TaxTMI 
TaxTMI 
2001 (12) TMI 892
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....aid 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-CE, dt. 2.4.1986 was not available. The demand has been raised only upto 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 700C to 800C immediately before use. This wormed and sticky mixture is put on to three brown calendaring machine where it passes through upper two rollers so as to facilitate its simultaneous spreading in between two layers of fabric. In this way the fabrics get sandwitched with the mixed material. According to the learned Advocate the product is never vulcanised and is in raw crude and elementary stage. In the said stage the fabrics and rubb....
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....l 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 against the above evidence adduced by the appellant, the department has not produced any evidence to show the marketability of the product in question. He submits that the appellant having taken a definite stand right from the beginning about the non-marketability of the product, the Revenue should have produced some evidence to count....
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.... All of the processed elastomer coated fabric, to be made into a finished material, must go through the cycle of curing. The vulcanization is necessary to give the proper physical properties to the rubber compound. Curing, or vulcanizing, 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 Encyclopedia of Polymer Science and Engineering: Useful rubber articles, such as tires and mechanical goods, cannot be made without vulcanisation. Unvulcanized 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 gum". (Pg. 7 of Suppl. P.B.) The term 'vulcanization' is generally applied to rubber or elastomeric materials. These materials forcibly retract approximately to their original shape after the large mechanically imposed deformation. Vulcanization can be defined as a process that increases the retractive force and reduces the amount of permanent defor....
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.... 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) National Insulated Cable Co. (I) Ltd.; (ii) BMF Beltings Ltd. v. Union of India, (iii) Brammer v. Link Belting (I) Ltd. v. ACCE; (iv) CCE v. Bharat Electronics & Plastics; (v) 2000 (39) RLT 895--CCE v. K.K. Rubber Co. Pvt. Ltd.; (vi) CCE v. United Phosphorus Ltd. (SC); (vii) Nirlon Synthetic Fibres & Chemicals v. CCE (SC); (viii) Moti Laminates Pvt. Ltd. v. CCE (SC); (ix) India Cable Co. Ltd. v. CCE (SC); (x) CCE v. Ambalal Sarabhai Enterprises (SC); (xi) 2000 (41) RLT 159--Freedom Rubber Ltd. v. CCE; (xii) Chloride Indus. Ltd. v. CCE; (xiii) Diamond Rubber Mills v. Suprnt. CE; (xiv) 1999 (33) RLT 143--CCE v. Asian Rubber & Plastics Indus.; (xv) 1999 (84) ECR 446--CCE v. Saghay Rubber Products. ....
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....ure 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. Khana. In case of doubt, a request was made for re-testing of the samples. All these factors were ignored by the Commissioner. 3.10 Shri Bagaria also assailed the order of the Commissioner on the point of limitation. He submits that the entire facts were known to the Revenue and there is no ground for invoking the longer period. He submits that the dispute about the fabric was going on before the various High Courts including the Hon'ble High Court of Calcutta who gave the verdicts in their favour and in such circumstances the Revenue cannot hold that the appellants suppressed any information from the department with an intention to evade duty. Reliance in this regard has been placed on number of decisions of the Hon'ble Supreme Court including the decision in the case of National Radio and Electronics Co. Ltd. 2000 (36) RLT 363. Imposition of penalty amount of Rs. 1 crore has also been challenged by the learned A....
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....e of the important decisions of Tribunals on this topic are worth mention: In the case of Indian Oxygen Ltd. v. CCE Bhuwneshwar 1997 (87) ELT 557 (T), it was held in para 2.4 that a short shelf life was immaterial. Para 2.4 is reproduced for ease of reference; "2.4 We have carefully considered the pleas advanced from both sides. We agree with the adjudicating authority that a product different from its inputs (Jute stick powder, bags and liquid oxygen), namely Liquid Oxygen Explosive (LOX) has come into existence. Therefore, manufacture of goods has taken place. The fact that the goods are actually being marketed as LOX is clearly on record in view of the invoices being issued by the appellants to that effect. In the face of this evidence, appellant's plea that the goods (LOX) have no shelf life is not material to the excisability of the goods. In the case of CEAT tyres, relied upon by the appellants, argument of 'dip solution' having no shelf-life was taken as indicative of non-marketable character of those goods i.e., 'dip solution' since there was no actual marketing of those goods and these were being used only captivity. In the present case, LOX is being....
