Bhor
Industries Ltd., Bombay Vs. Collector of Central Excise, Bombay [1989] INSC 31 (31 January 1989)
Mukharji,
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION:
1989 AIR 1153 1989 SCR (1) 382 1989 SCC (1) 602 JT 1989 (1) 450 1989 SCALE (1)226
CITATOR
INFO : R 1989 SC2066 (5) R 1990 SC 59 (4) R 1990 SC1676 (11) R 1990 SC1893 (4)
RF 1991 SC 999 (7)
ACT:
Central
Excises and Salt Act, 1944/Central Excise Rules, 1944: Sections 2(d), 2(f), 3,
35-L and 35-P/Rules, 10-A 173-J.
Excise
duty--Excisable goods--Mere fact that an article falls within Tariff Schedule
is not enough--Taxable event is 'manufacture of goods'--Which are marketable or
capable of being marketed-Marketability is an essential element--Burden of
proof on revenue that goods are marketable.
Central
Excise Tariff Act, 1985: Schedule Item 15-A(2)-Production of crude PVC
films--Non-marketable--Intermediate products--Used for captive consumption in
end products such as leather cloth--Laminated jute mattings and PVC
tapes--Whether clas- sifiable and liable to duty.
Words
and Phrases: 'Excisable goods'-'Manufacture'--Meaning of.
HEAD NOTE:
The
appellant is a manufacturer of Crude PVC films for the purpose of use in final
products such as leather cloth and laminate jute mattings and PVC tapes both
insulation and adhesive. The films manufactured by the appellant were subject
matter of adjudication by the Excise authorities during the period commencing
from 1st March, 1970 to 29th May, 1971. The Appellate Collector of Central Excise by an order
dated 14.1.1974 held that the appellant had produced sufficient evidence to
prove that the said Crude PVC films were not marketable and were therefore not
liable to excise duty. On 20.11.1975 the appellant filed a classification list
in respect of Crude PVC films used for lamination with jute and for tapes
claiming that the said PVC films were non-excisable on the ground that the same
were non-marketa- ble intermediate products used exclusively for captive
consumption. On 9.12.1975 the classification list was ap- proved by the
Assistant Collector, Central Excise.
On
15.2.1977, however, the Assistant Collector issued a show 383 cause notice
calling upon the appellant to show cause as to why the aforesaid films should
not be re-classified as excisable under Item No. 15A(2) of the Central Excise
Tariff Schedule and appropriate duty not recovered under Rule 10 of the Central
Excise Rules, as these then stood, read with Rule 173-J. By a corrigendum,
dated 23.2.1977, to the said show cause notice Rule 10-A was substituted in
place of Rule 10. The appellant contested the notice but the Assistant
Collector vide his order dated 16th February, 1978 confirmed the said show
cause notice by holding that the said PVC films were classifiable under Item
No. 15A(2) and directed the appellant to pay duty at the appropriate rate on
past clearances under Rule 10-A read with Rule 173-J.
The
appeal filed against the aforesaid order was reject- ed by the Appellate
Collector of Central Excise on 10th October, 1979. A revision was preferred before Customs, Excise and Gold (Control)
Appellate Tribunal. The Tribunal confirmed the order of the Appellate Collector
and held that the goods in question fell under Tariff Item No. 15A(2) and were
dutiable in the intermediate list and the question of marketability or being
capable of being sold in the market was not relevant, but modified the order to
the extent that duty in respect of clearances prior to the issue of show cause
notice was restricted to the period permissible in terms of Rule 10 read with
Rule 173-J viz. 12 months.
In the
statutory appeal to this Court under Section 35-L, of the Central Excises and
Salt Act, 1944 the question for consideration was whether the Crude PVC film
was dutiable under Item No. 15A(2).
