Customs, Excise and Gold Tribunal - Bangalore
Bharat Electronics Ltd. vs Commissioner Of C. Ex. on 11 July, 2002
Equivalent citations: 2002(84)ECC386, 2002ECR412(TRI.-BANGALORE), 2002(145)ELT485(TRI-BANG)
ORDER G.A. Brahma Deva, Member (J)
1. Issue relates to durability of sub-assemblies (PCB-Populated Circulated Boards) for EVM (Electronic Voting Machines). Whether the impugned item is marketable or capable of being marketed is an issue to be considered herein. The ld. Counsel appealing for the appellant submitted that the very item was used for captive consumption and neither it is marketed nor it is capable of being marketed. In this context, he drew our attention to Para 8 of the impugned order which reads as under :-
"8. As regards marketability of the products, it is held by the Hon'ble Tribunal in the case of Dote Printers v. Collector as reported in 1987 (81) E.L.T. 793 (T) that marketability is essential to excisability but actual marketability is not necessary for dutiability. The fact that the PCBs are intermediate products in the manufacture of EVMs is not disputed. Hon'ble Tribunal in the case of Orient Paper Mills v. Union of India as reported in 1983 (14) E.L.T. 1813 (T) held that "for the purpose of dutiability, it is immaterial whether goods are cap-tively consumed or cleared for sale". It has been held in the Bhor Industries' case by the Hon'ble Supreme Court that to become goods, an article must be something which can ordinarily come to the market to be bought and sold. This case law of the Hon'ble Supreme Court which is relied upon by the defence is not applicable for the reason that PCBs of EVMs are custom made/tailor made. They are not the goods which ordinarily come to the market to be bought and sold and this fact is admitted by M/s. BEL also. M/s. BEL have admitted that PCBs in question cannot be used as it is not in any way useful excepting only in relation and with reference to the EVMs for which, alone it is prepared. Therefore the question of marketability in this case does not arise."
Referring to the averments in Para 8, he said that there is a clear finding by the Commissioner that "they are not the goods which ordinarily come to the market to be bought and sold and this fact is admitted by M/s. BEL also. He said that in view of the categorical finding given by the Commissioner, the said product do not come to the market and accordingly, question of levy of duty on the impugned product does not arise. He also relied upon the decision of the Supreme Court in the case of Moti Laminates Pvt Ltd. v. CCE, Ahmedabad reported in 1995 (76) E.L.T. 241 (SC). Particularly, he drew our attention to Para 10 of the order which is as under :-
"10. Having traced the development of law that any goods produced or manufactured ipso facto do not attract duty unless they are marketable or capable of being marketed, we may now examine the dutiability of goods cap-tively consumed. Prior to 1979 no duty was levied on such goods. But, as stated earlier, after amendment of Rules 9 and 49 captively consumed goods become exigible to duty. The rationale for not treating such goods as excisable was same that since such goods were not brought to the market for buying and selling they could not be subjected to duty. But when the Rules were amended a fiction was created that any article produced or manufactured if captively consumed was statutorily presumed to satisfy the test of marketability. But this presumption can be rebutted if it is established that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed. The duty is attracted not by captive consumption of any article but it must be a goods within the meaning of the Act which apart from having a distinctive name and known as such must be marketable or capable of being marketed. In Bhor Industries (supra) crude PVC films manufactured by the appellants as intermediate product used for captive consumption in manufacture of leather cloth, jute matting and PVC tapes were held not to be excisable goods on the test of marketability. In Collector of Central Excise v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 the manufacturers produced starch hydrolysate which was captively consumed and fell under item 1E of the Central Excise Tariff. It was held to be goods, no doubt, but it was observed that from a practical point of view it was apparent that the goods were not marketable consequently they were not exigible to duty."
He also referred to the decision in the case of M.A. Kuruvilla v. Union of India reported in 1999 (106) E.L.T. 21 in support of his contention.
2. On the other hand, Smt Radha Arun submitted that the party has claimed the exemption as per the Notfn. No. 354/2/88, dtd. 29-5-99. That Exemption Notification exempts only Electronic Voting Machines and parts thereof. She also submitted that referring to the very Para 8 of the impugned order that there is a finding that the very goods are capable of being marketed and it has to be interpreted in that manner and accordingly, Department was justified in demanding duty. She said that ratio of the decisions of the Supreme Court is not applicable to the facts of this case. In that case, the goods do not have shelf life and accordingly the Apex Court has arrived to the conclusion that there is not marketability.
3. We have carefully considered the matter. It is settled position now that marketability is a pre-requisite for excisability. In other words, ex-cisability depends upon marketability. Goods must be marketed or it must be capable of being marketed to attract excise duty. Precisely, this was the view of the Supreme Court in the case referred to above and in a series of cases. Following the same, Tribunal has been consistently taking a view that unless goods are capable of being marketed, the question of levy does not arise. Admittedly, in the instant case, the goods were captively consumed, they were not marketed. Further there was a categorical finding by the Commissioner in the impugned order "they are not goods which ordinarily come to the market to be bought and sold" and in view of this clear finding and in absence of any evidence to show that the goods are capable of being marketed, we do not find any force in the arguments advanced on behalf of the Revenue. In the result, appeal is allowed with consequential relief, if any.
4. [Assent per : S.S. Sekhon, Member (T)]. - I agree with the reasoning of Id. Brother (J) as arrived at herein. The specific finding that the Commissioner has arrived at that "the Populated Circuit Boards (PCBs) in this case are not goods which ordinarily come to the market to be bought and sold and therefore the same have held to be not marketable" and no material has been brought in the proceedings before us to rebut the same. In this view of the matter, no duty demand could be made under any Tariff Heading. Since goods found to be not marketable are not exigible.
5. However, Populated / Printed Circuit Boards are known items of Trade and are marketed. Circuits on which mechanical elements or electrical components have been mounted or connected i.e Populated Circuit Boards are not regarded as printed circuit boards within the meaning of Heading (8534). They, generally fall to be classified in accordance with Note 2 to Section XVI or Note 2 to Chapter 90 as the case may be or 8542. It is found that the Tribunal in the case of HAL v. CC, Vizag [1998 (104) E.L.T. 355] classified Printed Circuit Boards under 8534 and not under Heading 8473 in view of the Note 2 to Section XVI and Rule 1 of Rules of Interpretation. The Special Bench B-II in the case of Jindal Aluminium Ltd. [1989 (42) E.L.T 268] held that Populated or Unpopulated type of Printed Circuit Boards are classifiable under specific Heading 8542 or 8534 of the Customs Tariff Act, 1975 and not under Heading 8473.30, and held 8542 to be more specific for Populated Circuit Boards. Reading the note and following the Case law in the present case, also, the entity under classification dispute being Populated Circuit Boards for Electronic Voting Machines would be classified under 8542.00, if marketable. The show cause notice in this case has demanded duty on these Populated Circuit Boards by calling them as PCBs, classifiable under Heading 8479.00. Therefore, the proposed duty demands under Heading 8479 are ab initio not sustainable. Therefore, the duty demand made under Heading 8479.00 of CETA, 1985 on Populated Circuit Boards, herein captively utilised in the manufacture of Electronic Voting Machines is a demand mis-directed. While I observe that there is no appeal on the grounds of challenging this classification under Heading 8479.00 of CETA, 1985, the duty demand under Heading 8479 could never be made in the facts of this case on Populated Circulated Boards.
6. Appeal allowed with consequential relief.