RALLIS INDIA LTD. Vs. CCE

JUDGEMENT

(1.) THE issue involved in this appeal filed by M/s. Rallis India Ltd. is whether the intermediary products emerging during the manufacture of their final products are excisable goods chargeable to duty and if so, whether the demand is hit by time limit specified in Section 11A(1) of the Central Excise Act. Briefly stated the facts are that the appellants manufacture fungicides, viz. (i) Captafol and (ii) Capton. During the visit of officers on 23.6.1987 to the factory premises of the appellants they found that following 3 products emerged at the intermediate stage which are captively consumed without payment of duty and without maintaining any record: - -

(2.) SHRI D.B. Shroff, learned Advocate, submitted that first two intermediate chemicals are removed from the reactor and stored in a vessel at a temperature of 10 -15 degrees centigrade for only about 1 or 2 hours till the third product Tetra Hydrophtalic Imide is prepared after which they are added to the third chemical; that these chemicals have an extremely short shelf life and decompose if exposed to oxygen or moisture; that the state in which these intermediate chemicals are obtained in the appellants factory, they cannot be brought to the market for sale; that these goods contain impurities and are unstable and are not purified and unless they are isolated and further purified, these intermediate chemicals cannot be brought to the market and sold and hence, they are not goods; that the mere fact that an article is listed in the schedule to the Central Excise Tariff Act does not make it liable to excise duty; that the duty can only be levied if the article is marketable. Reliance was placed on the following decisions: - -

(3.) COUNTERING the arguments Shri H.K. Jain, learned SDR submitted that Collector has relied upon the statement dated 23.6.1987 of Shri D.M. Bhavsar, Factory Manager of the appellant from which it is evident that first two products are isolated and stored in storage tank before their further use within the factory for the manufacture of final product; that Shri Bhavsar did not at all mention in the statement that these products which are organic chemicals are not marketable; that he has also not alleged at any time that his statement was taken under duress. It is only in his second statement dated 23.7.1987 that he deposed that goods are neither marketable nor marketed by anybody in India. He further mentioned that chemical examiner has categorically opined that all the three impugned products are well defined organic chemicals which are classifiable in Chapter 29 of the Central Excise Tariff; that the Chemical Examiner has based his conclusion on the basis of technical literature; that Chemical Examiner has referred to the book namely, "Pesticides Manual, A Work Compendium, 6th Edition"; that during his cross examination the Chemical Examiner has clearly deposed that the impugned product was not semi -finished, formation of these products was complete, though impurities were present in the reaction mixture. He also stated that the product would be stable even if it is not isolated or purified. He further mentioned that though Chemical Examiner had not tested any sample of the product, he had gone through the detailed manufacturing process given by Shri Bhavsar; that the products are not unstable. The learned SDR also referred to note 1(a) to Chapter 29 of the Central Excise Tariff, according to which Chapter 29 applies to separate chemically defined organic compounds, whether or not containing impurities and contended that even if the impugned product contain impurities they are classifiable under Chapter 29 and chargeable to duty. Regarding marketability of the product, learned SDR submitted that as the products are captively consumed entirely by the appellants the question of their coming to market does not arise until and unless some other manufacturer manufactures these products. Reliance was placed by him on the decision in the case of Plasmac Machine Manufacturing Co. (P) Ltd. v. CCE, : 1991 (32) ECR 1 (SC) : ECR C 1679 (SC) in which it was held that actual sale in the market is not necessary for determining the marketability of the product. In this case Tie Bar Nuts manufactured by the appellants were captively used for fixing platens at appropriate distance. The Supreme Court held "it cannot be said that Tie Bar Nuts after their manufacture did not constitute goods; their actual sale in the market was not necessary." He also relied upon the decision in the case of A.P. State Electricity Board v. CCE, : 1994 (70) ELT 3 (SC) : 1994 (53) ECR 349 (SC) in which it was held that "Marketability is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisation. The fact that the goods are not, in fact, marketed is of no relevance. So long as the goods are marketable they are goods for the purpose of Section 3. It is also necessary that the goods in question should be generally available in the market. Even if the goods are available from any one source or from a specific market, it makes no difference so long as they are available for purchases." He also mentioned that similar view was held in the case of Associated Cement Co. Ltd. v. CCE, : 1996 (88) ELT 149. Regarding short shelf life the learned SDR reiterated the findings of the Collector to the effect that opinion given by Shri U.T. Bhalerao, Dy. Director, Regional Research Laboratory, Hyderabad and Dr. Seshadri did not mention any time span which could be the normal shelf life of these products; that the appellants have not adduced any evidence that these products have such short or no shelf life; that they are totally incapable of being marketed and used by someone else within a specified time limit. He relied upon the decision in the case of Tamilnadu State Transport Corporation Ltd. v. CCE, Madurai, : 1998 (102) ELT 153 in which it was held by the Tribunal that Shelf life of 8 to 10 hrs. was sufficient for the use of aluminium paints manufactured by the appellants therein, in view of the fact that the appellants had not at any time substantiated their claim of short shelf life by submission of a report of a chemical analysis. He also mentioned that the Collector has dealt with the affidavit filed by Shri M.L. Shah.