Customs, Excise and Gold Tribunal - Delhi
Graphite India Ltd. vs Collector Of Central Excise on 11 October, 1993
Equivalent citations: 1994(54)ECR273(TRI.-DELHI)
ORDER G.A. Brahma Deva, Member (J)
1. This is an Appeal preferred agains the Order-in-Appeal dt. 16.8.1985 passed by the Collector (Appeals), Calcutta.
2. The point to be decided in this case is whether 'Head Blocks' manufactured by the Appellants for captive consumption are classifiable as excise goods falling under T.I. 67 of C.E.T.
3. It was held by the Lower Authorities that Graphite Head Blocks manufactured by the Appellants for captive consumption are classifiable under Item 67 of the CET since the goods in question are having a commercial name and are also capable of being bought and sold. Further it was observed that the words 'all sorts' appearing in Tariff description, i.e. T.I. 67 cover Graphite Electrodes and Anodes all sorts (sic) including Graphite Head Blocks.
4. The nature and use of the product in question which is not in dispute, is as follows:
These Head Blocks are rectangular pieces of material and its use is located in the Graphitising furnace for the graphitisation of Electrodes and Anodes at high temperature. By its use in the furnace thee Head Blocks get worn of and broken when these are again replaced by fresh Head Blocks specially made by the Appellant for the purpose. This also can be called as an accessory to the furnace. These are used as conductor of electricity in graphitisation furnace.
5. Shri D.B. Desai, Ld. C.A. appearing for the Appellants submitted that marketability is the main criteria to decide whether particular item is excisable or not and since the item in question was not sold as a commercial commodity nor available for being bought and sold cannot be considered to be excisable goods to attract duty. Mere fact that item was captively consumed does not mean that it was capable of being sold as it was neither bought nor sold as such. He drew our attention to the finding-given by the Asstt. Collector that "there are very few manufacturer of Graphite Electrodes and Anodes in India who need these products which requirement they meet with by their own production in their factories and, therefore, the question of sale of such products does not arise at all". In support of his contention that to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold, to attract duty, he relied upon the following decisions:
1. Collector of Central Excise v. Amaratra Industries .
2. Cipla Limited v. Union of India ).
3. Union of India and Ors. v. Delhi Cloth and General Mills Co. Ltd. and Ors. 1977 ELT 0-199).
4. South Bihar Sugar Mills Ltd. and Anr. etc. v. Union of India and Anr. etc. and Tata Chemicals Ltd,. Bombay v. R.M. Desai, Inspector, Central Excise Mithapur and Ors. 1978 ELT J-336).
5. Union Carbide India Ltd. v. Union of India and Ors. .
He said that the excise duty is payable only on manufacture of goods which are perse marketable and so long as such marketable goods have not come into in (sic) existence no question of paying any central excise duty in respect thereof can arise as it was held in the case of Flocks (India) Pvt. Ltd. v. Govt. of India and Ors. 1983 ELT 197 (All). He argued that words "all sorts" appearing in the Tariff does not include the item in question as it was neither specified nor excisable and furthermore even if it is specified in the tariff it is not liable to excise unless it is marketable relying upon the ratio of the decision in the case of Bhor Industries Ltd. v. Collector of Central Excise . He also argued that burden lies on the Deptt. to prove that goods are marketable and in the absence of any evidence to show that they are capable of being marketed, the goods are not liable to excise duty and he relied upon the following decisions in support of his contention:
1. Jagatjit Cotton Textile Mills Ltd. v. Collector of Central Excise .
2. Hindustan Lever Ltd. v. Collector of Central Excise 1990 (49) ELT 409 (Tribunal).
3. L.M.L. Ltd. v. Collector of Central Excise .
6. Smt. Shanti Sundaram, Ld. SDR for the Revenue while countering the arguments submitted that item in question is having a distinct name and same has been used as conductor in graphitisation furnace. Since it is having a commercial name and is being used, that itself is sufficient to fulfil the condition of capable of being marketed. She submitted that the issue with reference to the same commodity in the very Appellants' case has already been decided by the Tribunal holding that Graphite Blocks are liable to duty classifying under T.I. 67 of the CET as reported in 1983 ECR-766-D. She also relied upon the decision in the case of Plasmy Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise wherein it was held that captive use is not determinative factor for classification but commercial meaning is to be given to expression in tariff entry.
