Customs, Excise and Gold Tribunal - Mumbai
Mohan Rocky Springwater Breweries Ltd. ... vs The Commissioner Of Central Excise on 19 September, 2003
ORDER S.S. Sekhon, Member (T)
1. These two appeals are being disposed of by this Order since the issue involved in them is the same. The issue is whether 'WORT' which comes into existence, during the Brewing of 'Beer' in a Brewery which the appellants are engaged in, would be classified under heading 1901.91 of the Central Excise Tariff Act 1985. This 'WORT' which is captively consumed after it comes into existence in the Composite Brewery could be charged to duty under the Central Excise Act.
2. After hearing both sides and considering the material on record it is found
a) The 'WORT' is an intermediate product. The Show-cause notices issued in both these cases, do not bring out any material to indicate how the intermediate product 'WORT' is marketable. It is now well settled that for levy of duty under the Central Excise Act 1944 on an intermediate product, establishing it's marketability is essential. The Apex Court in the case of Cadila Laboratories Pvt. Ltd., v. CCE Vadodara (2003 (152) ELT 252 SC had held that the burden of proof of marketability of an intermediate product, is to be discharged by the Department. Orders passed on the basis that the subject goods "conceivably sold" can not be sustained as in the present case.
b) It is found that the Commissioner has found as regards the salability as follows:
"As per salability of the 'wort', I find that assessee have claimed that wort is not liable to duty since the same is not a saleable product. In this regard I find that, merely because the assessee have consumed the product in question captively and are not selling, will not turn the same into non-marketable product. I find that the word marketability only enshrined capable of being bought and sold (Indian Cable Co. Ltd. v. CCE Calcutta-1994 (74) ELT 22 (SC)."
The law on the levy of duty on intermediate goods captively consumed has been well settled since the case of UOI v. Delhi Cloth & General Mills Co. Ltd., (1977 (1) ELT (J 199) (SC) by a Constitutional Bench, wherein it has been held "17. These definitions make it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold by merchants and traders"
This binding decision has been followed by the Supreme Court in a series of decisions including the decision in the case of Indian Cable Company Ltd., (1994 (74) ELT 22) (SC), relied upon by the adjudicator. In this case a full bench had held 'marketability' is a decisive test for 'dutiability'. It only means "salability" or "suitable for sale". It need not be infact "marketed". The article should be capable of being sold or been sold to consumers in the market as it is i.e. without anything more. Thereafter observing in the facts of the Indian Cable Company case that the Tribunal was swayed by the fact that conversion of PVC resin into PVC compound by the process employed by the appellants amounted to manufacture, within the meaning of Section 2(f) of the Act by itself will justify the levy of duty was a impalpable error committed by the Tribunal and the matter was remanded back to the Tribunal to consider the appeal afresh. In the cases before us, in absence of any material in the Show-cause notice to accept the marketability or salability of the product, the matter cannot be remitted back to the learned adjudicator for redetermining the question of marketability, since he had no material to conclude on salability as arrived at it could be only an assumption. The onus of proving marketability can not be discharged.
c) The submissions have been made that under the control of Brewery Officer of State Excise, the goods in question could not be marketed. In this connection, we would like to follow the decision of the Delhi High Court Division Bench in the case of Delhi Cloth and General Mills Ltd. and Ors. [1977 (1) ELT J 199] wherein the court after considering the fact that excisability of goods is often regulated by law and unless the relevant rules are complied with, the goods could not be exchanged and that may be an additional reason, why 'WORT' may not be "goods". In the facts of that case, the marketability of calcium carbide was not upheld since Chapter III of carbide of calcium rules 1937, made under the Act, 1934, prohibited the transport of Calcium carbide, it's storage, it's delivery or discharge and it's sale, except after complying with the directions prescribed there under. And since those conditions were not complied with they held that the calcium carbide in that case was not 'goods'. In this case also the plea has been made, before us that controls prescribed under the Maharashtra State enactments viz., manufacture of Beer and Wine Rules, 1966, where it is mentioned at different rules, the process is in the control of a Brewery Officer/ (excise) and no removals of 'WORT' could be effected without his permission. This plea of the appellant was to be dealt with by the Commissioner and a finding arrived at how the goods would still be marketable. The plea, does lead to a conclusion that the tests, prescribed by the Apex court in Delhi Cloth and General Mills case [1977 (1) ELT J 1999] of the goods ordinarily coming to the market to be bought and sold by merchants and traders has not been applied by the investigators and the Commissioner to the 'entity' 'WORTS', no evidence on records points to 'WORTS', no evidence on records points to 'WORTS' passing this test.
d) Since the order is not being upheld on the ground of lack of evidence of removal and capable of Pragmatic Marketing for 'WORTS' to become 'goods' in the facts of these cases, the question on the other aspect of it's classification under the heading as proposed can not arise, since it is 'goods' that are to be classified under the tariff. Once the 'entity' is not held to be 'excisable goods' as per Apex Court decisions, classification there of is not called for.
e) In view of our findings, the order is required to be set aside and appeals allowed.
3. These two appeals are disposed of in the above terms.
(Pronounced in open Court on 19/09/2003).