TaxTMI 
TaxTMI 
2001 (12) TMI 664
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....The duty has been confirmed by treating the said intermediate product as double textured rubberised fabric and by classifying the same under Heading 59.05 of the Central Excise Tariff. 2. As per the Revenue inasmuch as the said intermediate excisable product was captively used by the appellant in the manufacture of exempted footwear, the exemption under the provision of Notification No. 217/86-C.E., dt. 2-4-1986 was not available. The demand has been raised only up to 6-12-1994 as a specific Notification No. 143/94, dt. 7-12-1994 granting exemption to rubberised textile fabrics falling under Heading 59.05, if captively used for manufacture of exempted footwear was issued. 3. Shri S.K. Bagaria, learned Advocate appearing for the appellant submits that for the manufacture of rubber canvas footwear the appellant buys fully manufactured fabric, rubbers and chemicals from the market. Rubbers and chemicals are mixed in mixtures. The mixture is warmed at a temperature of 70°C to 80°C immediately before use. This wormed and sticky mixture is put on to three bowl calendering machine where it passes through upper two rollers so as to facilitate its simultaneous spread....
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....r inside the vulcansing chambers. 3.2 Based upon the above facts, it is the submission of the learned Advocate that in view of the short shelf life and in view of the raw, crude and elementary condition of the product, it is not possible or feasible to sell or market the said fabrics. He submits that the appellant had produced a number of evidences in the shape of experts' opinion before the adjudicating authority to stress upon their plea that the product as emerging in their factory is not marketable. He drew the attention of the Bench to the following experts' opinion :- (a) Certificate dt. 13-2-1994 from Footwear Design & Development Institute, Ministry of Commerce, Government of India. (b) Affidavit of well-known Rubber & Plastic Technologist, Mr. Somnath Chakravarty, M.Sc., Ph. D., FPRI, FICS FIC. (c) Affidavit of Mr. Parvati Pada Mukherjee, Rubber & Plastic Technologist and having experience of about 50 years in Rubber & Plastic Industry. (d) Affidavit of Mr. Maharaj Krishan Khanna, the appellant's Production Manager. Shri Bagaria submits that as again....
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....e subject in support of his arguments that vulcanization is necessary to give stability and resultant marketability to the product. It would be beneficial to reproduce from the various books, as quoted by the learned Advocate at this stage. (a) The Vanderbilt Rubber Handbook published by P.T. Vanderbit Company Inc. Norwalk "All of the processed elastomer coated fabric, to be made into a finished material, must go through the cycle of curing. The vulcanisation is necessary to give the proper physical properties to the rubber compound. Curing, or vulcanising, is generally accomplished by festooning in a dry heat chamber under specific conditions of time of temperature. These conditions are adjusted to the rubber compound and the specific requirements of the finished goods." (Pg. 5 of Suppl. P.B.) (b) Concise Encyclopaedia of Polymer Science and Engineering : "Useful rubber articles, such as tyres and mechanical goods, cannot be made without vulcanization. Unvulcanised rubber is generally not very strong, does not maintain its shape after large deformation, and can be very sticky; it has about the same consistency as chewing ....
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....23-7-1979 appearing at pages 315 to 330 of the Paperbook has held that the cotton fabrics impregnated with soft rubber compound and in unvulcanised condition are not marketable. Similarly the Hon'ble High Court at Delhi vide its order dt. 20-8-1973 in CW No. 606/70 appearing at pages 331 to 334 of the appellants' paperbook has directed the Union of India to refund the amount collected by the Revenue as Central Excise duty in respect of friction cloth used in the process of manufacture of footwear inasmuch as the matter was not opposed by the excise authorities. 3.6 Shri Bagaria also relied upon the following judgments in support of his contention that the unvulcanised fabrics quoted with rubber compound emerging at an intermediate stage cannot be held to be dutiable. (i) 1997 (89) E.L.T. 538 - CCE v. National Insulated Cable Co. (I) Ltd. (ii) 1990 (50) E.L.T. 10 - BMF Beltings Ltd. v. UOI (iii) 1987 (31) E.L.T. 671 - Brammer V. Link Belling (I) Ltd. v. ACCE (iv) 1993 (67) E.L.T. 140 - CCE v. Bharat Electronics & Plastics (v) 2000 (120) E.L.T. 28 (....
