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 ... Marketability as a determinative test for excise - goods as known in the market - excise duty leviable only on manufacture of goods known to the market - classification under a tariff entry vis-a -vis market identity of the article - burden on revenue to prove that manufactured article is goods as known in the market - intermediate/captive consumption product not dutiable unless it attains market characterMarketability as a determinative test for excise - goods as known in the market - classification under a tariff entry vis-a -vis market identity of the article - Whether the crude PVC films/sheets manufactured by the appellant are dutiable under Tariff Item 15A(2) of the Central Excise Tariff Act, i.e., whether they are 'goods' known in the market and hence liable to excise duty. - HELD THAT: - The Court applied settled principles that excise is a duty on the manufacture of goods and for an article to attract excise it must be an article 'known in the market' or capable of being sold in the market, as elaborated in Union of India v. Delhi Cloth & General Mills and subsequent authorities. The Tribunal erred in treating the mere textual ambit of the tariff entry as decisive and in holding that marketability was irrelevant. The Appellate Collector had earlier found, after technical and factual inquiry, that the crude PVC sheets were not marketable PVC sheets: they were produced at lower temperature and higher roller speed, lacked finishing/embossing/printing and had materially lower tensile strength, and were used as an intermediate product to be fused later when coated with fabrics. Those findings established that the product had not acquired the character of PVC sheets 'as known in the market'. The revenue failed to adduce any contrary evidence before the Tribunal to rebut the Appellate Collector's factual conclusion. In these circumstances the legal test of marketability (i.e., whether a manufactured article is an identifiable commodity known to the market) was not satisfied and the goods could not be held dutiable merely because their description could, in abstract, fall within the tariff entry. Applying these principles to the material findings, the Court concluded that the crude PVC films/sheets were not 'goods' within the meaning required to attract excise under Item 15A(2). [Paras 5, 8, 10, 11, 12]Appeal allowed; crude PVC sheets/films held not liable to excise duty under Tariff Item 15A(2) as they were not goods known in the market.Final Conclusion: The Tribunal's order upholding duty was set aside; on the factual finding that the crude PVC films/sheets were not marketable or known in the market and in absence of contrary evidence, no excise duty under Item 15A(2) can be charged. 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.