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....s. The excisability of such fabrics is, therefore, in no doubt. MARKETABILITY It has been held that marketability is a must for anything to qualify as goods. Marketability does not imply the actual sale and purchase but ability of being bought and sold in market. The product in question is admittedly taken out for job work outside the factory. The same after job work is brought back by the appellant for further use. That in itself is a good proof about the marketability of the product. In case a canvas shoe manufacturer does not have the machinery for manufacture of this double textured fabrics, it can always buy their product from Bata or any other manufacturer. In view of that marketability of the product is established. NATURAL JUSTICE Appellants have alleged denial of natural justice on account of certain manufacturing details of these goods as described by the Commissioner in his order. They have specifically objected to the finding that a rubber sheet/strip emerges in the process which is mechanically placed between the two fabrics layers as according to them nothing of this sort happens at all. However, the production of the said double textured fabrics i.e. the ....
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....id not declare manufacture of these rubberized fabrics in their statutory record or declaration. Some of the relevant case laws on the subject are indicated below: 1. Century Cement v. CCE. 2. CCE v. Demons Pultro teknic. 3. S.P. Gupta & Sons v. Union of India. 4. Gujarat Ambuja v. CCE. 5. Leisure land Pvt. Ltd. v. CCE. 5. In their rejoinder, the appellants submit that the issue is not about vulcanisation of rubber but is as to whether any rubberised textile fabrics can be manufactured or come into existence as a commodity without vulcanisation. They submit that it is clear from the various technical books that without vulcanisation the product is not stable. He submits that the affidavits of the technical experts were given after thorough examination of the sample and the Commissioner was the adjudicating authority and not a technical expert or rubber technologist. As such there could be no scope for the Commissioner to decide about dutiability or marketability after seeing the sample on the basis of his own personal notions. Relying upon the Supreme Court's decision in the case of Hindustan Ferodo Ltd. v. CCE 1997 (89) ELT 16, h....
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....d decision of the Hon'ble Calcutta High Court. 8. The Hon'ble Calcutta High Court, on an appeal filed by Union of India against the order of the lower authorities held Here fit sheets, Thermo plastic sheets and Celluloid sheets made from cotton and silk fabrics for use in footwear, as excisable goods. It is seen on a reading of the said decision of the Calcutta High Court that though the observations as contained in the said judgment were against M/s. Bata India Ltd., the operative portion of the said decision rejected the appeal filed by the Revenue. Vide para 32 of the said judgment, the Hon'ble High Court has held that the three types of sheets are liable to levy of duty but in para 33 of the said judgment it was held--"accordingly the appeal fails". It may be clarified here that the appeal was filed by Union of India. The learned Commissioner in his impugned order has observed that M/s. Bala India Ltd. filed an appeal against the above order which was dismissed by the Hon'ble Supreme Court, as reported in Volume 68 of Excise Law Times at page A-158. The said report only reports about the dismissal of Special Leave Petition filed by M/s. Bata India Ltd., by th....
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....tly long shelf life so as to enable the same to come to the market for being bought and sold in the ordinary course of their business. It is well settled law that the onus to prove the marketability is upon the Revenue, who have failed to discharge the same in the instant case. 10. It is also seen that the appellants have strongly contended that the fabric in question after the mixture is spread on the same is not vulcanised, whereas the Commissioner has observed that the rubber mixture, before being spread on the fabric was vulcanised. Apart from the fact that this allegation was never made in the show cause notice so as to give an opportunity to the appellant to rebut the same, we find that the same is based upon the personal opinion of the adjudicating authority without the support of any technical literature or expert opinion as against the technical literature produced by the appellant and a definite stand taken by them that vulcanisation only takes place at the final stage of the complete footwear. It is seen that it is not the excisability of the rubber, which is in question. On the other hand, the product which is being sought to be charged to excise duty is the fabric d....
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....s rejected the enquiries made by the Inspector of Central Excise relating to marketability of vulcanised rubber which reveal that the product could be marketed, as here say evidence and without having any basis. 15. The Tribunal in the case of CCE v. Bharat Electronics and Plastics MANU/CE/0328/1992 has held that rubber quoted fabrics emerging an intermediate product in the course of manufacture of friction tapes obtained by quoting of grey cotton fabrics with rubber, but without any vulcanisation process, are not liable to duty being not marketable. 16. To the same effect is the decision of Eastern Bench of the Tribunal in the case of Chloride Indus. Ltd. v. CCE, Calcutta MANU/CK/0044/1996. By taking note of the various decisions of the Supreme Court that the burden to prove marketability of the goods is on the Revenue. The Tribunal has observed that there was utter lack of evidence from the department about the marketability of the goods on which the Revenue wants to levy the duty. 17. We find that the Hon'ble Allahabad High Court in the case of Diamond Rubber Ltd. v. Suprt. of Central Excise and Ors. MANU/UP/0226/1985has held that vulcanised sheets (rubberised cotto....
