Customs, Excise and Gold Tribunal - Delhi
Maize Products vs Collector Of Central Excise on 30 October, 1987
Equivalent citations: 1987(14)ECC525, 1987(13)ECR1209(TRI.-DELHI), 1988(33)ELT143(TRI-DEL)
ORDER
G. Sankaran, Senior Vice President
1. By the impugned order, the Appellate Collector held that the products "wet dextrose" and "mother liquor" were classifiable under item No. IE of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the "CET"). He held that the fact that the appellants were not marketing these products would not make any difference to their excisability since they could be marketed though under controlled conditions to arrest the rate of deterioration. On this basis, the Appellate Collector confirmed the Assistant Collector's order dated 18-10-1979. The Appellants are now in appeal before this T ribunal against the aforesaid order of the Appellate Collector.
2. We have heard Shri Anil Diwan, Counsel for the appellants and Smt. Dolly Saxena, Sr. D.R. for the respondent Collector.
3. Before we discuss the submissions before us; it is expedient to set out the tariff item IE and the manufacturing process adopted by the appellants. Item No. IE reads as follows :-
"GLUCOSE AND DEXTROSE AND PREPARATIONS THEREOF :
(1) Glucose in whatever form including liquid glucose, dextrose monohydrate and anhydrous dextrose.
(2) Preparations of glucose and dextrose in which the reducing sugars expressed as anhydrous dextrose amount to more than eighty per cent by weight."
4. The following is a flow-chart representing the different stages in the manufacture of sorbitol (which is the final product manufactured by the appellants) during which wet dextrose and mother liquor emerge as intermediate products :-
Starch Slurry | Convertor | Refining | ION Exchange | Evaporation | 1st Crystallization | Centrifuging |
------------------------------------------
| |
1st Wet Dextrose Dextrose Syrup
---------------------------- |
| | | Evaporation
To A Drying & Sorbitol
Dextrose Packed Plant |
Dextrose 2nd Crystallization
| |
Dissolved for Centrifuge
Anhydrous ----------------------------
Dextrose | |
| 2nd Wet
Vacuum Dextrose Hydel
Crystallisation Golden
| | Syrup
Centrifuge Drying &
| Packing
Anhydrous Dryer Mother liquor obtained
Dextrose |
Packed To Sorbitol
5. At the outset, the learned counsel for the appellants referredto this T ribunal's decision in the case of Anil Starch Products Ltd. v. Collector of Central Excise, Ahmedabad [Appeal No. ED(SB)T/1534/81-D disposed of by Order No. 180/84-0 dated 2-4-1984] holding wet dextrose to be classifiable under Item No. IE of the CET. The contention there was that wet dextrose having about 15 to 20% moisture was liable to fermentation and formation of hard lumps on storage and that the moisture content rendered it liable to micro-biological decay. The Tribunal citing the judgment of the Allahabad High Court in Union of India v. Union Carbide India Ltd. 1978 (2) ELT (3 1), to the effect that a thing would nevertheless be goods even if it does not have a general market where it could be easily bought and sold and that the test of general marketability is not sound, and relying on passage in Kirk Othmer's Encyclopaedia of Chemical Technology (Vol. IV page 964), held that wet dextrose was but a form of glucose classifiable under item No. IE CET. Shri Anil Diwan, however, pointed out that the Allahabad High Court's judgment in the Union Carbide case (supra) on which the Tribunal had based its conclusion had since been reversed by the Supreme Court in its judgment reported in 1986 (24) ELT 169.
