1989 (1) TMI 128 - SC - Central Excise

Crude PVC films not dutiable under Central Excise Tariff when not shown as marketable distinct goods; revenue bears burden.

SC held that crude PVC films used as inputs for leather cloth, laminates and tapes are not dutiable under the Central Excise Tariff because they were not ... Manufacturer of crude PVC films for the purpose of use in final products such as leather cloth and laminate jute mattings and PVC tapes - both insulation and adhesive - Whether the crude PVC films is dutiable? Held that:- The goods being articles which are known to those who are dealing in the market having their identity as such. Section 3 of the Act enjoins that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or 'manufactured' in India. 'Excisable goods' under Section 2(d) of the Act means goods specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt. Therefore, it is necessary, in a case like this, to find out whether there are goods, that is to say, articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not 'goods' known to the market. Marketability, therefore, is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff Act, 1985. In view of the Appellate Collector's order dated 14-1-1974 it was the duty of the revenue to adduce evidence or proof that the articles in question were goods. No evidence or proof was produced. The Tribunal went wrong in not applying the proper test. The test of marketability or capable of being marketed was not applied by the Tribunal. There being no contrary evidence found by the Tribunal in this case subsequent to the finding by the Appellate Tribunal, we are of the opinion that the appeal should be allowed and no excise duty should be charged under [Section[3] 15A(2) of the Central Excise Tariff on the Crude PVC sheets. Issues Involved:1. Whether crude PVC films are dutiable under the Central Excises and Salt Act, 1944.2. Whether the crude PVC films are marketable intermediate products.3. Whether the classification list approved by the Assistant Collector is valid.4. Whether the Tribunal correctly interpreted the tariff entry and the concept of marketability.Detailed Analysis:1. Dutiability of Crude PVC Films:The primary issue in this case was whether crude PVC films manufactured by the appellant are subject to excise duty under the Central Excises and Salt Act, 1944. The appellant argued that these films are non-excisable as they are non-marketable intermediate products used exclusively for captive consumption. The Tribunal, however, concluded that crude PVC films fell under Tariff Item 15A(2) and were thus dutiable.2. Marketability of Crude PVC Films:The appellant contended that crude PVC films are not marketable as they are not known in the market as PVC sheets and require further processing to become marketable. The Appellate Collector had previously held that crude PVC films were not marketable and thus not liable to duty. The Tribunal, however, dismissed the relevance of marketability, stating that the tariff entry did not specify whether it covered only finished or crude films/sheets.3. Validity of Classification List:The appellant had filed a classification list claiming that crude PVC films were non-excisable, which was approved by the Assistant Collector. However, a subsequent Show Cause Notice was issued by the Assistant Collector challenging this classification. The appellant argued that the re-classification attempt was unjustified and that the Appellate Collector's decision was binding.4. Interpretation of Tariff Entry and Marketability:The Tribunal concluded that the tariff item covered all types of films/sheets, including crude ones, and that the concept of marketability was not relevant. However, the Supreme Court disagreed, emphasizing that for an article to be dutiable, it must be known in the market or capable of being sold in the market as goods. The Court cited previous judgments, including Union of India v. Delhi Cloth & General Mills and South Bihar Sugar Mills Ltd. v. Union of India, to reinforce the principle that marketability is essential for excise duty to be applicable.Conclusion:The Supreme Court held that the Tribunal erred in its interpretation by not considering the marketability of crude PVC films. The Court reiterated that excise duty is levied on goods that are known in the market or capable of being sold in the market. Since the crude PVC films manufactured by the appellant were not marketable, they were not subject to excise duty under Tariff Item 15A(2). Consequently, the appeal was allowed, and no excise duty was to be charged on the crude PVC sheets.