TaxTMI 
TaxTMI 
2026 (5) TMI 1663
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....DERATION ..................................................... 9 VI. ANALYSIS .................................................................................. 10 A. Scope and ambit of expression "the determination of any question having a relation to the rate of duty of excise or to the value of goods" in sub-section (1) of Section 35G of the Act, 1944 .......................... 10 i. Nature of amendment in sub-section (2) of Section 35L of the Act, 1944 ..................................................... 24 B. Meaning, scope and application of "manufacture" under Section 2(f) of the Act, 1944................................................ 34 i. First Limb - No goods with distinct characteristics came into existence 38 ii. Second Limb - Transformed goods are marketable as distinct goods ... 48 a. Meaning and understanding of the term "marketable" ................................ 51 b. Standard of proof to be met while discharging burden of proof ................... 54 VII. CONCLUSION ........................................................................... 61 1. This appeal is at the insta....
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....hen erects a frame at the building/structure. The cut and grooved ACPs are taken to the site and are fixed on the frames using angles, clamps, and fasteners leaving a gap of not more than 16 mm between adjacent panels and matching adjacent panels, suitable for a weather-sealed junction using appropriate sealant. 5. It appears from the materials on record that before April 2002, the appellant was paying excise duty on the cutting and grooving of ACPs. Thereafter, the appellant discontinued the payment excise duty under the bona fide belief that the aforementioned process of cutting and grooving does not amount to "manufacture" under Section 2(f) of the Act, 1944, and consequently, it was under no obligation to pay excise duty for the same. 6. On 14.09.2004, the appellant was issued a Show Cause Notice (SCN) on the ground that the process of cutting, grooving, and assembling of the ACPs for use in structures would amount to "manufacture". Thus, the assessee was required to show cause as to why under the provisions of the Act, 1944: (i) duty of Rs. 21,46,437/- on the ACPs cleared from April 2002 to December 2003 should not be demanded and recovered; (ii) intere....
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.... the provisions of the Central Excise Act, 1944?" 13. The High Court answered the aforesaid question in favour of revenue holding as under:- "5. Having heard the learned counsel for both the parties and after perusal of the material on record, it is not in dispute that the respondent-assessee has been purchasing aluminium composite panels and on the said panels it has been cutting the same into required size and also grooving the said panels which is called routing. The scope of the work that is done on the said goods is that of fixing the aluminium composite panel comprising polyethylene core sandwiched between two skins of 0.50 mm. thick special alloyed sheet and pre-fabricated panels and these are used for various purposes by cutting them into requisite sizes and also by grooving the said sheets. The said aluminium composite panels are then fixed to the main frame, therefore the question that has to be considered is as to whether the respondent is carrying on manufacturing activity on the aluminium composite panel. The panels thus pre-fabricated are to be fixed to suit the conditions. The aluminium panel has to be pre-coated with weather resistant coating of fluoro c....
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....he Additional Commissioner of Central Excise (Appeals) is restored by answering the substantial question of law in favour of the Revenue and against the assessee." 14. In such circumstances referred to above, the appellant are here before this Court with the present appeal. III. SUBMISSIONS ON BEHALF OF APPELLANT 15. Ms. Charanya Lakshmikumaran, the learned counsel appearing for the appellant would submit the following:- i. The jurisdiction to decide whether the activity undertaken by the appellant amounts to manufacture lies solely with this Court in view of Section 35L(1)(b) of the Act, 1944. In the same breath, it was submitted that Section 35G precludes the High Court from deciding any issue relating to "determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment". In this regard, reliance was placed on decision of this Court in Navin Chemicals Manufacturing & Trading Co. Ltd. v. Collector of Customs, reported in (1993) 4 SCC 320. ii. The process of cutting and grooving or routing of the ACPs undertaken by the appellant does not amount to manufacture as there is no emergence of a pr....
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....assed on either side, we must look into the issue of maintainability of the appeal. Sections 35G and 35L of the Act, 1944, respectively, reads thus:- "35G. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. [...]" xxx "35L. Appeal to the Supreme Court-(1) An appeal shall lie to the Supreme Court from- (a) any judgment of the High Court delivered- (i) in an appeal made under section 35G; or (ii) on a reference made under section 35G by the Appellate Tribunal before the 1st day of July, 2003; (iii) on a reference made under section 35H, in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after the passing of the judgment, the High Court certifies to be a fit one for ap....
