2002 (9) TMI 104 - SC - Central Excise

Excise duty on mosquito repellent plastic bodies and fragrant mats hinges on marketability and tariff classification; duty demand rejected.

Excise duty on the plastic body of an electro mosquito repellent depended on whether it qualified as 'goods' under the Central Excise Tariff, requiring ... Marketability as an essential attribute of 'goods' under the Central Excise Tariff - exemption of finished product and liability of parts under Notification No. 160/86-C.E. (clauses 5(d) and 5(f)) - classification of preparations akin to 'Agarbatti' and 'Dhoop' - classification of Fragrant Mat under Sub-Heading 3307.41Marketability as an essential attribute of 'goods' under the Central Excise Tariff - exemption of finished product and liability of parts under Notification No. 160/86-C.E. (clauses 5(d) and 5(f)) - Plastic body of Electro Mosquito Repellant is not 'goods' liable to excise as a 'part' under clause 5(f) of Notification No. 160/86-C.E. - HELD THAT: - The Court applied the twin requirements of 'goods' under the Tariff Act - manufacture and marketability. There was no dispute as to manufacture, but the determinative question was marketability. Relying on the principles in A.P. State Electricity Board v. Collector of Central Excise (summarised in the judgment), marketability is essentially a question of fact and depends on whether the manufactured article has a commercial identity known to the market for being bought and sold. The plastic body was produced to suit the respondents' own EMR design, was not a standardised or commercially recognised item, was not available in the market for purchase or replacement, and was made for captive consumption. For these reasons it lacked the requisite marketability and therefore did not qualify as 'goods' for the purpose of imposing excise duty on 'parts' under the Notification. [Paras 7, 8, 9]The plastic body is not 'goods' within the meaning of the Tariff Act and is not liable to excise duty as a part under clause 5(f) of the exemption notification.Classification of preparations akin to 'Agarbatti' and 'Dhoop' - classification of Fragrant Mat under Sub-Heading 3307.41 - Fragrant Mat is classifiable under Sub-Heading 3307.41 (including 'Agarbatti', 'Dhoop' and similar preparations) and not under Sub-Heading 3307.49. - HELD THAT: - The Court examined the nature and process of manufacture of the Fragrant Mat as described by the respondents and concluded that the Mat, though in a different form, is similar to 'Agarbatti' and 'Dhoop' in that it produces vapour on burning and spreads perfume. Sub-Heading 3307.41 covers not only agarbatti and dhoop but preparations akin to them 'in whatever form'. The Revenue's contention that a Mat cannot be equated with agarbatti or used for religious rites did not negate the classificatory test of similarity in form and function. On the facts and description of the product, the Fragrant Mat falls within Sub-Heading 3307.41. [Paras 10, 11, 12, 13]Fragrant Mat is classifiable under Sub-Heading 3307.41 and not under Sub-Heading 3307.49.Final Conclusion: The appeals are dismissed; the High Court's quashing of the show cause notices insofar as the plastic body is concerned is affirmed and the Fragrant Mat is held classifiable under Sub-Heading 3307.41; no order as to costs. Issues:1. Whether plastic body and Fragrant Mat are chargeable to excise duty under specific clauses of the Central Excise Tariff Act, 1985.Analysis:1. The case revolved around the chargeability of excise duty on the plastic body of Electro Mosquito Repellant (EMR) and the Fragrant Mat under relevant clauses of the Central Excise Tariff Act, 1985. The High Court held that the plastic body is not considered 'goods' under the Tariff Act and therefore not liable to excise duty. Similarly, the Fragrant Mat was disputed for classification under Sub-Heading 3307.49, with the Revenue arguing against it being classified as 'Agarbatti' or 'Dhoop' under Sub-Heading 3307.41.2. The plastic body issue was debated based on its marketability. The plastic body was manufactured specifically for the EMR and not traded in the market independently, leading to the argument that it lacks commercial identity and marketability. The Supreme Court referred to precedents emphasizing that marketability is a crucial factor for determining the liability to excise duty, and in this case, the plastic body did not meet the criteria for being considered 'goods' under the Tariff Act.3. Regarding the Fragrant Mat classification, the Court analyzed the process of its preparation provided by the respondents. The preparation method indicated similarities to 'Agarbatti' and 'Dhoop', falling under Sub-Heading 3307.41. The Court concluded that the Fragrant Mat's manufacturing process aligned with the characteristics of 'Agarbatti', warranting its classification under Sub-Heading 3307.41 instead of 3307.49.4. Ultimately, the Supreme Court dismissed the appeals, upholding the High Court's decision and finding no illegality in the orders under challenge. The judgment clarified the classification and liability to excise duty for the plastic body and Fragrant Mat, providing a detailed analysis based on the relevant clauses and precedents.