Allowing
the appeal,
HELD:
1. In view of the Appellate Collector's order holding that the Crude PVC films
were not marketable goods and there being no contrary evidence found by the
Tribunal subsequent to the finding by the Appellate Collector no excise duty
should be charged under Item No. 15A(2) of the Central Excise Tariff on the
Crude PVC Sheets. The Tribunal went wrong in not applying the proper test. The
test of marketability or capable of being marketed was not applied by the
Tribunal. [395D-E]
2.
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 manufac-
ture goods must come into existence. For articles to be goods these must be
known in the market as such or these 384 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 articles must be capa- ble of
being sold in the market or known in the market as goods. Taxable event in the
case of duties of excise is the manufacture of goods and the duty is not
directly on the goods but on the manufacture thereof. The manufacturer could
not be taxed unless manufacturing process resulted in pro- duction 'of goods as
known in the market'. The expression "goods manufactured or produced"
must refer to goods which are capable of being sold to the consumer. [389B-C;
391F] Union of India v. Delhi Cloth and General Mills, [1963] Suppl.
1 S.C.R. 586; South Bihar Sugar Mills Ltd. etc. v. Union of India & Ors, [1968] 3 S.C.R. 21; Union
Carbide India Ltd. v. Union of India, [1986] 2 S.C.C. 547; Governor General in Council v.
Province of Madras, [1945] 7 F.C.R. 179; In Re. the Bill to Amend S. 20 of the
Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944,
[1964] 2 S.C.R. 787; applied.
3.
Simply because a certain article falls within the Schedule it would not be
dutiable under excise law if the said article is not 'goods' known to the
market. Marketabil- ity, therefore, is an essential ingredient in order to be
dutiable under the Schedule to the Central Tariff Act, 1985. [392F-G]
3.1.
In the instant case, the Crude PVC films as pro- duced by the appellant were
not known in the market and could not be sold in the market and were therefore
not capable of being marketable. [392G-H]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 2820 of 1984.
From
the Order dated 25.4.84/4.5.84 of the Customs Excise and Gold (Control)
Appellate Tribunal, New
Delhi in Appeal No. F.D.
(SB)(T) A. 999/80-C in Order No. 223/84.
Harish
N. Salve, Mrs. P.S. Shroff, J.M. Patel and S.A. Shroff for the appellant.
B. Dutta,
Additional Solicitor General, Ms. Indu Malho- tra and C.V.S. Rao for the
respondent.
The
Judgment of the Court was delivered by 385 SABYASACHI MUKHARJI, J. This is an
appeal under Section 35L of the Central Excises and Salt Act, 1944 (hereinafter
referred to as 'the Act') from the order passed and judgment delivered on 25th
April, 1984/4th May, 1984 by the Customs, Excise and Gold (Control) Appellate
Tribunal, New Delhi (hereinafter referred to as 'the Tribunal'). The question
involved is whether the crude PVC film is dutiable. The appellant is, inter alia,
a manufacturer of crude PVC films for the purpose of use in final products such
as leather cloth and laminate jute mattings and PVC tapes--both insula- tion
and adhesive. The said crude PVC films are manufactured by the appellant in a
continuous process in the factory premises of the appellant which are licensed
premises under the Act. The appellant filed classification list No. XIV/75
dated 20th November,
1975 in respect of
crude PVC films used for lamination with jute and for tapes claiming that the
said PVC films were non-excisable on the ground that the same were non marketable
intermediate products used exclu- sively for captive consumption. The said
classification was approved by the Assistant Collector, Central Excise on 9th December, 1977.
