M/S. Nicholas Piramal
India Ltd Vs Commissioner of Central Excise, Mumbai
JUDGMENT
Dr. MUKUNDAKAM
SHARMA, J.
1.
The
short question which arises for determination in this Civil Appeal filed by the
Assessee under Section 35L(b) of the Central Excise Act, 1944 is whether
"Vitamin A Acetate Crude" and "Vitamin A Palmitate"
(hereinafter referred to as the product in question) or "Crude Vitamin
A" is excisable to duty.
2.
The
present appeal filed by the appellant - assessee herein under Section 35L(b) of
the Central Excise Act, 1944 1 (hereinafter referred to as `the Act') arises
out of an order dated 16.05.2002 passed by the Customs, Excise Gold Control
Appellate Tribunal, West Zonal Bench at Mumbai (hereinafter referred to as `the
CEGAT') in appeal No. E/2404/96-Bom holding that "crude vitamin A" is
marketable and hence liable to duty.
3.
The
appellant assessee is engaged in the manufacture of Vitamin A in a finished and
marketable form. These are cleared on payment of applicable excise duties under
Heading 29.36 of the Schedule to the Central Excise Tariff Act, 1985. The
assessee is also engaged in the manufacture of animal feed supplements with the
brand name `Rovimix' (now called `Endomie') and `Rovibe' (now called
`Endobee').
4.
During
the intermediate stage of manufacture of vitamin A, "Vitamin A Acetate
Crude" and "Vitamin A Palmitate" or Vitamin A in its crude form
emerges. The crude Vitamin A acetate is subjected to further process of
crystallization using Methanol and the crystals centrifuged and dried to obtain
finished Vitamin A, which is marketed by the appellant.
5.
Five
show cause notices were issued to the appellant demanding excise duty on the product
in question 2consumed by the appellant in the manufacture of animal feed
supplements. Adjudicating upon these five show cause notices issued to the appellant,
the Commissioner confirmed the liability to duty for the goods manufactured and
cleared between December 1989 and February 1995and imposed a penalty on the
appellant. The relevant portion of the finding of the Commissioner is
reproduced herein : "SOURCE: MARTINDALE - THE EXTRA PHARMACOPOEIA From the
above it can be seen that this is a commercially known and marketable product. Merely
because it is unstable at room temperature does not exclude it from commercial
marketability. Intermediate goods of distinctly and differently known in the
commercial sense of the word constitute manufacture under Section 3 of Central
Excises & Salt Act, 1944. Vitamin A acetate crude and Vitamin A Palmitate
are different commercial item from that of Rovimix and Rovibe. It is also known
in different pharmacopoeia as such. Merely because the company has not sold the
product does not exclude it from the purview of commercial marketability. It
has to be kept in an oxygen free environment to prevent oxidizing by other agents
which similarly is the case in many drugs and chemical compositions. The fact
that it has no standard specification and potency does not exclude it from
distinct commercial entity as it still remains Vitamin A acetate and Vitamine A
Palmitate. Apart from the aforesaid the Tariff head 2936.00 of Central Excise
Tariff Act, 1985 covers "Provitamins and Vitamins, natural or reproduced
by synthesis (including natural concentrates), derivatives thereof used primarily
as Vitamins and intermixtures of the foregoing whether or not in any solvent
and Vitamin A acetate and Vitamin A Palmitate clearly falls within the
parameter of this Tariff head. This clearly indicates that there are commercially
marketable entities and supports the earlier arguments of distinct commercial entity"
6.
The
Tribunal considered the entire facts and the records and on appreciation
thereof, upheld the finding of the Commissioner. The Tribunal also considered
the fact that nobody would manufacture a pharmaceutical of such purity unless
the manufacturer was interested in its sale. The Tribunal however remanded the
matter back to the adjudicating authorities for the purposes of determining the
valuation of the products in question.
7.
So
far the other issue with regard to demands being barred by limitation was
concerned, the Tribunal held that the show cause notice dated 29.12.1994 would
be barred by limitation for the period from February 1993 to October 1993 but
so far other three notices relating to the period 4 November 1994 to April
1994, May 1994 to October 1994 and November 1994 to February 1995 were
concerned, they were held to be within limitation. The aforesaid findings and
conclusions arrived at by the Tribunal are under challenge in this appeal on
which we heard the learned counsel appearing for the parties.
8.
The
Counsel appearing for the appellant submitted that crude vitamin A, on which
duty is being demanded by the Revenue is an intermediary and that such demand
is untenable and unjustified inasmuch as the said product cannot be termed as
"goods" and is incapable of being marketed, particularly in view of
the fact that the life of the item would not be more than two days. He also
submitted that the burden to prove the "marketability" of a product would
always rest on the respondent and that the department has failed to lead any
evidence indicating its capability of being marketed, particularly owing to the
fact that it is unstable if it is not stored in sub-zero degree centigrade. He
also submitted that the anti-oxidants which are needed to give stability to the
product are not added to the crude vitamin A separately but are added to crude vitamin
A simultaneously along with other ingredients in a single operation to obtain
the final product, namely the animal feed supplement and therefore demand
raised by the Revenue is unwarranted. In support of his submissions, 5 reliance
was placed on Union of India v. Delhi Cloth and General Mills Co. Ltd reported
in (1997) 5 SCC 767; Nirlon Synthetic Fibres and Chemicals Ltd v. Collector of
C. Excise reported in 1996 (86) ELT 457; Hindustan Zinc Ltd v. CCE, Jaipur
reported in 2005 (181) ELT 170; CCE, Baroda v. United Phosphorus Ltd reported
in 2000 (117) ELT 529; Cipla Ltd v. CCE, Bangalore reported in 2008 (225) ELT
403.