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....n Petroleum Corporation Ltd. v. Union of India MANU/SC/1971/1995, laying down that the burden is on the department to prove marketability of the product which they want to charge to duty. Duty not leviable if department fails to prove so. Similarly in the case of Union of India v. Darbare Nylons MANU/SC/0967/1996, the Hon'ble Apex Court has again held that burden of proof is on the taxing authorities to show that a particular item is taxable in the manner claimed by them. Mere assertion is of no avail. Taxing authorities to lay evidence especially when claim of the assessee supported by trade enquiries and the affidavits of the persons dealing with the subject goods. The gist of the decisions of the Hon'ble Supreme Court referred supra is that the capability of the product to be marketed is essential pre-condition of levying the same to duty of excise and the onus to prove so lies upon the Revenue. The appellants' definite stand right from the beginning has been that the said product on account of its short shelf life is not marketable. The Revenue has not produced any concrete and positive evidence to rebut the above stand of the appellant by showing that the produc....
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.... holding rubberised textile fabric or friction cloth as non-excisable relied upon the decision of the Punjab & Haryana High Court in the case of Punjab Rubber & Allied Indus. On an appeal filed by Union of India and others against the decision of the Punjab & Haryana High Court, the same was allowed by the Hon'ble Supreme Court as reported in 1997 (19) RLT 359 (SC). As such a doubt about the applicability of the earlier decisions of the Tribunal or of the various High Courts as regards the excisability of the friction cloth arose in our minds. However, we find that Subsequently the said decision in the case of Punjab Rubber & Allied Indus, was taken note of by the Hon'ble Supreme Court in another appeal of the Revenue in the case of CCE, Delhi v. K.K. Rubber Co. Pvt. Ltd. 2000 (120) ELT 28 (SC). It was observed by the Court that the decision of Punjab & Haryana High Court in the case of Punjab Rubber and Allied Indus., was reversed on the technical ground, namely, that in that case the High Court disposing the writ petition has wrongly assumed that no contention was raised by the department as to the marketability of the commodity and it was on that count the Supreme Court ....
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....e explained the process of manufacture as under-- The manufacturing process of combined/laminated fabric involves the preparation of a rubber compound by mixing inter alia rubber with various chemicals and solvent oils in a specific ratio in the power operated mixers and then this rubber compound known as friction mixture is applied through a three bowl calendering machine on two textile fabrics in running length so as to obtain laminated/combined fabric which are simultaneously stuck together in the same machine resulting in a thin layer of rubber mixture sandwitched between the two fabrics", (refer page 114 of the paper book). 26. It was described that the above process generated tensile strength, elasticity, waterproofness and abrasion resistance to the product. It was for making the uppers for canvas shoes. The product so obtained was cut into required shape and sizes which were stitched to obtain the uppers (refer page 115 of the paper book). 27. About shelf life, the Manager--Supply & Transport had stated as under-- The said upper material is stable enough to have a shelf life of maximum four weeks", (refer page 115 of the paper book). 28. The material so obtai....
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....were used for the manufacture of footwear which were exempted from the whole of the duty of excise leviable thereon or were chargeable to nil rate of excise duty. 31. The main argument of M/s. Bata in contesting the levy and the proposal to impose penalty was that the goods in question held to be classifiable as rubberised waterproof fabric, were not a marketable commodity. 32. The marketability does not depend upon the shelf life of a given product alone. The marketability depends upon the fact whether there could be a market for a particular product. If the goods could be brought to the market and could be dealt with in the market, then it could not be argued that such goods were not marketable. In the present case, it has been admitted that depending upon the weather conditions, the goods in question could be stored and kept for use for a period of 10 days, (refer page 156 of the paper book) to 4 weeks (refer page 201 of the paper book). The goods were sent to outside job workers for stitching and return. They were capable of being stored, transported and used over a period of time. As uppers, they had both national and international market. After cutting into specific sha....