7. In rejoinder, Shri Desai submitted that decision relied upon by the D.R is of different unit and it was decided by the Tribunal on altogether different grounds. The issue of excisabiliry is mainly depending upon the marketability of the item and furthermore observation made by the Tribunal in the aforesaid case on the issue of marketability is favourable to the party. He drew our attention to the relevant observation in para 23 of the said order wherein it was observed that "we find in the peculiar circumstances of this case, that the goods with which we are concerned, are unique in nature and not commonly found in market."
8. We have carefully considered the arguments advanced on both sides and perused the records including citations. On going through the decision in the case of Graphite India Ltd. v. Collector of Central Excise, Bangalore, we find that neither an issue of excisability was raised not considered as it was rightly pointed out by the counsel for the Appellants. By taking into consideration of the nature, character and use of the product with reference to the Dictionary meaning the item was classified under T.I. 67 of the CET as against the claim of the assessee under T.I. 68. Apart from distinct name, character and use of the product in question marketability is an essential ingredient to decide whether an article is excisable or not. The Tribunal has been consistently holding this view following the decisions of the Supreme Court and further burden is on the Deptt. to prove that item is marketable as such. Mere fact that it was captively consumed does not necessarily mean that it is capable of being bought and sold. The Deptt. has not brought on record any evidence to show that these goods were either sold or marketable as such. Under these circumstances, following the ratio of the decision of the Apex Court, we have no other alternative except to hold that the goods in question are not liable to excise duty.
9. In the result, we set aside the impugned order and the Appeal is allowed, accordingly.
Sd/- Sd/- (G.A. Brahma Deva) (K.S. Venkataramani) Member (J) 1.6.1992 Member (T) K.S. Venkataramani, Member (T)
10. The order proposed by the Hon'ble Member (Judicial) has been carefully perused and since my views in the matter do not coincide with those expressed by the Ld. Member (Judicial) the following separate order is proposed:
11. In the first instance, as to whether the Graphite Head Blocks, in question, are dutiable or not, it has to be established that there is a process of manufacture. On this aspect, there is a finding, which is un-contested, in the order of the Asstt. Collector that these head blocks are the result of manufacture out of C.P. Coke and Coal Tar Pitch and other ingredients and that it is the result of treatment, labour and manipulation. It has, further, been recorded on personal verification by the Asstt. Collector that these head blocks are used as conductors between the furnace and the bus bars. Further, according to the Appellants, these head blocks are used for the graphitisation of electrodes anodes and they have said that these can be called as accessories to the furnace and are used as conductors of electricity in graphitisation furnace. The precedent decision of the Tribunal in their own case in respect of the same product in 1983 ECR 766D (Cegat) has settled the classification of these products. The Tribunal has held that tariff entry item 67 CET relates to graphite electrodes and anodes all sorts which term is of wide amplitude and the head blocks are made of graphite and have the same chemical composition or properties as electrodes and had performed the basic function of an electrode, namely, as conductor of electricity and, therefore, the Tribunal held that graphite head blocks were classifiable under Item 67 CET. The Tribunal has also noted that the graphite head blocks are being manufactured by the Appellants for their own captive consumption and that this item is not commonly traded. Therefore, the Tribunal found that these are the goods which are specific type of goods put to a specified use and are not of such general nature which would have consumers outside the factory. The Tribunal observed that these goods have, thus, no use or meaning attached to that, except the one given to them by the Appellants. Paragraphs 22 and 23 of the Tribunal's Order, reproduced below, are also relevant:
The Appellants have also not shown that any other manufacturer in India is producing such type of goods so as to enable us to have a comparable data as to the nature of the product. Even the catalogue of the appellants (which is on record) does not contain any reference to these "graphite head blocks" as a separate entity, whereas they show the graphite electrodes as one of their main products.
We have thus to fall back in this case on the meaning of the term "electrodes" as can be understood from reference books as we find, in the peculiar circumstances of this case, that the goods with which we are concerned, are unique in nature and not commonly found in market. We, therefore, have to accept the dictionary meaning as relied upon by the Depttl. Representative, because the said dictionary meaning has at least the merit of being impersonal and objective, and is certainly to be preferred to the expert opinion given on request of the Appellants, but without support of any authority on the subject.