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....ditions. In other words, they must be satisfied for the appeal to be maintainable before the High Court. Whereas, condition (ii) is a negative condition. If the order passed by the Appellate Tribunal falls within this condition, the appeal does not lie, regardless of whether (i) and (iii) are met. 23. The expression that we are concerned in the case at hand is the bracketed portion in Section 35G, which reads, "(not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment)". 24. A plain yet careful reading of Section 35G leaves very little to imagine. The word "any" in the aforesaid expression gives the exclusion as regards the jurisdiction a wide sweep, indicating that the question referred to therein is not limited to a specific question of rate of excise duty or value of goods. In other words, even peripheral questions touching a question pertaining to rate or valuation can attract such exclusion. Further, the conscious use of the prefatory phrase "among other things" also serves to communicate that these are not the only exclusions and are merely il....
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.... jurisdiction of the High Court. 29. Although the respondent has not addressed the submission canvassed by the appellant on maintainability of the appeal as regards the issue of jurisdiction, yet it could be argued that the question of excisability is a pure question of law and therefore falls within the High Court's jurisdiction to decide a "substantial question of law" under Section 35G. This argument although, at first glance, appears persuasive, yet does not withstand scrutiny. 30. Jurisdiction cannot be assumed merely because the question is framed as question of law, if the underlying subject matter of the order is that the legislature has explicitly placed beyond the reach of the High Court. In other words, the nature of the question, whether it is one of fact, law, or mixed question of fact and law, is a separate inquiry from whether the subject matter of the order falls within the exclusionary bracket. The satisfaction of the High Court as to the existence of a substantial question of law is a condition precedent to the exercise of jurisdiction but it has to be within the four corners of bar imposed by the exclusion. 31. In this regard, we would like to refer to t....
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....essment. Further, if the order relates to several issues or questions but when one of the questions raised relates to "rate of tax" or valuation in the order in the original, the appeal is maintainable before the Supreme Court and no appeal lies before the High Court under section 35G of the Central Excise Act, 1944. [...] xxx 32. The question raised is whether the assessee was liable to pay service tax under section 65(105)(zzb) of the Finance Act, 1994. Case of the assessee is that they were not liable as the activities undertaken were non-taxable. 33. In view of the interpretation given above, the dispute would fall in the category of "rate of tax". Hence, the present appeals would not be maintainable before the High Court under section 83 of the Finance Act, 1994 read with section 35G of the Central Excise Act, 1944." (Emphasis supplied) 32. We may also refer to the decision of the Full Bench of the Bombay High Court in CCE v. Reliance Media Works Ltd., reported in 2019 SCC OnLine Bom 5162, where the Court was called upon to decide the issue whether the question of excisability of goods is an issue of rate of duty appealable to this Court ....
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....me Court for uniformity of decisions. Otherwise, we would have a situation where different High Courts take different views on the issue of excisability/taxability, leading to a situation where in some States the service/goods are not taxable/excisable and taxable in other States.[...] (c) The appellant Revenue also relies upon the decision of this court in Greatship (India) Ltd. (supra) and of the Supreme Court in Navin Chemicals (supra) to contend that an appeal arising from an order dealing with taxability/excisability would only be before this High Court and not the hon'ble Supreme Court. We find that the decision in Greatship (India) Ltd. (supra) of this court is not applicable to the present facts as it itself records in paragraphs 24 and 28 thereof that there was no dispute before it that the services are taxable. Thus, the objection of the Revenue (respondent before it) that this court does not have jurisdiction, was negatived. So far as reliance upon the decision of the apex court in Navin Chemicals (supra) is concerned, we note that in paragraph 11 thereof, the Supreme Court has observed as under : "11. It will be seen that sub-section (5) uses the s....
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....e High Court on the issue of determination of rate of duty may be looked at from one another angle. In Commr. of Customs v. Motorola (India) Ltd., reported in (2019) 9 SCC 563, the issue before this Court was whether an appeal from the order of the CESTAT, on violation of conditions contained in customs exemption, would lie before the High Court under Section 130 of the Customs Act, 1962 ("the Customs Act") or this Court under Section 130E of the Customs Act. It is pertinent to note that Sections 130 and 130E of the Customs Act, respectively are pari materia to Sections 35G and 35L of the Act, 1944. The Court referred to the decision in Navin Chemicals (supra) wherein the expression "relation to" in the bracketed portion of Section 130 of the Customs Act was stated to indicate that the direct and proximate relationship of the question before the court to the "rate of duty of excise or to the value of goods" for the purpose of the assessment. The relevant observations read thus:- "11. Upon a conjoint reading of the aforesaid provisions, it could thus be seen that an appeal shall lie to the High Court against every order passed in appeal by the Appellate Tribunal, if the Hig....
