2003 (4) TMI 98 - SC - Central Excise

Twin tests of manufacture and marketability required to tax goods; tariff listing alone insufficient, burden on revenue prevents double taxation

SC held that the twin tests of manufacture and marketability remain essential to determine excisability; mere inclusion of a product in a tariff entry ... Manufacture - Spent earth - applicability of the twin tests of 'manufacture and marketability' in determining excisability - whether a goods becomes excisable merely because it falls within a tariff item - Held that:- In the case of B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise [1995 (5) TMI 98 - SUPREME COURT], it has also been held that merely because there is a change in the Tariff Item the goods does not become excisable. Subsequently in a judgment [2003 (2) TMI 65 - SUPREME COURT], it has been held that merely because an item falls in a Tariff Entry, it does not become excisable unless there is manufacture and the goods is marketable. In Lal Woollen & Silk Mills' case [1999 (4) TMI 78 - SUPREME COURT], it has not been held that the twin test of manufacture and marketability is not to apply. It is not possible to accept the contention that merely because an item falls in a Tariff Entry it must be deemed that there is manufacture. The law still remains that the burden to prove that there is manufacture and that what is manufactured is on the revenue. In this case no new evidence is placed to show that there is manufacture. 'Spent earth' was 'earth' on which duty has been paid. It remains earth even after the processing. Thus if duty was to be levied on it again, it would amount to levying double duty on the same product - Decided against Revenue. Issues:1. Whether 'spent earth' is liable to excise duty post the 1985 Tariff amendment.2. Whether a good becomes excisable solely by falling within a tariff item.3. The applicability of the twin tests of 'manufacture and marketability' in determining excisability.4. The impact of specific tariff entries on the excisability of goods.Analysis:1. The primary issue in this case revolves around the excisability of 'spent earth' post the 1985 Tariff amendment. The conflict arose due to differing interpretations by various benches of the Tribunal. The Larger Bench of the CEGAT held that 'spent earth' was not dutiable, leading to the appeals before the Supreme Court.2. The Court focused on whether a good automatically becomes excisable by being included in a tariff item. The argument presented was that since 'spent earth' falls under a specific entry, it should be considered excisable. However, the Court emphasized the importance of the twin tests of 'manufacture and marketability' in determining excisability, irrespective of tariff classification.3. Prior to the 1985 Tariff amendment, it was consistently held that 'spent earth' did not undergo a transformation amounting to manufacture. The Court reiterated that the mere presence of a specific tariff entry does not eliminate the requirement to prove manufacture and marketability. It was emphasized that duty should not be levied twice on the same product.4. The Court referred to precedents to support its stance, highlighting that the mere inclusion of an item in a tariff entry does not automatically render it excisable. The burden of proof regarding manufacture lies with the revenue authority. The judgment dismissed the appeals, upholding the decision that 'spent earth' remains non-dutiable. The Court emphasized the need for evidence demonstrating a change in the nature of the product to justify excisability.