2022 (5) TMI 1393 - AT - Central Excise

Tribunal upholds decision on non-dutiable goods, emphasizing lack of marketability.

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner's decision to drop proceedings against the respondents. It was held that the ... Marketability as decisive test for dutiability - dutiability of manufactured goods - manufacture within meaning of Central Excise Act - burden of proof on the Department to establish marketability - captively consumed / intermediate goods - exemption under Notification No.67/95-C.E. - CENVAT Rule 6 obligations - inadmissibility of after the fact evidence to establish marketability at relevant time - limitation and extended period for suppressionMarketability as decisive test for dutiability - burden of proof on the Department to establish marketability - inadmissibility of after the fact evidence to establish marketability at relevant time - captively consumed / intermediate goods - Impugned goods (Long Residue and Refinery Gases) are not marketable and therefore not liable to excise duty for the periods covered by the show cause notices. - HELD THAT: - The Tribunal accepted the Commissioner's approach that excisability requires (i) goods specified in the Tariff, (ii) manufacture, and (iii) marketability. Classification and manufacture of the residues were undisputed; the determinative question was marketability. The Department had not pleaded or adduced evidence of marketability in any of the ten show cause notices, and the burden to establish marketability lies on the Department. Inquiries made by the Commissioner with jurisdictional Customs and Excise officers showed no known removals or imports of the residues, and, in the absence of evidence led by the Department, those enquiries supported the conclusion that the goods were not marketable. Material subsequently placed by the Department - predominantly internet printouts and later dated documents - did not establish that the products were known and capable of being bought and sold at the relevant times; such after the fact web material is inadmissible to prove marketability for earlier periods. Marketability is a question of fact to be determined at the relevant time and hypothetical usability or emergent technologies does not suffice. As the Department failed to discharge its onus to prove marketability, the gravamen of the demand (levy of excise on the residues) could not be sustained, and the appeal based on levy was dismissed without examining the subsidiary questions on exemption under Notification No.67/95 or CENVAT compliance. [Paras 14, 15, 18, 19, 20]Revenue failed to prove marketability of Long Residue and Refinery Gases for the periods in issue; appeal dismissed and demands set aside.Final Conclusion: The revenue appeal is dismissed: having failed to establish marketability of the two refinery residues for the periods covered by the ten show cause notices, the levy of excise duty could not be sustained and the Commissioner's order dropping the proceedings is affirmed. Issues Involved:1. Marketability and dutiability of the impugned goods (Long Residue and Refinery Gas).2. Admissibility of exemption under Notification No. 67/95-CE.Issue-wise Detailed Analysis:I. Marketability and Dutiability of the Impugned Goods:The primary issue addressed in the judgment is whether Long Residue (LR) and Refinery Gas (RG) are marketable and, therefore, dutiable under the Central Excise Act, 1944. The Commissioner, in the order under appeal, emphasized that for goods to be dutiable, they must satisfy three tests: they must be excisable goods, produced or manufactured in India, and marketable.1. Excisability and Manufacture:- The Commissioner noted that LR and RG are classified under Chapter subheading 2713.30 and 2711.19, respectively, making them excisable goods as per Section 2(d) of the Central Excise Act, 1944.- Both LR and RG emerge during the refining of crude oil, thus meeting the definition of manufacture under Section 2(f) of the Central Excise Act, 1944.2. Marketability:- The Commissioner found that the show cause notices did not assert or substantiate the marketability of LR and RG.- Enquiries conducted from various refineries and customs authorities indicated that LR and RG were not being marketed or imported, leading to the conclusion that these goods were not marketable.- The Commissioner relied on the Supreme Court's precedent that marketability means the goods should be capable of being sold in the market without further processing.3. Burden of Proof:- The burden to prove marketability lies with the department. The Commissioner concluded that the department failed to provide evidence of marketability, and thus, the goods could not be subjected to excise duty.4. Revenue's Appeal:- The Revenue's appeal argued that the Commissioner erred in not considering the marketability of LR and RG and relied on various web printouts to establish marketability. However, these printouts did not provide evidence of actual marketability at the relevant time.- The Tribunal held that marketability must be established at the relevant time and that hypothetical possibilities or subsequent technological advancements could not be relied upon to prove marketability retrospectively.5. Precedents and Legal Principles:- The Tribunal cited several Supreme Court judgments emphasizing that marketability is a question of fact and must be established with concrete evidence.- It reiterated that goods must be marketable in the condition they emerge and that mere usability does not equate to marketability.II. Admissibility of Exemption under Notification No. 67/95-CE:Given the conclusion that the impugned goods (LR and RG) were not marketable and, therefore, not dutiable, the Tribunal found it unnecessary to address the issue of exemption under Notification No. 67/95-CE. The appeal was dismissed on the grounds of non-marketability, rendering the discussion on exemption moot.Conclusion:The appeal filed by the Revenue was dismissed, with the Tribunal upholding the Commissioner's order that dropped the proceedings against the respondents. The Tribunal concluded that the Revenue failed to establish the marketability of the impugned goods, and thus, they were not liable to excise duty. The other issues, including the admissibility of exemption under Notification No. 67/95-CE, were not considered necessary to address due to the primary conclusion on marketability.