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....he other forums and modes of seeking [remedy] are excluded." (Emphasis supplied) 36. The issue before the High Court i.e., whether the activity of cutting and routing or grooving of aluminium composite panels would bring into existence new product subjecting it to payment of excise duty would be an issue clearly covered by Section 35(1)(b). This dispute as to whether the aforesaid activity undertaken would be excisable or not relates directly to the rate of duty applicable thereto for the purpose of assessment. The assessee had raised an objection with regards to maintainability of the appeal before the High Court. However, the same was left unaddressed. 37. We have gone through the order passed by the Appellate Tribunal. The only determination made by the Tribunal is with regards to the excisability of the goods in question. Since what was done by the Tribunal is the determination of the levy of duty under the Act, 1944. In our considered opinion, the Revenue ought to have preferred an appeal before this Court under Section 35L of the Act, 1944. 38. For all the aforesaid reasons, we are of the considered view that the issue in the present appeal is in regard to e....
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....hat:- "Clause 99 of the Bill seeks to insert a new sub-section (2) in section 35L of the Central Excise Act so as to clarify that determination of disputes relating to taxability or excisability is covered under the expression "determination of any question having a relation to rate of duty." (Emphasis is ours) 42. In the aforesaid context, the Memorandum on the Finance (No. 2) Bill, 2014, by the Central Board of Direct Taxes Memorandum also clarified the position as regards appellate jurisdiction of this Court. It reads thus:- "Section 35L is being amended so as to clarify that determination of disputes relating to taxability or excisability of goods is covered under the term 'determination of any question having a relation to rate of duty' and hence, appeal against Tribunal orders in such matters would lie before the Supreme Court." (Emphasis is ours) 43. The reading of the text of the provision stipulates that it does not create any new legal position. It merely gives statutory expression to what was already the natural and necessary consequence of collective reading of Sections 35G and 35L, respectively. As a result, such a clar....
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....of us, J.B. Pardiwala, J., was a part of the Bench, held that procedural amendments are presumed to be retrospective in nature unless the express intention of the legislature to the contrary. It was categorically held that presumptions against retrospectivity is not applicable to enactments which affect procedure, or forum, or are declaratory in nature. The relevant observations read thus:- "191. It is no more res integra that the presumption against retrospective operation does not apply to the legislation merely concerned with matters of procedure or of evidence; on the contrary, the provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of Parliament. 192. We may summarize the principles on retrospective application of legislations as under: (i) Presumption against retrospectivity is not applicable to enactments which merely affect procedure or change the forum or are declaratory; (ii) Retroactive/retrospective operation can be implicit in a provision construed in the context where it occurs; (iii) Given the context, a provision can be held to apply to cause of....
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....ding to the courts giving conflicting decisions, and in several cases directing the Revenue to refund the entire amount of income tax paid by the assessee where the Revenue was not in a position to frame a fresh assessment. Being clarificatory in nature it must be held to be retrospective, in the facts and circumstances of the case. It is well-settled that the legislature may pass a declaratory Act to set aside what the legislature deems to have been a judicial error in the interpretation of statute. It only seeks to clear a meaning of a provision of the principal Act and make explicit that which was already implicit." (Emphasis supplied) 51. In Reliance Media Works (supra), the Full Bench of the Bombay High Court also dealt with this issue. It held that the amendment by insertion of sub-section (2) is clarificatory and retrospective in nature as its intention was to make explicit what was implicit in Sections 35G(1) and 35(1)(b) respectively. The Court also highlights the Notes on Clauses to the Finance (No. 2) Bill, 2014, mentioned hereinabove. The relevant observations read thus:- "(e) It was also contended by the appellant-Revenue that insertion of sub-sect....
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....le the issue being urged and set the matter at rest, it appears that the amendment has been introduced. The amendment, therefore, is in the nature of a clarification and not for bringing about any change in the law, i. e., excluding a set of orders of the Tribunal, which were earlier appealable to the High Court, now made appealable to the hon'ble Supreme Court for the first time. This is also supported by the plain reading of sub-section (2) of section 35L of the Act which merely clarifies/states "having relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment". In case, it was a new category, then, all that Parliament had to do was to state that the question of excisability and taxability arising in of an order of the Tribunal would be appealable to the Supreme Court. Further, our interpretation that the amendment of section 35L of the Act by insertion of sub-section (2) thereof was clarificatory in nature, is supported by Notes on Clauses to the Finance (No. 2) Bill, 2014. [...] (b) Next submission on behalf of the appellant was that even if there has been an intent on the part of the Governmen....