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....ch the observations of the adjudi­cating authority that the Calcutta High Court's order stands confirmed by the Hon'ble Supreme Court is not correct inasmuch as there was no view expressed by the Hon'ble Supreme Court on the excisability of the product. 3.9 Shri Bagaria also submitted that the benefit of exemption Notification No. 5/87-C.E., in respect of Gussed brand of footwear was denied by the adjudicating authority in a most arbitrary manner by alleging that there is a serious doubt, whether in the said rubberised fabrics, the rubber content pre-dominated by weight. He submits that the appellant had filed copies of production guides relating to the said footwear, copies of quality specification, copies of certificates from the suppliers of the fabrics, copies of costs cards, copies of daily production report, etc., to show that so called rubberised textile fabric prepared for being used in manufacture of Gussed brand of footwear never exceeded more than 500 gms., per square metre in weight and rubber always pre-dominated by weight in the said fabrics. They also made submission as regards the report of chemical examiner and filed an affidavit of Shri M.K. Khanna. In....
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....sioner, after seeing the sample, found that the impugned goods appeared very stable and there was nothing unstable, transient about the goods. (The sample of the goods being used are enclosed herewith. The sample produced before Commissioner during adjudication proceedings is also enclosed). It is also pointed out that vulcanization as a chemical process is only associated with rubber compound and has nothing to do with fabrics. SHORT SHELF LIFE : One of the pleas advanced by the appellant is that the product has a short shelf life and, therefore, cannot be called goods. It may be seen that even by party's own admission these goods were capable of being stored for a period of two to four weeks, two weeks during summer and four weeks during winter. Periods of two weeks and four weeks cannot be considered to be short shelf life. It is also admitted fact that the goods were taken out of the appellants' factory to job workers for stitching, etc. Some of the important decisions of Tribunals on this topic are worth mention - In the case of M/s. Indian Oxygen Ltd. v. CCE, Bhubaneshwar reported in 1997 (89) E.L.T. 557 (T), it was held in Para 2.4 that a short shelf life was immate....
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....s concerned." From the above it is clear that the product in dispute does not have very short shelf life so as to be taken out of the category of goods. It has a reasonably long shelf life. If kept in a cold storage or similar other place, it can be stored for long period of time. It can be taken outside the factory for further processing like cutting, stitching, etc. EMERGENCE OF NEW PRODUCT : It has been held time and again by Supreme Court and other judicial authority that what is necessary for the process of manufacture is emergence of a new product. Admittedly the inputs here are textile fabrics having sandwich of rubber compound and mixtures in between. The said lamination is passed between roller heated at 70 degree to 80 degree C. What emerges out of the roller is rubberized fabrics having rubber between two layers of textiles. The inputs and outputs are entirely different things. The commodity that emerges is a distinct commodity having its own identity, name and specific use and is totally different from the raw materials. The excisability of such fabrics is, therefore, in no doubt. MARKETABILITY : It has been held that marketability is a must for anything ....
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.... Strangely the appellants have also alleged violation of natural justice on this count which appears rather far-fetched. CLAIM OF EXEMPTION UNDER 5/87-C.E. : Internal document referred to by the party will have no relevance in view of clear test report of the chemical examiner. It may be seen that the test report in respect of "gusset" brand of footwear can be seen on pages 163, 171, 179, 187 of the main paperbook. It may be seen that in all the test report it is clear that there is a predominance of textiles. There was no justification for granting the benefit of that notification as rubber was not predominating. CLASSIFICATION : Once it is established that the impugned item is "goods", the same is to be classified under the Central Excise Tariff. The best possible classification occurs under the sub-heading 5905.10 of the CETA, 1985. LIMITATION : This is a fit case for invocation of proviso to Section 11A of the Central Excise Act. Even though there was a specific High Court judgment of Hon'ble High Court of Calcutta the party did not declare manufacture of these rubberized fabrics in their statutory record or declaration. Some of the relevant case laws on the s....