12. The Appellants have emphasised that these head blocks are not actually sold in the market and, therefore, they are not marketable and in the absence of such marketability, they cannot be considered as excisable goods. As against this, the Tribunal in its earlier decision, has already noted the fact that the goods are of specified type and not generally traded. This cannot be taken to support the proposition that the goods are not marketable at all. It may be useful in this context to refer to the decision of the Supreme Court in the case of Ambalal Sarabhai Enterprises v. Collector of Central Excise . The Supreme Court in that case had also considered the ratio of the Bhor Industries Ltd. v. Collector of Central Excise and observed that liability to excise duty arises only when there is a manufacture of goods which is marketable or capable of being marketed and the taxable event in the case of excise duties is the manufacture of goods. The Supreme Court observed "Under the Act, in order to be goods as specified in the Entry, it was essential 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 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 may be further noted that the Supreme Court in the case of Akbar Badruddin Jiwani v. Collector of Customs had held that there is no doubt that the general principle of interpretation of Tariff Entries occurring in taxing statute is of a commercial nomenclature and understanding between persons in the trade but it is also a settled legal position that the said doctrine of commercial nomenclature or trade understanding should be departed from in a case where the statutory content in which the Tariff Entry appears, requires such departure. It may be seen that the Tribunal, in its precedent decision in the case of same Appellants, had found that this principle is applicable in the present case. In the present case, the fact that the Appellants, who manufacture the head blocks, did not sell them in the market actually but consume them captively, will not by itself be sufficient ground to say that the goods are not marketable. It is not the Appellants' claim that the goods are not capable of being marketed for any reason such as having a very short shelf life or because the goods are of a volatile nature or for any other such reason. It is only because of the specific nature of the goods which is manufactured for specific purpose that these have not been marketed, in other words, unique nature of the goods noted by the Tribunal in its precedent decision. It is not the case of the Appellants that the graphite head blocks are incapable of being marketed. It is found from the records, as noted above, that these head blocks are manufActured out of certain raw-materials and the finished product is different from the original material and it is used, in the words of the Appellants, as an accessory to their furnace. The Tribunal has already found that the finished goods answers the description of the Tariff Entry Item 67 CET. In such circumstances, in the absence of evidence that these are incapable of being marketed and in the light of the Supreme Court decision in the case of Ambalal Sarabhai case (supra), it has to be held that the graphite head blocks are excisable goods correctly classifiable under Item 67 CET. In this view of the matter, the impugned order is upheld and the Appeal rejected.
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(K.S. Venkataramani) Member (T) POINTS OF DIFFERENCE
13. In view of the separate orders proposed by the two Members of the Bench, the following point of difference has arisen for being referred to a third Member by the Hon'ble President in terms of Section 129C(5) Customs Act, 1962 as made applicable to Central Excises & Salt Act, 1944:
Whether in the facts and circumstances of the case, the graphite head blocks produced by the Appellants can be held to be excisable goods classifiable under Item 67 CET or whether these graphite head blocks, not being marketable, are not goods at all, and, therefore, do not fall within the ambit of Central Excise Tariff.
Sd/- Sd/- G.A. Brahma Deva K.S. Venkataramani Member (J) dt. 9.6.1992 Member (T) P.K. Kapoor
14. The following point of difference has arisen between the Ld. Counsel Members who first heard the aforesaid matters.
whether in the facts and circumstances of the case, the graphite head blocks produced by the Appellants can be held to be excisable goods classifiable under Item 67 CET or whether these graphite head blocks, not being marketable, are not goods at all, and therefore, do not fall within the ambit of Central Excise Tariff.
15. During the course of arguments before the Ld. Members, the main point raised on behalf of the Appellants was that graphite head blocks could not be deemed as excisable goods since they are not marketable. In this regard it was contended that these goods are used only by the very few manufacturers of graphite electrodes who meet their requirements by their own production in their factories.
16. On the grounds that the Deptt. had not brought on record any evidence to show that graphite head blocks were either sold or marketable, the Ld. Member (Judicial) was held that the graphite head blocks are not liable to excise duty.
17. The Ld. Member (Technical) has on the other hand observed the following:
"It is not the Appellants' claim that the goods are not capable of being marketed for any reason such as having a very short shelf life or because the goods are of a volatile nature or for any other such reason. It is only because of the specific nature of the goods which is manufactured for specific purpose that these have not been marketed, in other words, unique nature of the goods noted by the Tribunal in its precedent decision. It is not the case of the Appellants that the graphite head blocks are incapable of being marketed. It is found from the records, as noted above, that these head blocks are manufactured out of certain raw-materials and the finished product is different from the original material and it is used, in the words of the Appellants, an accessory to their furnace. The Tribunal has already found the finished goods answers the description of the Tariff Entry Item 67 CET. In such circumstances, in the absence of evidence that these are incapable of being marketed and in the light of the Supreme Court decision in the case of Ambalal Sarabhai case (supra), it has to be held that the graphite head blocks are excisable goods correctly classifiable under Item 67 CET. In this view of the matter, the impugned order is upheld and the Appeal rejected.