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.... the Supreme Court." (Emphasis supplied) 53. The net effect of the aforesaid is that sub-section (2) being merely clarificatory in nature does not create new liabilities or obligations or to impose new duties in respect of transactions already accomplished. The provisions of Sections 35G and Section 35L, read together, always pointed to one and only one conclusion that the question of excisability fell within the exclusive appellate jurisdiction of the Supreme Court. Even prior to the amendment, a question of excisability of goods was never a question that could be answered in isolation. It is a question that would arise in the context of, and as a precursor to, the assessment of excise duty. The amendment does not alter this relationship, it merely articulates it. In other words, the amendment states in express terms were always implicit in the structure and language of the provision. B. Meaning, scope and application of "manufacture" under Section 2(f) of the Act, 1944 54. Ms. Charanya Lakshmikumaran, the learned counsel appearing for the appellant herein vociferously contended that the process undertaken by them involves cutting of the ACPs in required smaller ....
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....ter, or use emerge indicating transformation; ii. Whether the transformed goods is marketable or capable of being marketed. 59. By reading the aforementioned test, one could argue that if the taxable event is the manufacture of goods, then assessing marketability of the manufactured goods ought not to be made necessary. When the taxable event is said to be of manufacture, it means that even though the taxable event is "manufacture", the collection of duty on excisable goods is shifted to stage of removal of goods for administrative convenience. 60. Through the first test, the question that requires an answer is whether distinct goods with the new name, identity, character or use have emerged. Whereas, through the second test, the question that requires an answer is whether the resultant goods are marketable after undergoing the particular process. 61. The test laid down in J.G. Glass (supra) was laid down to decipher "manufacture" of goods. In furtherance of the 'fundamental change' test and 'but for the process' test, this Court in Servo-Med (supra) tied the application of the tests to marketability of the manufactured goods. This is done so because it is marketa....
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....o goods with distinct characteristics came into existence 65. We may now put the activity undertaken by the appellant through the first limb of the test. The first question to be asked is, could it be said that the process undertaken by the appellant results in emergence of distinct goods having their own character, identity, or use. The answer is an emphatic 'No'. We say so because what enters the process is an ACP consisting of two aluminium sheets bonded to a polyethylene core, and what emerges from the process is still an ACP cut to a particular size, grooved at the edges, and bent into a frame. Here, the essential character of the goods remain entirely unchanged. 66. The process of cutting, grooving, and bending does not alter the fundamental nature of identity of the ACP, it merely adapts its dimensions and shape for a specific use. In other words, it amounts to no more than preparation, sizing, and installation of the ACPs for use as a cladding or façade material. The process of grooving or routing does not alter the material properties or the commercial character of the ACPs in any manner whatsoever. The form and shape of the ACPs are being changed to facilitat....
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.... distinctive name or badge or identification in the market, are not pipes and tubes. It is true that all pipes and tubes cannot be described as pipe fittings. But it would not be correct to say that pipe fittings are not pipes and tubes. They are only a species of pipes and tubes. The use of the words "all sorts" and the reference to the various processes by which the excisable item could be manufactured set out in the tariff entry are comprehensive enough to sweep within their fold the goods presently under consideration." (Emphasis supplied) 69. We may also look into the decision of this Court in CCE v. S.R. Tissues (P) Ltd., reported in (2005) 6 SCC 310, wherein the question before this Court was whether the activity of unwinding, cutting, slitting, and packing it as boxes of tissue paper amounts to manufacture. This Court held that through the predominant test of the characteristics of the tissue in jumbo roll and tissue paper in the form of table napkins, facial tissues and toilet rolls the texture, moisture absorption capacity, feel, etc., they come out to be the same. It was observed that the jumbo rolls were cut into various shapes and sizes for nothing but convenienc....