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....he process of manufacture as detailed by them has not been rebutted by the learned SDR. 6. We have considered the submissions made from both the sides and have gone through the impugned order-in-original. 7. The issue required to be decided in the present appeal is as to whether the unvulcanised sandwiched fabric assembly produced in the appellants' factory and captively consumed by them can be called as 'goods' and can be classified as rubberised cotton fabrics falling under Chapter 59 of CETA, 1985. The sum and substance of the appellants' submission is that the said item come into existence at an intermediate stage and being in unvulcanised stage and having short shelf life is incapable of being marketed. For this proposition, the appellants have referred to a number of decisions of the Tribunal, various High Courts as also of the Hon'ble Supreme Court. However, we find that as against the said decisions the adjudicating authority has relied upon Calcutta High Court's decision in the appellants' own case as confirmed by the Hon'ble Supreme Court inasmuch as the appeal filed by M/s. Bata India against the said decision of the Hon'ble High Court, as reported in 199....
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....s such we find that the reliance on the same by the adjudicating authority is not appropriate. 9. As against the above decision the appellants have referred to a number of other decisions. We will discuss the same in the succeeding paragraphs. It is seen that right from the beginning it has been the appellants' stand that the so called in-process material emerging at an intermediate stage is not marketable commodity inasmuch as the same is incapable of being ordinarily brought to the market on account of its short shelf life. This stand of the appellant has not been rebutted by the Revenue by producing any evidence on record to show that the goods in question are capable of being marketed. On the other hand we find that the Commis­sioner has relied upon the fact that such rubberised fabrics are being sent by the appellant to their job workers for further stitching, which fact proves the marketability of the goods in question. The appellants have explained that the shelf life of the so called rubberised fabric varies from 7 days to 4 weeks depending upon the weather conditions and keeping this view in mind they always chose their job workers which are situated nearby. Fo....
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....ith rubber solution and vulcanised and cured after being wrapped around cables cannot be held to be dutiable. 12. In the case of CCE, Delhi v. K.K. Rubber Co. Pvt. Ltd. - 1998 (103) E.L.T. 652 (T), rubberised cotton fabrics called friction cloth captively con­sumed in manufacture of transmission belting and having no market were held not liable to excise duty. 13. In BMF Beltings Ltd. v. Union of India - 1990 (50) E.L.T. 10 (A.P.), the Hon'ble Andhra Pradesh High Court has observed that if the product in question is not generally marketed and is not known in the market as a product by itself which can be bought and sold across the counter in the open market then it does not come within the category of the 'goods' as envisaged under Section 3. By observing so the Hon'ble High Court has held that the unvulcanised friction cloth used in manufacture of belts not capable of being generally marketed cannot be held to be goods. 14. The Hon'ble Bombay High Court in the case of Brammer V. Link Belting India Ltd. and Another - 1987 (31) E.L.T. 671 (Bom.) has held that application of rubber compound to cotton fabrics is only an intermediate stage and does not amoun....
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....anufacture of rubber belts was held to be non-excisable inasmuch as no evidence relating to market­ability of the same was produced by the Revenue. 19. The appellants have further relied upon the Tribunal's order in the case of CCE, Madurai v. Saghay Rubber Products, 1999 (84) ECR 446 (T), holding rubberised cotton fabrics arising at an intermediate stage as not liable to duty on account of its non-marketability. 20. We also take note of the Hon'ble Supreme Court's decision in the case of CCE, Baroda v. United Phosphorous Ltd. - 2000 (117) E.L.T. 529 (S.C.). By taking note of the earlier decisions of the Apex Court in the case of Bhor Indus. Ltd. - 1989 (40) E.L.T. 280 (S.C.); Ambalal Sarabhai Enterprises - 1989 (43) E.L.T. 214 (S.C.); Moti Laminates Pvt. Ltd. - 1995 (76) E.L.T. 241 (S.C.), it has been held that no product is goods unless shown to be marketable by the department. Mere specification in the dictionary or Central Excise Tariff and draw back rate schedule is of no consequence. The Hon'ble Supreme Court in the case of Nirlon Synthetic Fabrics Ltd. - 1996 (86) E.L.T. 457 (S.C.) has again stressed the criteria of marketability of a product for its duti....