There
was an order passed by the Appellate Collector on 14th June, 1974 holding that crude PVC films were not mar- ketable and were
not liable to excise duty. It is necessary to refer to the Tariff Entry
involved in this case. Tariff Item 15-A(2) of the Central Excise Tariff reads
as follows:
"Articles
made of plastics, all sorts includ- ing tubes, rods, sheets, foils, sticks,
other rectangular or profile shapes. whether lami- nated or not, and whether
rigid or flexible, including levy flat tubings and polyvinyl chloride sheets,
not otherwise specified." The same crude PVC films which have been
manufactured by the appellant and used in the manufacture of some other end
product were subject-matter of adjudication by the concerned authorities in the
period 1.3.1970 to 29.5.1971. The Appel- late Collector of Central Excise in an
order dated 14th January, 1974 held that the said PVC films manufactured by the
appellant are not marketable intermediate products and hence not liable to
duty. The Appellate Collector, Central Excise in his order noted the
contentions of the appellant that the appellant had produced sufficient
evidence to prove that the crude PVC sheets which were the subject-matter of
the Show Cause Notice in that case and which are also the subject-matter of the
present show cause notice were not known in the market as PVC sheets nor were
386 these marketable as PVC sheets. After reference to the rival contentions,
the said Appellate Collector in his order held, inter alia, as follows:
"PVC
films/sheets for the clearance of which demand letters are issued are not
marketable as the same are neither embossed nor printed nor any finishing Work
is done when compared to PVC films/sheets which are marketed by them. It was
further stated that the tensile strength of PVC sheets which is marketed by the
appellants is as per the international standards laid down by A.S.T.M./I.S.I.
and is much higher than the crude PVC sheets manufac- tured by them as an
intermediate product for further manufacture of leather cloth. As such, it was
contended that the product manufactured by the appellants is not liable to
central excise duty. Shri Patel further stated that it was not necessary to
prove from technical angle that the curde PVC sheets manufactured by the
appellants for manufacturing leather cloth are different from PVC sheets which
are manufactured by them and sold in the market as such. Crude PVC sheets used
in the appellants' factory for further manufacture of leather cloth can be
distinguished from PVC sheets which are marketed by them as such by naked eye.
Moreover, all the processes which are required in case of PVC sheets which are
marketed by the appellants so as to make these sheets marketable are not
carried out in the case of crude PVC sheets which are used by the appellants in
their factory for the manufac- ture of leather cloth ........" The
Appellate Collector further held in the said order that from the technical
point of view, crude PVC sheets are different from marketable PVC sheets
inasmuch as the tensile strength of crude PVC sheets is much lower than that of
marketable PVC sheets. He further held that:
"This
is so because marketable PVC sheets are passed through the calender at very
high temperature and at a slow speed to that gela- tion/curing fusion takes
place while in the case of crude PVC sheets, the same are passed through the calender
at very fast speed and lower temperature with the result that gela- tion fusion
in the course of heating and ageing is not formed resulting in lower ten- sile
strength. When these crude PVC sheets are coated with textile 387 fabrics, the
two layers are passed through the rollers at slow speed and at high temperature
and it is only at this stage that the GEL is properly formed and resin
particles become swollen by diffusion of plasticizer into them that they touch
each other. As heating progresses, the swollen particles begin to weld
together, resulting in the required degree of strength." Thereafter, the
Classification List was filed in respect of crude PVC films manufactured for
use in adhesive tapes on 9th December, 1975 and the said list was approved by
the Assistant Collector of Central Excise after making an in- quiry in that
behalf. On 15th February, 1977, however, a Show Cause Notice was issued by the
Assistant Collector, calling upon the appellant to show cause as to why crude
PVC films should not be classified under teriff Item 15A(2) and appropriate
duty not recovered under Rule 10 of the Central Excise Rules, as these then
stood, read with Rule 173-J of the Central Excise Rules. There was a
corrigendum issued on February
23, 1977 to the said
Show Cause Notice dated 15th
February, 1977
substituting the words 'Rule 10' by the words 'Rule 10A'. A reply was given by
the appellant to the said Show Cause Notice. In the said reply, the appellant
stated as follows:
"We
have repeatedly pointed out that the issue of "Crude Film" has been
decided by the Appel- late Collector and also by the Assistant Collector while
approving classification.