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....to slabs and tiles by the appellant would not amount to manufacture. The relevant observations read thus:- "2. The contention put forth on behalf of the appellant is that the activity carried on by the appellant does not amount to manufacture at all. The case put forth by the learned counsel appearing on behalf of the appellant is that the cutting of blocks into marble slabs involves only sawing of the marble blocks and thereby does not bring into existence a distinct commodity so as to state that when such activity is completed a new substance has come into existence. The submission is that even after such activity is completed the marble will remain marble and, therefore, this activity does not attract tax. xxx 4. In Rajasthan SEB v. Associated Stone Industries [(2000) 6 SCC 141 : JT (2000) 6 SC 522] such a question fell for consideration before this Court although in a different context, and this Court held as follows: (SCC p. 146, para 12) "This apart, excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. The word 'manufacture' generally and in the ordinary parlance ....
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.... vouchers produced by the respondents that the petitioner had supplied dolomite lumps, chips and powder to different glass manufacturers as required by them. Some manufacturers may not be having crushing facilities or of sufficient capacity. So they purchased in powder form also. However, the respondents by their additional return stressed that while dolomite lumps were sold for Rs. 38 per metric ton, dolomite powder was sold at the rates between Rs. 150 per metric ton, thereby suggesting that some lengthy process is required for getting the powder. The learned counsel for the petitioner has given us the break-up of the price of dolomite powder. As extra cost of Rs. 88 per metric ton is incurred in getting powder from the lumps by way of extra lead for taking the lumps to the crushing machine, loading, unloading charges, breaking charges and packing them in bags and stitching them. About 20 gunny bags are required for packing 1 metric ton powder in bags of 50 kg. each. Lumps are transported in bulk and not required to be packed in gunny bags. For breaking 1 ton lumps into powder, the breaking and labour charges are about Rs. 35 and another Rs. 35 are the costs of 20 gunny bags and ....
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.... decision in Union of India v. Delhi Cloth and General Mills Co. Ltd. [1962 SCC OnLine SC 148.] for an activity to amount to "manufacture" and not be considered as merely "processing" it has to produce a "transformation" of the subject article, i.e., a new and different article must emerge having a distinctive name, character or use. This test, as laid down by this court in Union of India v. Delhi Cloth and General Mills Co. Ltd. [1962 SCC OnLine SC 148.], has been extensively applied by this court in its subsequent rulings. xxx 28. This court in Union of India v. J.G. Glass Industries Ltd. [(1999) 114 STC 387 (SC); (1998) 2 SCC 32; 1997 SCC OnLine SC 22.] established a two-fold test to ascertain if an activity constitutes "manufacture": (a) Fundamental change test : The first criterion is to determine if the process results in a new commercial item being created, or if the original item's identity is fundamentally altered or ceases to exist. This means assessing whether a transformation occurs such that a distinct product with a new name, identity, character, or use emerges; (b) But for the process test : The second criterion evaluates wheth....
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.... Second Limb - Transformed goods are marketable as distinct goods 77. Although it may not be necessary to delve into the second limb of the test, yet we may discuss, in brief, the importance of the test of marketability of manufactured goods and the burden of proof required to be discharged by the Revenue. The CESTAT in this regard observed thus:- "On a careful consideration, it is seen that the Revenue has not produced any evidence of trade parlance and understanding in the market that this activity of cutting and routing i.e., cutting the aluminium of ACP would bring into existence the new product as known in the market. The Apex Court in the case of UOI Vs. Delhi Cloth and General Mills Co Ltd as reported in 1977 (1) ELT J199 (SC) has clearly laid down that manufacture means bringing into existence known the market and not merely producing some change in a substance. The same ratio was reiterated by, the Apex Court in Hindustan Zinc Ltd. (supra). In the light of both these rulings and the ruling relied on by the Counsel rendered in the case of M/s. Hubli Electricity Supply Company Ltd. and KEB (supra), it is clear that mere process of cutting and routing (i.e. cuttin....
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....nd the resultant goods are not marketable but transformation has taken place. It also cannot be said to manufacturing. Scenario Three: The goods entering the process were commercially useless but the resultant goods are marketable because transformation has taken place. At the same time, where the goods entering the process was commercially useful and the resultant goods are also marketable because of transformation. In both these cases, manufacturing takes place. Scenario Four: Where the goods entering the process were commercially useful but the resultant goods are not marketable even when transformation has taken place. It could not be said that manufacturing has taken place. a. Meaning and understanding of the term "marketable" 80. It is apposite to understand that marketability, as contemplated in the second limb of the two-fold test, is an absolute and standalone inquiry. The second limb asks whether the goods that have emerged possessing a distinct character, identity, or use, are marketable as such. In other words, the emerging goods must be capable of standing alone in the market, recognized or traded on the basis of what it is, not on the basis of ....
