TaxTMI 
TaxTMI 
2005 (4) TMI 66
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....l Satyapal (assessee), having its head office at 7/22, Ansari Road, Darya Ganj, New Delhi and factories at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi was found engaged in the manufacture of compound (kimam) containing chewing tobacco under sub-heading 2404.40/2404.49. The assessee, a partnership firm, was not registered with the Central Excise department as a manufacturer. The assessee appeared to have been manufacturing and clearing the said compound (kimam) without the knowledge of the department. 3.During the investigations carried out by the department, the assessee claimed that the compound (kimam) manufactured by them was moved in "balties" on stock transferred basis to their three branded chewing tobacco manufacturing factories located at 68/2, Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). The assessee claimed that the compound (kimam) was an intermediate item, not marketable as such and was, therefore, not excisable. Enquiries were made by the department at Barotiwala (HP), where the assessee claimed to have transferred the compound (kimam). The said enquiries indicated receipt of the said compound (kim....
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....ed its affairs and they had deliberately failed to obtain registration which circumstances constituted evidence of suppression and, therefore, the department was right in invoking the extended period of limitation. 7.Aggrieved by the above order of the commissioner dated 28-4-1998, the assessee challenged it in Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as the "tribunal") inter alia on the ground that the said compound (kimam) was neither chewing tobacco nor preparations for chewing tobacco; they were not capable of being used as such and could be used only after dilution; their manufacturing formula was secret and the said compound (kimam) was not sold in the market but it was sent to the assessees' own factories at 68/2, Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). The order of the commissioner was also challenged on the ground that the assessee was under a bona fide impression that no duty was leviable on the compound (kimam); the full quantity of the compound (kimam) manufactured at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi was used captively and, therefore, pr....
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....as further submitted that the said compound (kimam) was not akin to Lucknowi kimam; that the components thereof differed; that Lucknowi kimam was edible whereas the compound in question was not edible and, therefore, the same was not excisable. It was urged that though the assessee had bought Lucknowi kimam from the above traders the ratio of Lucknowi kimam in the final product, which contained tobacco leaves/flakes, was 1:1 whereas the ratio of the compound in question in the final product was 1:5. According to the learned counsel, the ability of the manufacturer to prepare a compound (kimam) and utilize the same for his own purpose would not make the said compound (kimam) a marketable commodity as the preparation was exclusive for the assessees' own use as an intermediate product. In the circumstances, it was urged that the said compound (kimam) was neither a chewing tobacco nor a preparation containing chewing tobacco and, therefore, it was neither marketable nor excisable. 11.On the rationale for invoking extended period, learned counsel submitted that the assessee was under a bona fide impression that the compound (kimam) was not excisable; the full quantity of the compound....
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....ch an argument was to be accepted it would be open to all producers of monopoly products to contend that their item was not marketable since they have refused to sell the same in the market. Learned counsel further submitted that the compound in question was not a by-product. 13.On the question of limitation, learned counsel submitted on behalf of the department that the assessee had suppressed the following facts from the department. The assessee had manufacturing units at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi, which fact was not disclosed to the department. They had manufactured and cleared the impugned goods without informing the department and without payment of central excise duty. Further, the assessee had not obtained registration for their above units at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi. That, they have not filed declarations/returns required under the said 1944 Act and the rules framed thereunder. Learned counsel further submitted that in the original hand-written challans, the compound in question was indicated by the word "balties" whereas in the computerized challans, the word "b....
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....er chapter sub-heading 2404.49 prior to 23-7-1996 and under 2404.40 w.e.f. 23-7-1996; it was neither edible nor consumable; it was made by the assessee from a secret formula and that the entire production was captively consumed by their three factories at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). 18.We do not find merit in the above submissions. Marketability is an attribute of manufacture. It is an essential criteria for charging duty. Identity of the product and marketability are the twin aspects to decide chargeability. Dutiability of the product depends on whether the product is known to the market. The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. Marketable means saleable. The test of classification is, how are the goods known in the market. These tests have been laid down by this Court in a number of judgments including Moti Laminates Pvt Ltd v. Collector of Central Excise, Ahmedabad [1995 (76) E.L.T. 241]; Union of India v. Delhi Cloth & General Mills Co. Ltd. [1997 (92) E.L.T. 315]; Cadila Laboratories Pvt Ltd. v. Commissioner of Central Excise, Vadodara....
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....ound (kimam) without payment of duty from the said two unlicensed units at 96, Okhla Industrial Estate, Phase-III, New Delhi and E-1, Maharani Bagh, New Delhi. That, the admissibility of the proforma/modvat credits, which could have warranted an enquiry at the end of the above three factories at Okhla Industrial Estate, Phase-II. New Delhi, Noida (UP) and Barotiwala (HP) as to receipt and utilization of the said compound, was not the subject of investigation. Therefore, the show cause notice was confined to demand for duty on the goods manufactured and cleared from the two unlicensed and unregistered units at 96, Okhla Industrial Estate, Phase-III, New Delhi and E-1, Maharani Bagh, New Delhi. 21.As stated above, assessee was in the business of manufacturing Tulsi Zafrani Zarda for couple of years. It used to buy similar compounds from the market from time to time. That, other traders, namely, M/s. Globe Traders and M/s. Laxmi Fragrances Pvt. Ltd. used to manufacture compounds similar to the compound manufactured by the assessee; that they had their units duly licensed/registered with the excise department; that they had maintained their books and documents in accordance with the....
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....s to get the above two units, in which the impugned compound (kimam) was manufactured, registered or licensed. As stated above, it has been buying a similar kimam from various traders. These circumstances constituted evidence of suppression brought on record by the department in answer to which it was contended on behalf of the assessee that they were under a bona fide impression that the compound was not excisable and that the benefit of proforma and modvat credit together with the benefit of exemption under Notification No. 121/94, dated 11-8-1994 was substantially equal to the demand for duty herein and, therefore, there was no intention to evade payment of duty. 24.We do not find any merit in these submissions. As stated above, the adjudication in this case was confined to the question of excisability and concealment of the existence of two units in which the compound (kimam) was manufactured. No explanation has been given by the assessee for not disclosing the affairs of these units, particularly when the assessee was in business for couple of years and when the assessee had been dealing with other traders who operated from licensed factories. It was for the assessee to exp....