However,
the Superintendent persisted in pressing us for giving information about
production figures of 'Crude Film' possibly with a view to raise demand. We had
requested the Superintendent to let us know the provi- sion under which he
required us to give the information in regard to a product which was
non-excisable. He was not able to clarify this and tried to invoke wrong
sections and rules according to us. The present action of re- classification,
in order to make the product excisable some how or other, seems to us to be a
continuation of the matter which the Super- intendent was not able to enforce on
us. There is no change in the market terminology of "PVC Film". Our
product is not known in the market as "PVC Film". Even technically
also a further process is required to be carried out on our product before it
is "PVC Film" as is known to the market. The various decisions of
Supreme Court on this point are well-known to the Department. It is also known
388 that the Appellate Collector's decision is binding on you. The principles
of natural justice cannot be served by serving a show cause notice on us in
order to change the Appellate Collector's decision in some manner or other. We
have an uneasy feeling that an attempt is being made to some how bring the
product under excise duty." There was an order passed on 16th February, 1978 by the Assistant Collector
confirming the Show Cause Notice. On 10th October, 1979 an appeal was preferred by the
appellant against the order of the Assistant Collector dated 16th February, 1978 which was rejected by the Appellate
Collector of Central Excise. On 6th February, 1980 a revision applica- tion was preferred, by the appellant to
the Joint Secretary, Government of India. That was transferred to the Tribunal
and by the impugned order, the Tribunal has rejected the appeal under
challenge.
The
Tribunal in the order has set out the contentions and observed that the
question for determination was whether crude PVC film fell for classification
under Item 15A(2) of the Central Excise Tariff or not. A submission was made
that the Appellate Collector had held that the crude PVC sheets were not
marketable and had not acquired the character and status of PVC films as known
to the market. It was contended on behalf of the appellant that only marketable
PVC film would fall within the said item. On the other hand, the Department's contention
was that there was nothing to show that the film/sheet was crude and the test
of marketability was not relevant. According to the Tribunal, the crude PVC
films/sheets would fall under the Tariff Item. The Tribunal was of the view
that the tariff entry did not spell out whether it covered only finished
film/sheet or whether it covered also crude film/sheet. The Tribunal came to
the conclusion that the tariff item covered all types of films/sheets. The
Tribunal also came to the conclusion that the concept of marketability was not
relevant and all sorts of crude films would be covered by the entry.
The
Tribunal was of the view that the Appellate Collec- tor's observations were
made entirely in different context.
In
that view of the matter, the Appellate Collector's order was confirmed subject
to the modification that duty in respect of clearances prior to the issue of
the Show Cause Notice was restricted to the period permissible in terms of Rule
10 read with Rule 173-J, that is to say, for 12 months.
In
other words, the Tribunal's view was that if the descrip- tion of the 389 goods
in question fell into the entry, it was dutiable in the intermediate list and
as such the goods had become goods as known to the market and the question of
marketability or being capable of being sold in the market was not relevant.
In
support of this appeal, on behalf of the appellant, it was contended by Shri Harish
Salve that it was only the 'goods as specified in the Schedule' to the Central
Excise that could be subject to the duty. 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 a 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 a goods. That was necessary. This has been clearly spelt
out by this Court in Union of India v. Delhi Cloth & General Mills, [1963]
Supp. 1 SCR 586. There this Court held that excise duty being leviable on the
manufacture of goods and not on their sale, the manufacturer could not be taxed
unless manufacturing process resulted in production 'of goods as known in the
market' (empahsis supplied). In that case, the respondents, who were
manufacturers of vegetable products known as Vanas- pati, were assessed to
excise duty under Item 23 of the First Schedule to the Central Excises and Salt
Act, 1944, on what the taxing authorities called the manufacture of 'r- efined
oil' from raw oil which according to them fell within the description of
"vegetable non-essential oils, all sorts, in or in relation to the
manufacture of which any process is ordinarily carried on with the aid of
power". The common case made by the respondents in their petition under
Article 226 of the Constitution challenging the imposition was that for the
purpose of manufacturing Vanaspati they purchased groundnut and til oil from
the market and subjected them to different processes before applying
hydrogenation to produce Vanaspati and that nothing that they produced at any
stage was covered by that item. Affidavits by experts were filed by both the
parties and the High Court found in favour of the respondents and allowed the
petitions. The Union of India appealed. It was urged on its behalf before this
Court that before finally producing Vanaspati the respondents produced at an
intermediate stage what was known as 'refined oil' in the market and although
they might not sell it and although Vanaspati, when produced, was liable to
excise duty under another item, that could not affect their liability.
