Customs, Excise and Gold Tribunal - Delhi
Mehtachem Industries vs Collector Of C. Ex. on 16 March, 1999
Equivalent citations: 1999ECR148(TRI.-DELHI), 2000(116)ELT690(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In these two appeals, the common issue involved is whether the Petroleum Jelly is being manufactured by the Appellants Company M/s. Mehtachem Industries at the intermediate stage of manufacture of Boroquein Antiseptic Cream. As both the appeals arise out of a common order, the same are being disposed of by one common order.
2. Briefly stated the facts are that the Appellant Company manufactured Boroquein Antiseptic Cream. They were purchasing Petroleum Jelly from the Market and using the same in the manufacture of their final product up to 9-10-1986. Thereafter they started using Micro Wax, Paraffin Wax and liquid paraffin oil in place of Petroleum Jelly. The Chemical test of the final product revealed that the cream contained Tankan Amla, Jasat Bhasma, Lanolin and soft Paraffin base; that soft paraffin is synoymus to Petroleum Jelly. The Collector, Central Excise, therefore held in the impugned order that the Appellant Company had manufactured Petroleum Jelly which was an excisable goods and chargeable to duty for the period from 1-9-1987 to 31-8-1992. He also imposed a penalty of Rs. 6000/- on the Appellant company and Rs. 5000/- upon Shri Ashok Harilal Mehta, Partner.
3. Shri Devan Parikh, ld. Advocate, submitted that Shri Ashok H. Mehta, in his statement dated 21-9-1991 gave the process of manufacture of antiseptic cream. According to the statement, liquid paraffin oil was heated into which Paraffin Wax , Micro Wax and Anyhydrous Lanolin were added which when heated became liquid; the liquid was then transferred to Planatory mixture and Tankan Amla and Jasat Bhasma were added; that all the above were continuously mixed in planatory mixture and before it was solidified it was transferred to plastic basket; that after it was completely cooled, it was fed to tube filling machine where the tubes were fitted. He further submitted that it was apparant from the process of manufacture that at no stage Petroleum Jelly in identifiable form came into existence; that the only product that came into existence was antiseptic cream; that prior to the cream coming into existence, the bulk of raw materials is only in liquid form and in the form of mixture; that the claim of the department that Petroleum Jelly came into existence at an intermediary stage of production was contrary to the facts and the inference to that effect was sought to be drawn merely from the test report. He contended that unless a product known amongst the commercial community and identifiable as such comes into existence, it can not be regarded as goods. In support of his contention he relied upon the following decisions:
(i) Bhore Industrties v. C.C.E., 1989 (40) E.L.T. 280 (S.C).
(ii) C.C.E. v. Ambalal Sarabhai, 1989 (43) E.L.T. 214 (S.C).
(iii) Union Carbide India Ltd. v. U.O.I. and Ors., 1986 (24) E.L.T. 169 (S.C).
(iv) Dharangadhara Chemicals Works Ltd. v. U.O.I., 1997 (91) E.L.T. 253 (S.C).
4. The ld. Counsel also relied upon the decision in Indian Hydraulic Industries Ltd. v. C.C.E., 1988 (37) 213 (T) in which it was held that if specialised material handling equipment is not assembled prior to manufacturing on chasis and the parts are mounted on the vehicle part by part and it is only when the mounting of all the parts is complete that the specialised equipment is identifiable but, at that stage, the whole thing is a vehicle with the equipment fitted on it and not the equipment as such, no duty is chargeable on specialised material handling equipment. The Tribunal further held that it is the specialised vehicle which is removed from the factory and not the equipment as a separate article. The ld. Advocate also mentioned that while computing the duty, the department has only taken into consideration the Notification No. 28/89, dated 1-3-1989; that either Notification No. 108/86, dated 27-2-1986 which provided a concessional rate of 12% ad valorem and Notification No. 22/88, dated 1-3-1988 which provided an effective rate of 15% ad valorem in respect of Petroleum Jelly were not taken into consideration. Finally he submitted that the demand of duty could not be made by invoking the larger period of limitation as there was no suppression of facts; that all the facts were within the knowledge of the department; that the appellants maintained Raw Material Account in Form IV wherein all the raw materials used were accounted for and they also submitted a quarterly return in Form RT. 5; that the Central Excise Officers used to visit their factory from time to time; reliance was placed on the decision in the case of C.C.E. v. Chemphar Drugs and Leninents, 1989 (40) E.L.T. 276 (S.C.) and Tech Invest (India) P. Ltd. v. C.C.E., 1990 (47) E.L.T. 665 (T).
5. Countering the arguments, Shri M.P. Singh, ld. DR submitted that it has not been disputed by the Appellants that they were initially using Petroleum Jelly in the manufacture of antispetic cream and the three products subsequently used by them were ingredients of Petroleum Jelly; that the test report had confirmed that the final product contained soft paraffin base which was synonymous to Petroleum Jelly; that the Petroleum Jelly is marketable in a semi solid form and as they were using the Petroleum Jelly in continuous production, they did not solidify it partially. He further submitted that no product can form part of any final product unless it come into existence during the process of manufacture. He mentioned that the fact of manufacture of Petroleum Jelly was never disclosed to the Department and showing of three ingredients in the RT 5 return was not in any way an information to the department that these were used for manufaturing Petroleum Jelly. Shri Parikh, ld. Counsel, in reply submitted that there should be positive intent to evade duty and non-disclosure was not with any intention to evade duty as they had clearly indicated the use of materials in 5 Returns. At this stage the ld. D.R. submitted that non-disclosure was a positive act as they switched from using the Petroleum Jelly to the raw materials which were ingredients of Petroleum Jelly.
6. We have considered the submissions of both the sides. According to Section 3 of the Central Excise Act, excise duty is levied and collected on the goods manufactured in India. In order to attract excise duty, the article manufactured must be capable of sale to a consumer. It has been held by the Apex Court in Union Carbide case, supra, that To become "goods", an article must be something which can ordinarily come to the market to be brought and sold. The burden of proof is on the department to prove that petroleum jelly came into existence at an intermediary stage in the production of antiseptic cream and it was marketable. It is observed from the process of manufacture, as explained by the ld. Counsel for the appellants, that after heating liquid paraffin wax and mirco wax along with lanolin, the liquid is transferred to planatory mixture. The department has not adduced any evidence even to show that at any stage Petroleum Jelly, as such, comes into existence attracting levy of duty of excise. No evidence has also been adduced by the Department that the liquid so obtained by heating paraffin oil, micro wax and paraffin wax is the "goods" which can be brought and sold in the market. The findings of the Collector that Petroleum jelly was purchased by them in barrels and goods in liquid/semi-liquid form are sold in barrel do not go to show that the liquid obtained by the Appellants at an intermediary stage in the manufacture of their final product is a goods which is marketable or is known as Petroleum Jelly in commercial parlance. The test report also does not certify that Petroleum Jelly comes into existence at an intermediary stage as it merely says that "the simple answers the test for lanolin and soft paraffin (Petroleum Jelly)". Obviously the result of test will show presence of soft paraffin as the final product Boroquien Antispetic Cream was manufactured by using, amongst others, liquid paraffin oil, paraffin wax and Micro wax. Accordingly, we hold that the Department has not been successful in substantiating their case that Petroleum Jelly came into existence as an identiable product at an intermediary stage of the manufacture of the final product. In view of this we set aside the impugned order and allow both the appeals, without considering the question of time limit for demanding the duty under Section 11-A of the Central Excise Act.