18. On behalf of the Appellants Sh. B.D. Desai, the Ld. Chartered Accountant, appeared before me. He reiterated the submissions made before the Ld. Counsel Members and stressed that in their own case reported in 1983 ECR 766 D, despite the observations in Para 23 of the Order that graphite heads blocks were not marketable held that they would fall under Tariff Item 67 purely on the basis of technical considerations such as composition and use of the disputed product. He submitted that it is well settled that an article even though covered by any entry in the tariff schedule would not be excisable, unless the said article can be deemed as goods known to the market. He contended that the Appellants had been consistently claimed that the disputed graphite head blocks were not marketable but the Deptt. had failed to produce any evidence to establish that they were marketable, even though the burden was solely on them to establish that fact. In support of his contentions he cited the decision on which reliance was placed during the hearing before the Ld. Counsel Members.
19. On behalf of the Deptt. Smt. J.M.S. Sundaram the Ld. SDR stated that the question whether the disputed graphite head blocks were goods covered by Tariff Item 67 CET, had been settled by the Tribunals decision in the Appellants own case, reported in 1983 ECR 766 D. She added that under these circumstances the only issue which is required to be examined is whether the goods in question are marketable. She submitted that the observations of the Asstt. Collector in his order and by the Tribunal in Paras 22 and 23 of the earlier order in Appellants own case were based only on the Appellants categorical assertion that the item was not capable of being sold and the few manufacturers in the country were making their requirements by goods produced their own (sic) units. She filed a copy of an article titled "Carbon (carbon and Artificial Graphite)" from the Encyclopaedia of Chemical Technology (Third Edition Volume 4) by Kirk Othmer and stated that from the details at pages numbered 586 and 587, it was evident that the graphite head blocks which are also known as Head electrodes are very important components of Acheson Furnace which is used in graphite industry. She stated that Acheson Furnace which made the graphite industry possible had been imported by the few manufacturers of graphite in India and the foreign suppliers of such furnaces had been supplying graphite head blocks or graphite electrodes alongwith the furnaces for being used during the initial installation of the furnace and even if any graphite unit requires them as replacements. In this regard the filed copies of Bs/E No. 006451 dt. 16.4.1986, 003682 dt. 5.4.1986 and relative invoices both dt. 30.1.1986 and issued by M/s. IERS of Paris against which M/s. Hindustan Electro Graphite Ltd., had imported 5 cases containing Power Feeding Electrodes and cross pieces from their collaborators. She stated that from the documents filed by her it was evident that the disputed graphite head-blocks were articles having distinctive name, character and usage and they were not only capable of being brought to the market but in fact they were actually being marketed by certain internarurally (sic) recognised firms. She added that lack of regular sale transactions in such goods within the country was explained by the fact that each of the few existing manufacturers of graphite had imported Graphite Furnaces alongwith their initial requirements of graphite head blocks or electrodes from foreign suppliers and their requirements of such electrodes after the setting up of the unit are met by their own production. She contended that even though on account of the nature of the product, its limited requirement within the country and the capacity of the users to produce it within their own factory, the product is and vital component of the furnace, and is internationally traded. She contended that it has been held that the same tests of marketability cannot be applied to different products. In support of her submissions she relied upon:
1989 (49) ELT 408 Hindustan Lever Ltd. v. CCE Kores India Ltd. v. CCE Bombay She argued that under these circumstances the Appellants contention that the goods in question are not marketable has to be rejected.
20. In his rejoinder, Shri Desai stated the fresh evidence on which the Ld. SDR had relied upon in support of arguments on the question of marketability of the goods should be disregarded. He argued that in any case instances of one time supply of graphite head blocks or electrodes alongwith the furnaces cannot establish their marketability. He contended that to be dutiable the goods should such that they can ordinarily come to the market. He submitted the contention by the Ld. SDR that the earlier findings of the Asstt. Collector and the Tribunal in regard to the marketability of the product were based on the categorical assertion by the Appellant that the goods were not sold in the country, amounted to an admission that the Deptt. had failed to established that the goods in question were marketable. In support of his contentions he cited the following case law:
I) 1977 ELT J 199 Union of India and Ors. v. Delhi Cloth and General Mills Co. Ltd. and Ors.