It was
held that excise duty being leviable on the 390 manufacture of goods and not on
their sale, the petitioners in that case no doubt be liable if they produced
'refined oil', as known in the market, at an intermediate stage. But the Court
found that it was clear that there could be no 'refined oil' as known in the
market without deodorisation according to the specification of the Indian
Standards Institute and the affidavits of the experts. Since, however, the
process of deodorisation was admittedly applied in the respondents' factories
only after hydrogenation was com- plete, they could not be said to produce
'refined oil' at any stage. Nor could the respondents be held to manufacture
some kind of 'non-essential vegetable oil'. K.C. Das Gupta, J., who spoke for
the Court, at page 595 of the report, observed as follows:
"On
a consideration of all these materials we have no doubt about the correctness
of the respondents' case that the raw oil purchased by the respondents for the
purpose of manufac- ture of Vanaspati does not become at any stage
"refined oil" as is known to the consumers and the commercial
community." After considering the definition of the word 'manufac- ture'
and several authorities and Words and Phrases, Perma- nent Edition, Vol. 18,
from a judgment of the New York Court and also other relevant authorities, this
Court held that the definitions made it clear that to become "goods"
an article must be something which can ordinarily come to the market to be
bought and sold. (Emphasis supplied). In that view of the matter this Court
agreed with the High Court and dismissed the appeal. Therefore, the first
principle that emerges is that excise was a duty on goods as specified in the
Schedule. In order to be goods an article must be some- thing which can
ordinarily come to the market and is brought for sale and must be known to the
market as such. Therefore, the marketability in the sense that the goods are
known in the market or are capable of being sold and purchased in the market is
essential. This principle was again reiterated by this Court in South Bihar
Sugar Mills Ltd., etc. v. Union of India & Ors., [1968] 3 SCR 21, where
this Court held that the gas generated by the appellant companies in that case
was kiln gas and not carbon dioxide as known to the market, i.e., to those who
deal in it or who use it. Therefore, the kiln gas in question is neither carbon
dioxide nor com- pressed carbon dioxide known as such to the commercial
community and could not attract duty under Item 14-H of the First Schedule. It
was held by this Court that the duty being on the manufacture and not on the
sale, the mere fact that kiln gas generated by those concerns was not actually
391 sold did not make any difference if what they generated and used in their
manufacturing process was carbon dioxide.
Justice
Shelat speaking for the Court at page 31 of the report observed:
"The
Act charges duty on manufacture of goods.
The
word "manufacture" implies a change but every change in the raw
material is not manu- facture. There must be such a transformation that a new
and different article must emerge having a distinctive name, character or use.
The
duty is levied on goods. As the Act does not define goods, the legislature must
be taken to have used that word in its ordinary, dictionary meaning. The
dictionary meaning is that to become goods it must be something which can
ordinarily come to the market to be bought and sold and is known to the market.
(emphasis
supplied). That it would be such an article which would attract the Act was
brought out in Union of India v. Delhi Cloth & General Mills Ltd., [1963] Suppl
1 SCR 586." In that view of the matter, the Court came to the conclusion
that the gas generated by these concerns was kiln gas and not carbon dioxide as
known to the trade, i.e., to those who deal in it or who use it. It must be
capable of being sold in the market and known in the market as such. Then only
it would be dutiable.