9.
The
aforesaid contentions of the counsel appearing for the appellant were, however,
refuted by the counsel appearing for the respondent contending, inter alia,
that the products in question admittedly retain its properties for a period of
1- 2 days and therefore it is a marketable product. He also submitted
marketability of the said product is a finding of fact, having been so decided
by the Tribunal as also by the Commissioner and therefore, such a finding of
fact should not be disturbed unless the same is perverse. Reliance was placed
on T.N. State Transport Corporation Ltd v. CCE, Madurai reported in 2004 (116)
ELT 433; A.P. State Electricity Board v. CCE, Hyderabad reported in 1994 (70)
ELT
10.
The
taxable event for the levy of excise duty is the manufacture of goods. The term
"manufacture" is of wide import and may include various activities
and processes which may not be termed as `manufacture' in the common parlance.
But manufacture of goods alone is not enough. In order to attract the levy of
excise duty, the goods should not only be manufactured, i.e., come into
existence, but also should be articles or products that are known to the market
and must be capable of being brought and sold. Some emphasis has to be laid on
the use of the word capable as actual sale of the product or article is not
essential and required. This has been settled in a number of authorities of this
Court and no longer res integra. There cannot be any doubt that intermediate products,
even if captively consumed and not actually sold, may be liable to levy of excise
duty if they satisfy the test of both manufacture and marketability. The
aforesaid legal principle has been laid down by this Court in the judgments in
Hindustan Zinc Ltd. v. Commissioner of Central Excise, Jaipur, reported in 2005
(181) E.L.T. 170 (S.C.), Union of India v. Delhi Cloth & General Mills Co.
Ltd., reported in 1997 (92)E.L.T. 315 (S.C.), Cadila Laboratories Pvt. Ltd. v. Commissioner,
reported in 2003 (152) E.L.T. 262 (S.C.).In the decision in Hindustan Zinc Ltd.
(supra), decided by three Judge Bench of this Court, it was also held by this Court
that marketability of a product is essentially a question of fact.
11.
Therefore,
the question of marketability, being a question of fact, has to be determined
in the facts of each case and cannot be strait-jacketed into pigeon holes. The
orders passed by the Commissioner as also the Tribunal clearly demonstrate that
the product in question is commercially known and is capable of being marketed.
The facts that the appellants have chosen not to sell the product in question does
not mean that the same is not capable of being marketed. The matter can be
looked from another angle. There is also no dispute that the said product in
question is used in the manufacture of the animal feed supplement sold by the
Appellant. Had the Appellant not used the product in question, they would have
had to buy the same from the market to manufacture and sell the Animal Feed Supplement.
This clearly shows that a marketable product emerges.
12.
Furthermore,
in dealing with a question of fact, this Court should be reluctant in
interfering with concurrent findings of fact on the issue of marketability
unless it is shown that the said finding is perverse or patently illegal.
13.
One
of the arguments placed by the Counsel for the Appellant is that the product in
question does not have shelf-life and hence cannot be said to satisfy the test
of marketability. The said argument is contradicted by the 8 evidence adduced
by the Appellant themselves. It has been brought on record by the Appellants themselves
that the product has a shelf-life of 2 to 3 days. Short shelf-life cannot be
equated with no shelf-life and would not ipso facto mean that it cannot be
marketed. A shelf-life of 2 to 3 days is sufficiently long enough for a product
to be commercially marketed. Shelf-life of a product would not be a relevant
factor to test the marketability of a product unless it is shown that the
product has absolutely no shelf- life or the shelf-life of the product is such
that it is not capable of being brought or sold during that shelf-life. This Court
in T.N. State Transport Corporation Limited (supra) has held that a shelf-life
of 8 to 10 hours was enough to market the product in issue before the Court in that
case.
14.
It
was further urged by the counsel appearing for the appellant that the aforesaid
show cause notices for the remaining three periods were also barred by
limitation. However, the Tribunal found that while the show cause notice for
the period from February 1993 to October 1993 dated 29.12.1994 was barred by
limitation, but in so far as other three notices relating to the period
November 1994 to April 1994, May 1994 to October 1994 and November 1994 to
February 1995 were concerned, they were held to be within limitation. It is
also disclosed from the records that the appellant did not disclose to the
revenue that the assessee was manufacturing the aforesaid product. Assessee
also did not maintain an account and paid no duty on this. Therefore, the
Commissioner, Central Excise as also the Tribunal were justified in holding
that the extended period of limitation under proviso to Section 11A (1) of the
Central Excises & Salt Act, 1944 could be in vokable. We find no reason to
interfere with the said finding. In that view of the matter, demand made for
the aforesaid three periods cannot be said to be time-barred.
15.
In
coming to the aforesaid conclusion, both on merit and also on limitation, we
are supported by the Division Bench decision of this Court in T.N. State
Transport Corpn. Ltd. v. Collector of Central Excise, Madurai reported in 2004 (166)
E.L.T. 433 (S.C.). The facts of the said decision are almost similar to the
facts of the present case and almost identical issues which are raised in the
present appeal were also raised by the assessee in the said case. We,
therefore, draw our support from the ratio of the aforesaid decision in arriving
at the conclusion in the present case.
16.
We,
therefore, find no infirmity in the findings of facts arrived at by the
Commissioner of Central Excise, Mumbai- III as also the Tribunal. The appeal
stands dismissed but we leave the parties to bear their own costs.
.......................................J.[Dr.
Mukundakam Sharma]
........................................J
[Anil R. Dave]
New
Delhi,
November
29, 2010.
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