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....e classification of the product may be decided keeping in view of the aforesaid position. 2. By Notification No. 5/87-C.E., dated 15-1-1987 rubberised textile fabrics falling under Heading 59.05 which do not weigh more than 15 grams per square metre and in which rubber predominates by weight have been exempted from duty. While applying this exemption care would have to be taken to ensure that only such Friction Cloth as is classifiable under Heading 59.05 in terms of Note 3(A) to Chapter 59 and also satisfies the description laid down in the notification is extended the benefit of the notification. The matter may be finalised accordingly. [M.F. (D.R. & 1) Letter No. 59/1/87-CX. 1, dated 2.6.1987] Reference may also be made to the Tribunal's decision in the case of Falcon Tyres Ltd. v. CCE, Bangalore MANU/CE/0580/1996, and MRF Ltd. v. CCE, Goa & Chennai MANU/CC/0136/1998 33. There is no relevancy of vulcanization in these operations-neither in the process of manufacture of rubberised textile fabrics nor its conversion into UPPERS'. Vulcanization, according to the Webster's Ninth New Collegiate Dictionary (page 1323) is the process of treating crude or synthet....
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....ile fabrics impregnated, coated, covered or laminated with rubber,-- (i) Weighing not more than 1, 500 g/m2; or (ii) Weighing more than 1,500 g/m2 and containing more than 50 per cent by weight of textile material; (b) Fabrics made from yarn, strip or the like, impregnated, coated covered or sheathed with rubber, of heading No. 56.04; (c) Fabrics composed or parallel textile yarns agglomerated with rubber, irrespective of their weight per square metre; and (d) Plates, sheets or strip, of cellular rubber; combined with textile fabric, where the textile fabric is more than mere reinforcement, other than quilted textile products The definition is wide enough to cover the goods under consideration. 35. The learned Member (Judicial) had concluded that the Revenue has failed to produce any evidence about the marketability of the product in question. The Departmental Representative has submitted that the product in question was admittedly taken out for job work outside the factory. The same after job work was brought back by the appellants for further use. He has also submitted that the canvas stripes manufacturers who did not have the machinery for manufacture of the....
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.... reference to the other manufacturers of shoes specially the small manufacturers who could not afford to have a large plant exclusively engaged in the production of such sheets and due to the process involved, they were to buy such sheets from the producers of such sheet. In para 28, the Hon'ble High Court had discussed as under-- 28. Again, no case has been made out by the respondent that they are holding monopoly in the manufacture of these particular sheets or such sheets are only used in their shoes to the exclusion of all other manufacturers. If these sheets are a common component for manufacture of the type of shoes the respondent manufactures the sheets would definitely be vendible. It is just this one circumstance which in our opinion is crucial to the determination of the matter. It may be, in this connection, mentioned that the respondent in their contentions before the Trial Court did not altogether rule out the possibility of marketing the sheets. The respondent never made the claim that they have monopoly in the manufacture of shoe with such sheet as re-enforcement material for the shoe-uppers. So, similar type of shoes wherein such sheets are embodied have to b....
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....shown to be non-marketable. They may be raw materials for manufacture of further goods but they by themselves constitute goods hence are liable to duty PRESENT: Mr. Ashok Desai, Sr. Advocate, for M/s. Khaitan & Co., for the Petitioner. The Supreme Court had noted the arguments that the discussion in the order of the Calcutta High Court was against M/s. Bata, Thus, even when the Hon'ble Supreme Court had not gone into the merits of the case, the decision of the Calcutta High Court stands and has the force of law. 38. The various schemes of exemptions relating to the product has been discussed in the impugned order and I agree with the same. 39. As regards the limitation, the appellants' unit was working under self-removal procedure. The manufacturer was an organised sector company. The view of the Calcutta High Court was not in favour of the appellants and in the facts and circumstances of the case, I agree with the view taken by the adjudicating authority that the extended period of limitation has been correctly invoked in these proceedings. 40. Similarly, with regards to the penalty, the appellants' unit was in the organised sector and the contraventi....
