2006 (1) TMI 397 - AT - Central Excise

Supreme Court case on excise duty for 'felts': marketability crucial

The Supreme Court remanded a case concerning the classification and duty demand on an intermediate item as 'felts' for excise duty. The appellant argued ... Intermediate product - Excisability - Classification dispute when not relevant Issues:1. Classification and duty demand on an intermediate item as 'felts' at the time of its clearance.2. Whether the item is marketable and subject to excise duty.Analysis:1. The judgment involves a remand by the Supreme Court in a case where the appellant had obtained permission for clearance of semi-finished goods for latexing at another location. The dispute revolved around the classification of the goods under sub-headings 5702.20 and 5702.90 for excise duty. The Tribunal was directed to reconsider the matter based on evidence brought on record, especially in light of a previous judgment regarding similar goods. The issue was whether the goods qualified as 'felts' attracting excise duty.2. The main contention in the appeal was the classification and duty demand on an intermediate item as 'felts' during clearance. The appellant argued that the item was not a finished, marketable product and therefore not liable for excise duty. The Tribunal had previously accepted the appellant's stance that the item was not felt and hence not dutiable. Reference was made to the principle that mere inclusion in the tariff does not automatically attract excise duty; the goods must also be marketable. The Collector's order was based on the appellant's admission in a letter.3. The Tribunal, after examining the manufacturing process and the marketability of the goods, concluded that the intermediate item could not be classified as 'felts' attracting excise duty. It was established that the goods were not marketable at the intermediate stage, as supported by technical and commercial evidence. The Tribunal emphasized the importance of marketability in determining excisability, stating that unless a marketable item emerges, there is no production of goods liable for central excise duty. The Tribunal's earlier order on the matter had not been challenged by the Revenue, making the finding final between the parties.4. In conclusion, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, as there was no manufacture of felt and hence no duty demand could arise. The judgment highlighted the significance of marketability in determining excisability, emphasizing that unless the goods were marketable, the question of classification and assessment of excise duty did not arise. The decision was based on expert opinions and materials, and the Tribunal's finding that the goods were not marketable was upheld.