2001 (7) TMI 566 - AT - Central Excise

Tribunal rules rubberised cotton fabrics not subject to excise duty

COMMR. OF C. EX., CHANDIGARH Versus SUB-MOUNT FOOTWEAR PVT. LTD.

COMMR. OF C. EX., CHANDIGARH Versus SUB-MOUNT FOOTWEAR PVT. LTD. - 2001 (135) E.L.T. 1080 (Tri. - Del) Issues Involved:1. Classification and marketability of 'Rubberised Cotton Fabrics'2. Exemption under Notification No. 217/863. Time-bar and suppression of facts4. Imposition of duty and penaltyIssue-Wise Detailed Analysis:1. Classification and Marketability of 'Rubberised Cotton Fabrics':The appellants manufacture Hawai Chappals and Canvas Shoes, and in the process, 'Rubberised Cotton Fabrics' emerge, which are captively consumed. The core question was whether these fabrics are marketable commodities and thereby liable to duty under Section 3 of the Central Excise Act, 1944. The Commissioner (Appeals) observed that the test of marketability is essential to determine if the intermediate product is dutiable. The Tribunal referred to the decision in CCE v. Sagnay Rubber Products, which held that rubber cotton fabrics/friction cloth captively used in manufacturing belts had no marketability and were not liable to excise duty. The Department failed to provide evidence that the rubberised textile fabrics were marketed. The Tribunal reiterated that for an article to be 'goods' under excise law, it must be capable of being bought and sold in the market, as established in the Supreme Court's decision in Union of India & Another v. Delhi Cloth & General Mills Ltd.2. Exemption under Notification No. 217/86:The appellants claimed exemption under Notification No. 217/86, dated 2-4-1986, which exempts captively consumed goods from duty unless the final product is not subject to duty. Since the final product, canvas shoes, were exempt from duty, the rubberised cotton fabrics were liable to duty. The Tribunal, however, focused on the marketability aspect to determine the excisability of the intermediate product rather than the exemption notification directly.3. Time-bar and Suppression of Facts:The show cause notice issued by the Collector of Central Excise alleged that the appellants suppressed the fact of manufacture and clearance of rubberised fabrics, invoking the extended period of limitation under the proviso to Section 11A of the Central Excise Act, 1944. The appellants contested the notice on merit and time-bar grounds. However, the Tribunal's decision did not specifically address the time-bar issue, focusing instead on the marketability of the intermediate product.4. Imposition of Duty and Penalty:The Deputy Commissioner confirmed the demand of Rs. 2,98,959/- and imposed a penalty of Rs. 20,000/-. The Commissioner (Appeals) set aside this order, leading to the Revenue's appeal. The Tribunal held that the Revenue failed to prove the marketability of the rubberised cotton fabrics, which is a prerequisite for imposing duty. The Tribunal emphasized that the burden of proving marketability lies with the Department, which they failed to discharge. Consequently, the Tribunal rejected the Revenue's appeal and upheld the Commissioner (Appeals)'s decision, thereby nullifying the duty and penalty imposed.Conclusion:The Tribunal concluded that the rubberised cotton fabrics, emerging as an intermediate product in the manufacture of canvas shoes, were not marketable commodities. Therefore, they were not liable to excise duty under Section 3 of the Central Excise Act, 1944. The Revenue's appeal was dismissed, and the cross-objections filed by the respondents were also disposed of accordingly.