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.... by direct judgment of the Hon'ble Calcutta and Delhi High Court in respect of identical products in their own case; that the Calcutta High Court in its judgment dated 23.7.1979 held that the goods were simply friction cloth unvulcanised, and as such not marketable; that the Delhi High Court judgment also relates to identical in-process material. In addition, he relied upon the decision in the case of CCE v. National Insulated Cable Co. of India Ltd. MANU/CK/0024/1996, wherein it was held that the cotton fabrics coated with rubber solution still wet stage, when unwrapped around cable, is not marketable, rubberized cotton fabric nor cotton fabrics subjected to process of rubberising. The Tribunal also held in the said case that "the process of the cotton fabric will end only when it is vulcanised". Further in BMP Beltings Ltd. v. Union of India MANU/AP/0138/1990, it was held that unvulcanised fabric-obtained by applying rubberising component to cotton fabric and then captively used in fan belts and V belt could not be subjected to any Central Excise duty the same was not marketable. The learned Advocate submitted that the relevance of transported and used over a period of time a....
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....e Department to prove the marketability of the impugned product; that it follows from the decision of the Supreme Court in the case of K.K. Rubber Co. Pvt. Ltd., that in-process material, sought to be called rubberized cotton fabric, was not marketable in the light of the evidence adduced by the parties thereto. The learned Advocate also relied upon the authorisation of such literature, which has already been detailed in the referral order by the learned Member (Judicial). Learned Advocate also mentioned that inspite of the definite stand of the appellant that the impugned in-process materials were not at all marketable no evidence was adduced by the Department either in the show cause notice or in the impugned order that it has been held by the Supreme Court in the case of Hindustan Ferodo Ltd, v. CCE Bombay 1997 (89) ELT 16 (SC); that when no evidence is adduced by the Department, Tribunal cannot make suppositions that tantamount to evidence; that learned Member (Technical) has made number of suppositions such as shoe uppers are known commodity and traded in the National/International Markets; the uppers are regularly imported in the Country for a number of well known foreign bra....
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....guments submitted earlier before the referral Bench and emphasized that even by appellants own admission the impugned goods were capable of being stored for a period of two to four weeks, which cannot be considered to be short shelf life; that further, it is also admitted fact that the goods were taken out of their factory to job workers for stitching etc.; that it was held in the case of Indian Oxygen Ltd. v. CCE, Bhubaneswar MANU/CK/0025/1996, short shelf life is immaterial. He also relied upon decision in the case of Amara Raja Batteries Ltd. v. CCE MANU/CC/0067/1997, wherein it was held that lead oxide, capable of being kept in silos for about three weeks, is goods and, therefore, excisable. He further submitted that as a new product emerges manufacture has taken place and as the product in question is taken out to job workers outside the factory, marketability is established; that canvas shoe manufacturer, who does not have machinery for manufacture of the impugned product, can always buy the same from the appellants or any other manufacturer. That this is a fit case for invoking the extended period of limitation as the appellants neither declared about manufacture of rubberiz....
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....d back from them. It has been emphasized by the appellants that they ensure that job worker should be located nearby their factory inasmuch as the said impugned materials have to be necessarily brought back to their factory and used within their shelf life as early as possible as any delay would render the material totally useless. It is, thus, apparent that the material is capable of being brought to the market for being bought and sold within the limited shelf life it has. If the contention of the appellants is accepted, that because of short shelf life, the product is not marketable, a number of products in the market has to be held to be non-marketable, for example Sweets which are perishable by nature having very short shelf life inasmuch as some sweets have only shelf life of a few hours. Numbers of other goods are marketed in the controlled conditions. The short shelf life does not mean that the product is not marketable. In the case of Indian Oxygen Ltd. (supra), the Tribunal held the view that no shelf life was not material to the excisability of goods in view of the fact that the goods were actually being marketed. Same is the situation in the present matter as the impugn....
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....fabrics. The crux of the matter is whether those sheets are known to the market as a distinctive and finished commodity with a separate name. This again rests on the answer to the question whether sheets are capable of being taken to the market and bought and sold. 49. The Hon'ble High Court after taking into consideration the various submissions made by the assessee including the statement that the transition time from the manufacture of the sheet and their use in the manufacture of footwear is so brief that sheets can never be marketed, held as under:-- We are not in disagreement with the submissions made on behalf of the respondent-plaintiff that unless vendible no product can be subject to the levy of the duty. Therefore, it is a matter of evidence whether end product i.e. the sheets which are solely consumed by its manufacturer for its ultimate product, footwear, could have a market. Apparently they should, because according to the respondent's own assertion respondent have special expertise to the manufacture of these sheets, which are essential component of the shoes as the strengthening materials for the toes and heels. That being so, the other manufacturers o....