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....us be disputed that even if the resin produced by the appellants are resols as mentioned in Item 15-A 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.[...] Since the test of marketability or capable of being marketable applies even to those goods which are mentioned in the tariff item the intermediate resin produced by the appellants which are mentioned as resols under Tariff Item 15-A were not exigible to duty. The finding of the Tribunal that once the product manufactured by the appellants answered the chemical description of the product under Tariff Item 15-A it was assessable to duty whether it was marketable or not was thus not well founded." (Emphasis supplied) 83. We may look into the decision of this Court in Union of India v. Sonic Electrochem (P) Ltd., reported in (2002) 7 SCC 435, where....
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....he market as commercial products. It is this capacity to be identified, bought and sold as a distinct article that constitutes marketability. b. Standard of proof to be met while discharging burden of proof 85. Where the Revenue seeks to levy excise duty, it is not sufficient for the Revenue to merely point to the process that has been undertaken. It must establish the commercial consequence i.e., the marketability of the goods. In other words, the Revenue must demonstrate not only that something has been done to the goods, but that what has been done has resulted in the emergence of goods that the market recognizes, treats, and deals with as something new and different. 86. It is well settled that the burden of establishing marketability lies on the Revenue. Marketability, being a question of fact, must be determined on the basis of the specific facts and circumstances of each case, and cannot be presumed or inferred in the absence of sufficient material. It is for the Revenue to affirmatively demonstrate by placing adequate material on record. The question of marketability must be answered on the basis of objective evidence. A mere assertion cannot discharge this burden.....
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....hat happened was that aluminium slugs were provided by the appellant to Messrs Krupp Group of industries for extrusion into aluminium cans. The facts show that the transaction was a works contract and nothing more. Apparently, the appellant made use of the requisite machinery owned by that firm for extruding aluminium cans. Not a single instance has been provided by the respondents demonstrating that such aluminium cans have a market, the record discloses that whatever aluminium cans are produced by the appellant are subsequently developed by it into a completed and prefected component for being employed as flashlight cases. 8. Much emphasis has been laid by the respondents on the circumstance that the appellant had in the past treated the aluminium cans produced by it as excisable goods and had submitted price lists to the excise authorise which included a margin of profit in the specified price. It is clear that the appellant did so under the mistaken belief that the aluminium cans attracted excise duty. The margin of profit included in the price was arrived at notionally, in order merely to comply with the demand of the excise authorities for the submission of price lis....
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....ise duty. The Revenue did not adduce any evidence to show that the product was marketable or capable of being marketed. It merely relied on Chemical Weekly Drug Directory to show BMS as an intermediate product. While rejecting such reliance, the Court observed that since there was no evidence of buying or selling in the market, it could not be said that the product was marketable. 91. In circumstances referred to above, there is no doubt that the standard of proof to be met is that of preponderance of probabilities. In this regard, it would be apposite to refer to observations of Lord Denning in Bater v. Bater, [1951] P. 35, wherein he succinctly expressed the degrees of probabilities within preponderance of probabilities. The relevant observations read thus:- "I do not think that the matter can be better put than it was by Lord Stowell in Loveden v. Loveden (1810) 2 Hagg. Con. 1, 3. "The only general rule that can be laid down upon the subject is, that the circumstances must be such as would lead the guarded discretion of a reasonable and just man to the conclusion". The degree of probability which a reasonable and just man would require to come to a conclusion - and l....
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....rated to the nature, rarity, or character of the goods in question. 94. All that we are trying to convey is that the degree of probability should be proportionate to the subject matter. In other words, on an objective perusal of the evidence so produced, the courts must either believe it to exist or consider its existence so probable that a reasonable man ought, under the given circumstances, acts upon the supposition that it exists. 95. The standard of proof to be met by the Revenue ought to be one where on a careful analysis of the evidence before the courts, it aids in eliminating subjectivity and reaching a justifiable conclusion. In other words, the courts must come at a considered conclusion as to whether the Revenue has discharged its burden of establishing that the goods in question were marketable as a distinct and independent product. The conclusion must flow from the evidence and not from assertion, assumption, or the mere fact of a process having been undertaken. 96. In the present case, as mentioned above, since the ACPs have not undergone any transformation being goods having distinct characteristics, or identity, or use, the question of marketability pales i....