are marketable is a prerequisite or "sine qua non" for the levy of duty". 3. But prior to adverting to it and notice in brief how the law on this aspect has developed, it is but appropriate to mention that the precise dispute before the Tribunal was whether the appellants who are manufacturers and sellers of laminated sheets which fell under Tariff Item No. 68 of the tariff schedule prior to 28th February, 1986 were liable to pay duty on such intermediate products produced by them, as were solutions of resin and water which were not stable, merely, because they were captively consumed. Since the question of law is common and has arisen in more or less similar circumstances in all the appeals, it is not necessary to give facts of each case. 4 The appellants manufactured laminated sheets out of various raw materials including paper and other chemicals, namely, phenol,, formaldehyde, hexamine etc., purchased from the open market after paying duty. In the process of manufacturing laminated sheets the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not mean that the resins produced by the appellants were not goods as if some stabiliser was used to lower down continuous reaction the same could be put in the market for the purpose of sale. The Collector (Appeals) agreeing with the finding that solutions were not stable allowed the appeals and held that an intermediate product in order to be excisable must be a product known to the market or commercial community. In other words the intermediate product which came into existence should have been a complete product known as such to the market. But if something more was to be done on the product to bring it into a form known to the commercial community then it could not be treated as excisable goods. The Collector (Appeals) held that even though it was not disputed that the products were used for the manufacture of plastic laminated sheets and synthetic resin was formed as an intermediate product but it being unstable in a non-marketable condition the resin mixture could not be considered as excisable under Tariff Item 15A(1) of Central Excise Tariff. In further appeal filed by the Department the Tribunal held that even though it was not claimed by the Department before the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther materials and articles specified below: Fifty per cent ad valorem. (1).................................. (2)............................................ (3)............................................ (4)............................................ Explanation I :......... Explanation II. - In sub-item (1), "condensation, polycondensation, polyaddition, polymerisation and co-polymerisation products" are to be taken to apply only to goods of a kind produced by chemical synthesis answering to one of the following descriptions :- (a) artificial plastics, including artificial resins; (b) silicones; (C) resols, liquid polyisobutylene, and similar artificial polycondensation or polymerisation products." Resols, according to Tribunal, is chemical name of resin at 'A' stage. It was held that phenol resin in course of manufacture due to reaction of mixture occurred at three stages: "1. Resol or A-Stage (beginning of Condensation); the resin as fluid, soluble, and still contains much water. 2. Resitol or B-Stage (continued condensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 were not marketed or capable of being marketed. 7. The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable, moveable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India & Anr. v. Delhi Cloth & General Mills Co. Ltd., 1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791, a Constitution Bench of this Court while construing the word `goods' held as under :- "These definitions make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold". Therefore, any goods to attract excise duty must satisfy the test of marketability. The tariff schedule by placing the goods in specific and general category does not alter the basic character of leviability. The duty is attracted not because an article is covered in any of the items or it falls in residuary cate- gory but it must further have been produced or manufactured and it is capable of being bought and sold. In South Bihar Sugar Mills Ltd. & Anr. v. U.O.I. & Anr. , 1978 (2) E.L.T. (J 336) (SC) = AIR 1968 SC 922 it was held by this Court : "The Act charges duty on manufacture of goods. The word `manufacture' implies 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 distinctive name, character or use. The duty is levied on goods. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in which they exist immediately after extresion suffices to attract a market". It was explained in Bhor Industries Ltd. v. C.C. E., 1989 (40) E.L.T. 280 SC: "It appears to us that under the Central Excise Act, as it stood at the relevant time, in order to be goods as specified in the entry the first condition was 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 in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods". It was reiterated in Hindustan Polymers v. Collector of C. E., 1989 (43) E.L.T. 165 : "Excise duty, as has been reiterated and explained, is a duty on the act of manufacture. Manufacture under the excise law is the process or activity which brings into being articles which are known in the market as goods, and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then only that manufacture takes place attracting duty. In order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held to be goods, no doubt, but it was observed that from a practical point of view it was apparent that the goods were not marketable consequently they were not exigible to duty. 11. It cannot thus be disputed that even if the resin produced by the appellants are resols as mentioned in Item 15A it could not be subjected to duty. The purpose of specifying the goods in the Schedule is twofold, one, the rate on which the duty would be charged and other that if the goods satisfy the description and are covered in the Entry then they are liable to pay excise duty. But even in respect of specified goods it could be established that it was not marketable or capable of being marketed, therefore, no duty was leviable on it. The finding on this aspect has been extracted earlier. The Assistant Collector (Excise) found that unless some retarder or stabiliser was added the unstable solution was not marketable. Even assuming that such solution could last for 15 days as found by the Tribunal that would not help the Department unless it is further found that is was a produce which was marketable or capable of being marketed. The Collector had agreed with the finding of Assistant Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X
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