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.... material on record that suggests that a small-scale or medium scale manufac­turer of brake linings and clutch facings would be interested in buying the said rings or that they are marketable at all. As to the brittleness of the said rings, it was for the Revenue to demonstrate that the appellant's averment in this behalf was incorrect and not for the Tribunal to assess their brittleness for itself. Articles in question in appeal are shown to the Tribunal to enable the Tribunal to comprehend what it is that it is dealing with. It is not an invitation to the Tribunal to give its opinion thereon, brushing aside the evidence before it. The technical knowledge of the Members of the Tribunal makes for better appreciation of the record and not its substitution." As such in the absence of any evidence by the Revenue, the observations of the Commissioner that he has seen the product and his findings based upon the same are not relevant, especially when the appellants have produced on record the technical evidence and the expert opinions to show that the goods are not marketable on account of their instability. The evidences produced by the appellant by the experts relating to market....
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....as in the instant case we have already given a finding about the failure of the Revenue to produce any evidence about the marketability of the product in question as against the appellants' clear and definite stand, the goods have to be held as non-excisable. We order accordingly. 23. Inasmuch as the issue on merits has been decided in favour of the appellants we are not giving any findings on the alternative issues of applicability of notification or on the point of limitation. Sd/- (Archana Wadhwa) Member (Judicial) 24. [Order per : Lajja Ram, Member (T)]. - With due respects to the Member (Judicial), I record separate order as under - The facts of the case and the submissions made by both the sides, have been summarised in the order proposed by the Member (Judicial) and are not being repeated. 25. The issue for consideration in this appeal filed by M/s. Bata India Ltd. (hereinafter referred to as 'M/s. Bata'), is the dutiability and marketability of the product referred to in the show cause notice dated 29-3-1995, as double textured fabric (para 17) and in the show cause notice dated 30-3-1995 as rubberised fabric....
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....reign brands, the uppers are regularly imported in the country. The rubberised cotton fabrics out of which the uppers are cut is a known commodity for the purpose of Central Excise. Under Notification No. 5/87-C.E., dt. 15-1-1987, rubberised textile fabrics fall under Heading No. 59.05 of the Central Excise Tariff which did not weigh more than 1500 grams per square metre and in which rubber predominated by weight, enjoyed exemption from Central Excise duty. This exemption remained valid up to 28-2-1994 when it was rescinded vide Serial No. 167 of Notification No. 64/94-C.E., dated 1-3-1994. Under Notification No. 143/94-C.E., dated 7-12-1994 rubberised textile fabrics falling under Heading No. 59.05 of the Central Excise Tariff, if used in the factory of their production for the manufacture of exempted footwear falling under Chapter 64 of the Central Excise Tariff, were provided exemp­tion from duty. It is clear from this exemption notification that the rubberised textile fabrics are used for the manufacture of footwear. Earlier there was no exemption for such rubberised textile fabrics when they were used in the factory of their production for the manufacture of exempted fo....
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....hing and cutting as identifiable parts of the footwear. The characteristics of the rubberised textile fabrics falling under Heading No. 58.05 of the Central Excise Tariff as it existed during the relevant period have been discussed in the Board's letter No. 59/1/87-CX.1, dated 2-6-1987 as under - FRICTION CLOTH (CHAPTER 40 OR 59) The question of the classification of Friction Cloth under the new Central Excise Tariff has been examined by the Board in consultation with the Chief Chemist. In terms of Chapter Note 3 to Chapter 59 of the Tariff, there are two conditions for classification of the product under sub-heading 5905.10 which applies to rubberised textile fabrics other than those of Heading No. 59.02. It is required under the said Chapter Note that the textile fabrics coated with rubber (i) should weigh below 1500 grams per square metre, or (ii) when it weighs more, should contain more than 50% by weight of textile material. In this view of the matter, such friction cloth would fall under Heading 59.05 except for such cloth in which the sheet material weighs more than 15 grams per square metre but contains less than 50% by weight of textile material. This particular c....
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....irreversible process during which a rubber compound, through a change in its chemical structure (e.g. cross-linking) becomes less plastic and more resistant to swelling by organic liquids, and elastic properties are conferred, improved or extended over a greater range of temperature. It is seen from the technical literature on record (refer page 7) of the order proposed by the learned Member (Judicial) that the vulcanization is a process to give the proper physical properties to the rubber compound and to make useful rubber articles. Thus, this process is applied either at the stage of rubber or at the stage of rubber articles. This process could not be relevant for the stage of production of rubberised textile fabrics which use rubber, and are usable in the manufacture of footwear. It is only at the stage of footwear that vulcanization may be relevant, and not at the stage of production of rubberised textile fabrics. 34. The Central Excise Tariff relating to textile fabrics is a multi stage tariff. Duties are levied at different stages. Under Chapter 59 of the Tariff, impregnated, coated, covered or laminated textile fabrics were classified. This duty was separate and i....
