1997 (5) TMI 55 - HC - Central Excise

Court quashes excise duty notices on rubberised cotton fabric, not considered 'goods'

The Court allowed the petitioners' request to quash the impugned notices under Section 11 of the Central Excises and Salt Act, 1944. It held that the ... Fabric - Removal - Classification Issues:1. Quashing of impugned notices under Section 11 of the Central Excises and Salt Act, 1944.2. Classification of rubberised cotton fabric as goods for excise duty.3. Interpretation of the definition of excisable goods under Section 2(d) of the Act.4. Application of Rules 9 and 49 of the Central Excise Rules, 1944.Detailed Analysis:1. The petitioners sought the quashing of notices dated 11-3-1983 and 29-4-1983 issued under Section 11 of the Central Excises and Salt Act, 1944. The notices called for showing cause regarding the levy of duty on rubberised cotton fabric under Section 11A of the Act. The petitioners argued that the fabric, an intermediary product, was captively consumed in their manufacturing process and not sold in the market, thus not exigible to excise duty.2. The key contention was whether the rubberised cotton fabric, being captively consumed by the petitioners, qualifies as 'goods' under the Act. The petitioners maintained that since the fabric was not sold in the market and was used solely in their manufacturing process, it did not meet the criteria for being classified as goods subject to excise duty.3. The Court referred to a previous judgment where it was held that excise duty is leviable only on articles that are ordinarily bought and sold in the market. Citing the case of Union of India v. Delhi Cloth and General Mills Co. Ltd., it was emphasized that for an article to be considered goods, it must be something that can come to the market for buying and selling. Applying this principle, the Court concluded that the rubberised cotton fabric, being an intermediary product used captively, did not meet the definition of goods for excise duty purposes.4. The Court also examined the relevance of Rules 9 and 49 of the Central Excise Rules, 1944, concerning the clearance and duty payment for intermediary products. Referring to the case of South Bihar Sugar Mills Ltd. v. Union of India, the Court highlighted that amendments to the rules only make intermediary articles liable to excise duty if they fall within the entries of the First Schedule independently. Since the rubberised cotton fabric did not independently fall within any entry of the First Schedule, the amended rules were deemed inapplicable.In conclusion, the Court accepted the petitioners' argument that the rubberised cotton fabric, being an intermediary product used captively and not sold in the market, was not exigible to duty. Consequently, the petition was allowed, and the impugned notices were quashed.