This
view was reiterated again in Union Carbide India Ltd. v. Union of India, [1986]
2 SCC 547 where Pathak, J. as the learned Chief Justice then was, speaking for
the Court observed that in order to attract excise duty the article
manufactured must be capable of sale to a consumer. The expression "goods
manufactured or produced" must refer to goods which are capable of being
sold to the consumer. This Court observed as follows:
"It
does not seem to us that in order to attract excise duty the article
manufactured must be capable of sale to a consumer. Entry 84 of List I of
Schedule VII to the Constitu- tion specifically speaks of "duties of
excise on tobacco and other goods manufactured or produced in India ....
", and it is now well accepted that excise duty is an indirect tax, in
which the burden of the imposition is passed on to the ultimate consumer. In
that context, the expression "goods manufactured or produced" must
refer to articles which are capable of being sold to a consumer. In Union of India v. 392
Delhi Cloth & General Mills, this Court con- sidered the meaning of the
expression "goods" for the purposes of the Central Excises and Salt
Act, 1944 and observed that "to become 'goods' an article must be
something which can ordinarily come to the market to be bought and sold",
a definition which was reiterated by this Court in South Bihar Sugar Mills Ltd.
v. Union of India." It is necessary in this connection to reiterate the
basic fundamental principles of excise. The Judicial Commit- tee of the Privy
Council in Governor General in Council v. Province of Madras, [1945] F.C.R.
179, this Court observed at page 1287 of the report that excise duty was
primarily a duty on the production or manufacture of goods produced or
manufactured within the country. This Court again in Re The Bill to Amend S. 20
of the Sea Customs Act, 1878, And Sec- tion 3 of the Central Excises and Salt
Act, 1944, [1964] 3 SCR 787 at page 822 of the report referring to the
aforesaid observations of the Judicial Committee reiterated that taxable event
in the case of duties of excise is the manu- facture of goods and the duty is
not directly on the goods but on the manufacture thereof. Therefore, the
essential ingredient is that there should be manufacture of goods.
The
goods being articles which are known to those who are deal- ing in the market
having their identity as such. Section 3 of the Act enjoins that there shall be
levied and collected in such manner as may be prescribed duties of excise on
all excisable goods other than salt which are produced or 'man- ufactured' in
India. "Excisable goods" under section 2(d) of the Act means goods
specified in the Schedule to the Central Tariff Act, 1985 as being subject to a
duty of excise and includes salt. Therefore, it is necessary, in a case like
this, to find out whether there are goods, that is to say, articles as known in
the market as separate distinct identi- fiable commodities and whether the
tariff duty levied would be as specified in the Schedule. Simply because a
certain article falls within the Schedule it would not be dutiable under excise
law if the said article is not "goods" known to the market.
Marketability, therefore, is an essential ingre- dient in order to be dutiable
under the Schedule to Central Tariff Act, 1985.
It
appears from the facts as aforesaid before that the crude PVC films as produced
by the appellant in this case were not known in the market and could not be
sold in the market and was not capable of being marketable.
The
learned Solicitor General submitted before us that the Tri- 393 bunal was right
in considering that as the article fell within the Entry the marketability was
irrelevant and the Tribunal was right in not considering whether the articles
in question, namely, crude PVC films used in this case, were marketable or
capable of being sold and used in the market.
Mr Harish
N. Salve on the other hand submitted that as it was found that the goods were
not marketable by the Appellate Collector in the order of 1974 and no evidence
was adduced before the Tribunal to the contrary and the Tribunal refused to
consider the question of marketability no useful purpose would be served in
remanding the matter to the Tribunal. The appeal should be allowed and no duty
should be charged.
As
mentioned before, the Appellate Collector has on 14.1. 1974 held that the crude
PVC sheets/films which formed the subject-matter of the appeal are manufactured
by the appellant for the production of leather cloth in the factory are not
marketable as PVC sheets and had allowed the appeal because he found that:
"
.... because PVC sheets of the gauges manufactured by the appellants are
invariably either embossed or printed or both. The nature of embossing may be
with an engraving roll or with a mirror finished roller or a mat finish.
