TaxTMI 
TaxTMI 
1995 (2) TMI 67
X X X X Extracts X X X X
X X X X Extracts X X X X
....Central Excise, Calcutta, 1994 (74) E.L.T. 22 while reversing the order of the Tribunal that "the conversion of PVC resin into PVC compound by the processes employed by the assessee, amounts to "manufacture" within the meaning of Section 2(f) of the Act", therefore, it "was to be charged with excise duty" held, "the provisions of the Act mandate that a finding that the goods are marketable is a prerequisite or "sine qua non" for the levy of duty". 3. But prior to adverting to it and notice in brief how the law on this aspect has developed, it is but appropriate to mention that the precise dispute before the Tribunal was whether the appellants who are manufacturers and sellers of laminated sheets which fell under Tariff Item No. 68 of the tariff schedule prior to 28th February, 1986 were liable to pay duty on such intermediate products produced by them, as were solutions of resin and water which were not stable, merely, because they were captively consumed. Since the question of law is common and has arisen in more or less similar circumstances in all the appeals, it is not necessary to give facts of each case. 4 The appellants manufactured laminated sheets out of various raw mate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essure to these goods. The Assistant Collector found that the mixture, namely solution of the resin and water was not stable. But he did not agree that merely because solutions were not stable it did not mean that the resins produced by the appellants were not goods as if some stabiliser was used to lower down continuous reaction the same could be put in the market for the purpose of sale. The Collector (Appeals) agreeing with the finding that solutions were not stable allowed the appeals and held that an intermediate product in order to be excisable must be a product known to the market or commercial community. In other words the intermediate product which came into existence should have been a complete product known as such to the market. But if something more was to be done on the product to bring it into a form known to the commercial community then it could not be treated as excisable goods. The Collector (Appeals) held that even though it was not disputed that the products were used for the manufacture of plastic laminated sheets and synthetic resin was formed as an intermediate product but it being unstable in a non-marketable condition the resin mixture could not be conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 15A of the Tariff Schedule. The main entry and Explanation II of it are extracted below : "Item No. 15A - PLASTICS Item No. Tariff Description Rate of duty 15A. Artificial or Synthetic resins and plastic materials; and other materials and articles specified below: Fifty per cent ad valorem. (1).................................. (2)............................................ (3)............................................ (4)............................................ Explanation I :......... Explanation II. - In sub-item (1), "condensation, polycondensation, polyaddition, polymerisation and co-polymerisation products" are to be taken to apply only to goods of a kind produced by chemical synthesis answering to one of the following descriptions :- (a) artificial plastics, including artificial resins; (b) silicones; (C) resols, liquid polyisobutylene, and similar artificial polycondensation or polymerisation products." Resols, according to Tribunal, is chemical name of resin at 'A' stage. It was held that phenol re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d under different entry and other the residuary. By this method all goods are excisable either under the specific or the residuary entry. The word `goods' has not been defined in the Act. But it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods are specified in the Schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the person on whom duty is proposed to be levied. The expression `produced or manufactured' has further been explained by this Court to mean that the goods so produced must satisfy the test of marketablity. Consequently it is always open to an assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being markete....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the goods, but the entire concept of bringing out new commodity etc. is linked with marketability. An article does not become goods in the common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. In Union of India & Anr. v. Delhi Cloth & General Mills Co. Ltd., 1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791, a Constitution Bench of this Court while construing the word `goods' held as under :- "These definitions make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold". Therefore, any goods to attract excise duty must satisfy the test of marketability. The tariff schedule by placing the goods in specific and general category does not alter the basic character of leviability. The duty is attracted not because an article is covered in any of the items or it falls in residuary cate- gory but it must further have been produced or manufactured and it is capable of being bought and sold. In South Bihar Sugar Mills Ltd. & Anr. v. U.O.I. & Anr., 1978 (2) E.L.T. (J 336) (SC) = AIR 1968 SC 922 it was held by this Court : "The Act charges duty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eded, beaded and anodised or painted. It is at that point only that they become a distinct and complete component, capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case. We find it difficult to believe that the elimentary and unfinished form in which they exist immediately after extresion suffices to attract a market". It was explained in Bhor Industries Ltd. v. C.C. E., 1989 (40) E.L.T. 280 SC: "It appears to us that under the Central Excise Act, as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufacture goods must come into existence. For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods". It was reiterated in Hindustan Polymers v. Collector of C. E., 1989 (43) E.L.T. 165 : "Excise duty, as has been reiterated and explained, is a duty on the act of manufacture. Manufacture under the ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and PVC tapes were held not to be excisable goods on the test of marketability. In Collector of Central Excise v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 the manufacturers produced starch hydrolysate which was captively consumed and fell under item 1E of the Central Excise Tariff. It was held to be goods, no doubt, but it was observed that from a practical point of view it was apparent that the goods were not marketable consequently they were not exigible to duty. 11. It cannot thus be disputed that even if the resin produced by the appellants are resols as mentioned in Item 15A it could not be subjected to duty. The purpose of specifying the goods in the Schedule is twofold, one, the rate on which the duty would be charged and other that if the goods satisfy the description and are covered in the Entry then they are liable to pay excise duty. But even in respect of specified goods it could be established that it was not marketable or capable of being marketed, therefore, no duty was leviable on it. The finding on this aspect has been extracted earlier. The Assistant Collector (Excise) found that unless some retarder or stabiliser was added the unstable solution was no....