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....ed fabrics in process which were rubberised textured fabrics for the purpose of Central Excise Tariff were correctly classifiable under Heading No. 59.05 of the Central Excise Tariff as in force during the relevant time. The appellants in that case, as in the present case, were buying base fabric from outside sources. Such fabrics in that case were being coated with rubber in the calendering machine. The rubber content predominated in weight of such clandered fabric and the fabric was said to be unvulcanised. In the present case also, almost similar process was being adopted [refer para 3 of the order proposed by the learned Member (J)]. 37. It is seen that the matter is entirely covered by the Calcutta High Court decision in the case of Union of India v. Bata India Ltd. - 1993 (68) E.L.T. 756 (Cal.). The issue for consideration was, whether the goods produced and named as herefit sheets, thermoplastic sheets and celluloid sheets from cotton and silk fabrics for use in footwear amounted to manufacture to attract excise duty under Item Nos. 19 and 22 of the erstwhile Central Excise Tariff. The High Court framed the question for their consideration in para 5 as "Whether the r....
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....ed as under - "The decision on the merits against the respondent renders the question on limitation unnecessary and does not call for determination." When a harmonised reading is given to the judgment, the matter had been squarely and unequivocally decided against M/s. Bata. Thus, the observations of the learned Member (Judicial) that reliance on the judgment by the adjudicating authority was not appropriate, do not flow from the ratio of the said decision of the High Court. The Hon'ble Supreme Court had dismissed the SLP filed by M/s. Bata and thus the decision of the High Court has become final and this Tribunal cannot go against the ratio of the said decision. In the Court Room Highlights, in 1993 (68) E.L.T. A158, the position has been reported as under - "Intermediate products also excisable but dutiable goods must be marketable - Actual sale not necessary - Civil suit no bar in excise cases The Supreme Court Bench comprising of Hon'ble Mr. Justice J.S. Verma and Hon'ble Mr. Justice S.P. Bharucha on 24-9-1993 has dismissed the Special Leave Petition S.L.P. (C) No. 6164 of 1993 filed by M/s. Bata India Ltd. against the judgment and order dated 12th January, 1993,....
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.... of footwear and different manufacturers do not undertake all the processes of manufacture. There is a market for different parts and even when the goods are sold under a single brand name, there are different manufacturers of parts, and the various parts are transmitted to the units undertaking the finishing of the footwear. In the case of footwear, rubber textile fabric was not a continuous stage of manufacture but was an independent process which all the manufacturers of footwear may not be undertaking as has been observed by the Calcutta High Court in the appellants' own case as referred to above. Thus, the various decisions discussed in paras 11 to 22 relating to other products, such as, rubber belting (etc.) are not applicable to the facts and circumstances of the present case. 42. On careful consideration of the matter, I find no merit in this appeal filed by M/s. Bata (India) Ltd., and the same is rejected. Sd/- (Lajja Ram) Member (Technical) DIFFERENCE OF OPINION In view of the difference of opinion between Member (Judicial) and Member (Technical), the matter is placed before the Hon'ble President for reference to the Th....
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....the so called rubber textile fabrics which is an intermediate in-process material prepared at their factory for manufacture of footwear and which remains only in unvulcanised, crude, unstable and elementary condition; that in fact such unvulcanised fabrics or the uppers cut therefrom are never traded, nor are capable of being traded nationally or internation­ally. He further mentioned that the learned Member (Tech.) has referred to the statement of Mr. Manhar Jagota, according to whom, the object of putting the mixture in between two textile fabrics was to generate tensile strength, elasticity, waterproofness and abrasion resistance; that full statement of Mr. Jagota should have been referred to, as in the same statement he had clearly deposed that the shoe was vulcanized in vulcanizing chamber and without vulcanization process, it was completely useless inasmuch as rubber mixture was in raw form. He, further, contended that the excisability of the product is to be decided on the basis and in the light of the evidence adduced by the parties and the issue could never be made clear by legal provisions as has been assumed by the learned Member (Technical); that the decision in the....
