2000 (4) TMI 38 - SC - Central Excise

Intermediate chemical process products and excise duty: whether tariff-listed intermediates are 'goods' without proof of marketability; appeals dismissed.

Excisability of intermediate products arising during an integrated chemical process was in issue, specifically whether such intermediates were 'goods' ... Liability to payment of excise duty - Manufacture of insecticides, fungicides, weedicides and pesticides falling under Tariff sub-heading 3808.10 and excisable thereunder - Whether in the form in which the said three products came into existence in the reaction process were capable of being marketed? Held that:- Though the intermediate goods so coming into existence may be specified in the Schedule as excisable they would not be subjected to duty unless they satisfy the test of marketability. In the case at hand the Collector (Appeals) has found that the abovesaid three intermediate products came into existence at a certain stage of a multiple stage integrated chemical process leading to the final products and therefore they could not be held to be goods as understood in commercial parlance because they were not marketable. The department had failed in showing if any facility existed for separation of the said three products and whether in the form in which the said three products came into existence in the reaction process were capable of being marketed. The finding of fact so arrived at has not been challenged much less dislodged before the Tribunal. The only argument advanced before the Tribunal was that the three items were mentioned as 'goods' in the dictionary and in the excise tariff and Mercuric Acetate (MA) was also mentioned as one of the items entitled to drawback in Duty Drawback Rules. The Tribunal has observed that these facts and mere mentioning of an item in Drawback Rules with reference to a different context was not enough to satisfy the test of marketability unless it was shown that the intermediate products were capable of being taken to market and bought and sold. No fault can be found with the view taken by the Tribunal. The appeals are devoid of any merit Issues:Manufacture of intermediate products liable to excise duty, Marketability of intermediate products for levy of excise duty.Analysis:The judgment revolves around the manufacturing process of certain intermediate products during the production of insecticides, fungicides, weedicides, and pesticides falling under a specific Tariff sub-heading. The Collector of Central Excise initially held these intermediate products liable for excise duty. However, the respondents appealed before the Collector (Appeals), who exonerated the products from the duty. Subsequently, the Revenue's appeals against this decision were dismissed by the CEGAT, leading to the appeals being filed in the Supreme Court.The Court reiterated that excise duty is levied on goods specified in the Schedule, with the taxable event being the manufacture of goods. For a product to be excisable, it must be marketable, even if not actually sold. The test of marketability is crucial, and intermediate products can be subject to excise duty if they meet this criterion. The judgment cited previous cases to emphasize that excise duty is linked to production for sale in the market, requiring the goods to be distinct commodities known for buying and selling.In this case, the Court examined whether the intermediate products in question were marketable. The Collector (Appeals) found that these products were part of an integrated chemical process and were not separable or capable of being marketed in their current form. The department failed to prove marketability, and the Tribunal upheld this finding. Mere mention of the products as 'goods' in dictionaries or tariff schedules was deemed insufficient to establish marketability. The Tribunal rightly concluded that for excisability, the products must be capable of being bought and sold in the market.Ultimately, the Court upheld the Tribunal's decision, stating that the intermediate products were not marketable and thus not liable for excise duty. The appeals were dismissed, emphasizing that the products did not meet the test of marketability required for excisability. The judgment did not award costs, as the appeals lacked merit.In conclusion, the judgment clarifies the criteria for excisability based on marketability of goods and highlights the importance of proving marketability for intermediate products to be subject to excise duty.