The
manufacture or PVC sheets marketable as such involves the following processing
se- quences, namely: Polyvinyl chloride resin is formulated with plasticizer,
colorants, heat stabilizers, etc. and the formulation is thoroughly mixed. When
homogeneous, this mix is fed through a two roll mill to give heavy sheet stock,
which in turn is fed to the calender, where it is reduced to the desired width,
thickness etc. The temperature at which PVC sheets which are marketed as such
are passed through the calender is about 178o C (330 - 350x) and the speed of
the roller is adjusted accordingly. The speed of the roller and the temperature
at which the sheets are passed through the calender are important factors in
order to achieve the minimum stand- ard of tensile strength of the sheets. Gela-
tion, i.e., the change of state from the liquid to the solid condition that
occurs during the heating and/or ageing, when the plasticizer has been absorbed
by the resin to an extent resulting in a dry but weak and crumbly mass, and
thereafter within normal proportions of resin and plasticizer, this state is
394 attained when the resin particles have become so swollen by diffusion of
plasticizer into them that they touch each other, is an impor- tant process in
the case of PVC sheets which are marketed as such. As heating progresses the
swollen particles begin to weld together, resulting in some degree of strength.
After the GEL is formed in such PVC sheets and resins get fused with plastisizer,
they are further subjected to the processing of finish- ing,
embossing/printing. On the other hand, crude PVC sheets manufactured by the appel-
lants for production of leather cloth in their factory are passed through the
rollers at a temperature of 130o - 1400 (280 F) and the speed of the roller is,
therefore, faster. Due to low temperature and faster speed of the rollers
fusion is not completed in such crude plasticizers thus resulting in the
tensile strength of such crude PVC sheets which is much less than the tensile
strength of the PVC sheets which are marketable as such. The tensile strength
of PVC sheets which are marketed as such and the crude PVC sheets which are
used by the appellants in their factory for the manufacture of leather cloth
are as under:
(1)
Marketable PVC sheets Thickness Tensile strength Per cm. sq. in Kgs. Longitudinal
Transverse 0.08 mm 239 185 O. 10 mm 230 201 O. 15 mm 268 2 13 0.20 mm 230 200
(2)
Crude PVC sheets Thickness Tensile strength Per cm. sq. kgs. Longitudinal
Transverse O. 11 mm 127 98 0.22 mm 144 107 The thickness of crude PVC sheets of
O. 11 mm ultimately comes to 10 mm when it is coated with textile fabrics and
rolled.
Similarly,
the thickness of crude PVC sheets of 0.22mm ultimately comes to when it is
coated with fabrics and rolled.
395
The idea behind producing crude PVC sheets at low temperature and at high speed
of the rollers is that when such crude PVC sheets are coated with textile
fabrics and passed through a coating machine, high temperature is required to
be maintained and the speed at which the rollers move has also got to be slow
so that these partially fused crude PVC sheets are eventually fully fused at
the time of coating these sheets with textile substrates.
No
finishing, embossing or printing is done in case of such crude PVC sheets. I,
therefore, hold that the crude PVC sheets manufactured by the appellants are
used by them in the manu- facture of leather cloth in their factory are not
marketable as PVC sheets and as such the same are not liable to duty under Item
15A(2) of the said Schedule." In view of the Appellate Collector's order
dated 14.1.1974 it was the duty of the revenue to adduce evidence or proof that
the articles in question were goods. No evi- dence or proof was produced. The
Tribunal went wrong in not applying the proper test. The test of marketability
or capable of being marketed was not applied by the Tribunal.
In
that view of the matter that there being no contrary evidence found by the
Tribunal in this case subsequent to the finding by the Appellate Tribunal, we
are of the opinion that the appeal should be allowed and no excise duty should
be charged under section 15A(2) of the Central Excise Tariff on the Crude PVC
sheets. In the facts and circumstances of the case, there will be no order as
to costs.
T.N.A.
Appeal allowed.
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