Polyester cotton rove twisted yarn not marketable goods, excise duty demand set aside under Section 11AC

CESTAT Chennai held that polyester/cotton rove twisted yarn and nylon/cotton rove twisted yarn are not marketable goods as they are unavailable in open market and cannot be sold if manufactured in excess or purchased if in shortage. Following SC precedent in CIMMCO BIRLA LTD., the burden lies on department to prove marketability for excise duty liability. Since goods are not marketable, they do not qualify as excisable goods, rendering classification issue irrelevant. Duty demand was set aside. Penalty under Section 11AC was also set aside as no proposal existed in show cause notice and dispute was interpretational in nature. Appeal allowed.

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Issues Involved:
1. Marketability of intermediate products.
2. Classification of intermediate products.
3. Demand of duty and imposition of penalty.
4. Appropriation of sanctioned rebate amount.

Summary:

1. Marketability of Intermediate Products:
The primary issue was whether the intermediate products, namely polyester cotton rove twisted yarn and nylon cotton rove twisted yarn, were marketable. The Tribunal emphasized that the issue of classification would only be relevant if the goods were marketable. The adjudicating authority and Commissioner (Appeals) failed to provide evidence proving marketability, merely relying on various judgments. The appellant argued that these goods were never sold and were only used captively. The Tribunal concluded that the goods were not marketable, referencing several cases, including Cimmco Birla Ltd. Vs. Commissioner of Central Excise, Jaipur and Macro Print Engineers (India) P Ltd. Vs. Commissioner of C. Ex., & S.T., Coimbatore, which established that goods must meet the twin tests of manufacture and marketability to be excisable.

2. Classification of Intermediate Products:
Given the finding that the goods were not marketable, the Tribunal held that the issue of classification was irrelevant. Since the goods were not marketable, they did not qualify as excisable goods, and thus, the demand for duty could not be sustained.

3. Demand of Duty and Imposition of Penalty:
The demand for duty and the imposition of an equal penalty u/s 11 AC were set aside. The Tribunal noted that the show cause notice did not propose a penalty and that the dispute was interpretative in nature, relating to the classification of the goods. Consequently, the imposition of the penalty was deemed unwarranted.

4. Appropriation of Sanctioned Rebate Amount:
The appellant's rebate claims, which were sanctioned but appropriated towards the pending arrears, were also addressed. Since the Tribunal set aside the demand of duty and penalty, the appropriation of the rebate amount was deemed unsustainable.

Conclusion:
The appeals were allowed with consequential reliefs, and the orders confirming the demand of duty, imposition of penalty, and appropriation of the rebate amount were set aside.

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