II) 1978 ELT J 336 South Bihar Sugar Mills Ltd. and Ors. etc. v. Union of India and Anr. etc. and Tata Chemicals Ltd. Bombay v. R.N. Desai, Inspector, Central Excise, Mithapur and Ors.
III) (43)ELT 215(SC) CCE v. Ambalal Sarabhai Enterprises IV) (24) ELT 169 Union Carbide India Ltd. v. UOI and Ors.
21. I have considered the submissions made on behalf of both sides, it is seen that the only ground on which the Appellants have contested the exisbility of the disputed graphite head blocks on the grounds that they are not marketable. They have contended that the Deptt. has failed to produce any evidence to establish that they are marketable. They have also contended that the fresh evidence relied upon by the Ld. SDR in support of her submissions on the question of marketability of the goods has to be disregarded.
22. On behalf of the Deptt., the Ld. SDR has relied upon an article titled Carbon (Carbon and Artificial Graphite) by L. L. Winter of Union Carbide Corporation, at pages 576 to 588 of the Kirk-Othmer, Encyclopaedia of Chemical Technology, Third Edition, Volume 4. She has also referred to Two invoices issued of both, dt. 30.4.1986 issued by M/s. SERS of Paris, France in respect of sales of power Feeding Electrodes to M/s Hindustan Electro-graphite Ltd. (M.P), India and also the relative Bs/E. Nos 006451 dt. 16.4.1981 and 003682 dt. 5.4.1986 filed in Bombay Customs House for the clearance of these consignments of "Power Feeding Electrodes and Cross Pieces" Since the article on Carbon (Carbon and Artificial Grahpite) is in the nature of a research paper by a leading personality in his field and has been extracted from the Encyclopaedia of Chemical Technology, it can only be of great assistance in arriving at a finding as regards the nature and usage of the disputed product. Similarly the other documents filed by the Ld. two invoices which SDR (sic) have been referred to by the Ld. SDR and the relative copies of Bs/E which after clearance of goods are retained as part of the records of the Customs Deptt.. Since these documents were shown by the Ld. SDR to the Counsel for the Appellants and appear to be vital to the basic point of issue, I hold that they can therefore be taken on record even at this stage.
23. From the article on "Carbon (Carbon and Artifical Graphite)" by L.L. Winter we find that dispute graphite head blocks or 'head electrodes" are vital parts of 'Acheson furnaces" which has made the graphite industry possible.
The furnace that made the graphite industry possible was invented in 1895 by Acheson (11) and is still in use today with only minor modifications. It is an electrically-fired furnace capable of heating tons of charge to tempreatures approaching 3000 degree Celcius. The basic elements of the Acheson furnace are shown in Figure 5. The furnace bed is made up of refractory tiles supported by concrete piers. The furnace ends are U-shaped concrete heads through which several grahpite electrodes project into the pack. These electrodes, which are water-copied during operation, are connected by copper bus work to the secondary of a transformer.
Apart from the fact that the dispute 'graphite head blocks' have a distinctive name character and usage, it is also evident from the invoices issued by M/s. SERS, of France in respect of export of 'Power Feeding Electrodes" and the relative Bs/E. against which these goods were cleared by the consignees M/s. Hindustan Electro-Graphite Ltd., that these goods are marketable and they are in fact commonly bought and sold. In the case of Bhor Industries v. Collector of Central Excise the test of marketability laid down by the Hon'ble Supreme Court is that the article must be something which can ordinarily come to market and is brought for sale and must be known to the market as such. As discussed earlier from the copies of invoices and Bs/E relating to imports of certain consignments of graphite head block, it follows that these goods are not only capable of being sold but they are in fact bought and sold in the course of international trade. The absence of any regular market for such goods in India is evidently on account of the fact that the number of users of 'graphite head blocks' is insignificant and on seting up a graphite furnace a manufacturer acquires the capability of meeting his own requirements of such electrodes.
24. In view of the above discussion I hold that in respect of the goods in question the Deptt. has been able to demonstrate that the test of marketability is also satisfied. I therefore, agree with the findings of the Ld. Member (Technical).
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30.9.1993 P.K Kapoor Member (T) In the light of the majority view, as above, the impugned order is up-held and the Appeal is rejected.