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....rocessed fabrics to the nearby workers for stitching purposes within their short shelf life of 10 days to 4 weeks; that final products were footwears and not the in-process material sent to job workers; that it is settled law that unless the test of marketability is satisfied, no duty can be levied. Reliance was placed on the decision in the case of Bhor Industries Ltd. v. CCE, 1989 (40) E.L.T. 280 (S.C.); Nirlon Synthetics and Chemicals Ltd. v. CCE - 1996 (86) E.L.T. 457, and Moti Laminates Pvt. Ltd. v. CCE - 1995 (76) E.L.T. 241 (S.C.). 46. Finally, learned Advocate mentioned that the issue involved is not covered by the decision of the Calcutta High Court as reported in 1993 (68) E.L.T. 756, read with Order dated 24-9-1993 of the Supreme Court as reported in 1993 (68) E.L.T. A158; that firstly, the said decision did not relate to the rubberized fabrics as it related to different products; that consequently, even though, several findings in the said judgment of the Calcutta High Court were against them, in the operative portion, the departmental appeal was dismissed; that they filed a Special Leave Petition in the Supreme Court which was pleased to take the view that sinc....
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.... Heading 5905.10 of the Schedule to the Central Excise Tariff Act. 48. We have considered the submissions of both the sides. As per provisions of Section 3 of the Central Excise Act, Central Excise duty is leviable on the goods manufactured in the country. The process of manufac­ture given by the learned Advocate shows that rubbers, chemicals, solvents, etc., are mixed in mixer and this mixture in warm and sticky condition is put onto three bowls calendering machine where it passes through upper two rollers so as to facilitate its simultaneous spreading in between two layers of fabrics. It is thus apparent that a new product emerges as a result of the process undertaken by the appellants irrespective of whatever the name is given to the product by the Department or the appellant. The test laid down by the Supreme Court in the case of Union of India v. DCM, 1977 (1) E.L.T. (J 199), is satisfied as a commercially different product having distinct name, character or use emerges as a result of the process undertaken by them. It is settled law that mere manufacture or mere mentioning of an item in the Central Excise Act is not sufficient to attract levy of excise duty. The p....
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....b workers who worked on the same and returned the same to the appellants. Similar views were held by the Tribunal in the case of Amara Raja Batteries case wherein three weeks shelf life was held to be sufficient to hold the goods liable to excise duty. In the said case, even the fact that the appellants were not selling them was held to be of no consequence so long as it could be shown the goods to have shelf life. Moreover, Division Bench of the Calcutta High Court in the case of appellants themselves as reported in 1993 (68) E.L.T. 756 (Calcutta) considered the excisability of goods namely herefit sheets, ther­moplastic sheets, and celluloid sheets. In the said matter, the processes undertaken were that cotton fabrics were treated in the stiffener solution and urea formaldehyde resin compounded with various other non-plastic ingredients like filter, oil and resin and dissolved in the water. The said solution was spread on the cotton fabrics. Some Cotton fabrics were treated with a solution of polystyrene compounded with plasticisers and other unsaturated elastomer dissolved in a blend of solvent and thereafter the compound or solution was spread on the cotton fabrics and drie....
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.... who cannot afford to have a large plant exclusively engaged in the production of these sheets shall be induced to buy such sheets." 50. I am of the view that ratio of this decision is squarely applicable to the facts of the present matter and the impugned order is capable of being marketed and as such is liable to Central Excise duty. In view of the Calcutta High Court decision in the appellants' own case, the decisions, relied upon by the learned Advocate for the appellant in support of his contention that unvulcanized fabrics is not chargeable to duty, are not relevant for the decision. Similarly, the Calcutta High Court decision of 1979 relied by the learned Advocate was delivered by single judge whereas the decision relied upon by the Revenue is delivered by the Division Bench. Similarly, the Delhi High Court decision, which was followed by the Calcutta High Court in its Order dated 23-7-1979 was also delivered by single judge. The learned Advocate also placed reliance in the case of K.K. Rubber Company Pvt. Ltd. - 2000 (120) E.L.T. 28 (S.C.) = 2000 (39) RLT 895 (SC). A perusal of the judgment reveals that the Supreme Court remanded the matter to the Tribunal for decis....