6. In the Union Carbide case referred to above, the goods were aluminium cans or torch bodies and the issue was whether they were liable to duty under item No. 27(e) of the CET. The company's contention before the Supreme Court was that the aluminium cans produced by them, could not be described as goods for the purpose of excise duty since they were not marketable and were prepared entirely by the appellants for the flash lights manufactured by them. The Court held that in order to attract duty, the article manufactured must be capable of sale to consumers. The Court reiterated its observations in U.O.I, v. Delhi Cloth and General Mills 1978 ELT (3 199) and South Bihar Sugar Mills Ltd. v. U.O.I. and Ors. 1978 (2) ELT 3 336 (S.C.) that to become "goods" for the purpose of the Central Excises and Salt Act, an article must be something which can ordinarily come to the market to be bought and sold. It appeared, said the Court, that the aluminium cans prepared by the appellants were employed directly by them in the manufacture of flash lights and were not sold as aluminium cans in the market. The cans were in a crude and elementary form incapable of being employed at that stage as a component in a flash light. They had sharp, uneven edges which required to be trimmed, threaded, redrawn, reeded, beaded and anodised on painted. Only then they became a distinct and complete component capable of being used as a flash light case for housing battery cells. The company's averment that in the just extruded form, the cans were unknown in the market, had not been controverted by the Department. It was on the basis of these considerations that the Court held that the aluminium cans produced by Union Carbide were not excisable goods under Section 3 of the Central Excises and Salt Act read with item No. 27 of the CET .
7. The learned Sr. D.R. however submitted that in the Union Carbide cas (supra), the torch bodies or aluminium cans were in unfinished and crude form which was not the case in the present matter. In this context, she cited the Tribunal's decision in the case of Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay 1987 (30) ELT 502. The dispute in that case was with reference to rings punched from asbestos boards and certain types of asbestos fabrics and the issue was whether these products which arose at an intermediate stage in the appellant's factory and used by them captively for further manufacture of automotive brake linings and clutch facings were liable to duty under item No. 22F (4) CET . The Supreme Court's judgment in the Union Carbide case (supra) was distinguished on facts by the Tribunal which observed that the samples of the goods produced for inspection were in a finished and not crude or elementary form and they were fully manufactured asbestos products though as intermediate products they were used for further manufacture of brake linings and clutch facings. They fitted into the entry for manufactures from mineral fibres.
8. In the above context, it is to be noted that the decision in the Anil Starch Products case (supra) was rendered by the Tribunal prior to the judgment of the Supreme Court in the Union Carbide case - 1986 (24) ELF 169 (S.C.). The classification of starch slurry which, incidentally, is the starting material in the appellants' process of manufacture of Sorbitol, had come up for consideration by this Tribunal in the appellants' 6wn appeal E.No. 261/82 disposed of by order No. 186/87-D dated 9-3-1987. There also the contention for the appellants was that starch slurry which emerged as an intermediate product in the manufacture of starch and which was liable to fermentation and, therefore, could not be stored for a long time nor marketed, was not "goods" for the purpose of levy of duty. The Tribunal noted that the appellant's assertion that they had never marketed starch slurry had not been disproved by the department, nor had the department produced any evidence to show that starch slurry had been marketed by any one else. The onus was on the department to show that starch slurry had a market and was being marketed in order to establish that the product would be goods for the purpose of levy of excise duty. On this basis, it was held that starch slurry was not liable to excise duty.
9. It was Shri Anil Dewan's submission that the ratio of the decision on starch slurry applied with equal force to the present goods. The appellants had not marketed these goods nor had the department shown that they had a market. We note that the show cause notice dated 6-7-1979, apart from stating that the appellants had eliminated wet dextrose and mother liquor from the classification list filed by them though they were manufacturing and clearing these products (and had earlier declared them as excisable under item No. IE which was approved by the department), did not put forth any material to show that they were "goods" having a market. The Assistant Collector's order also does not contain any material to this effect. The Appellate Collector had relied inter alia on the Allahabad High Court judgment in the Union Carbide case (supra), which, however, has since been reversed by the Supreme Court. He has correctly, in our opinion, observed that the fact that the appellants do not market the products would not make any difference if they are capable of being marketed but when he proceeds to say that the subject products can be marketed under controlled conditions to arrest the rate of deterioration, he does not disclose the basis for saying so. He has, of course, relied on some technical material to which we shall refer later.
10. The appellants had contended before the lower authorities that the two products in question were not known in the trade as commodities being sold and purchased and that wet dextrose, being liable to deterioration in a short time due to microbiological action, was not stable and, therefore, not marketable. These contentions have remained uncontroverted.
11. The Appellate Collector in para 6 of his order relies on passages on "Glucose" from the "Materials Hanbook" by George S. Braddy and Henry R. Clauser. From this passage (p. 350-351 of the book, 11th edition) we are not able to discover any basis for the conclusion that Wet Dextrose and Mother Liquor are products which are capable of being marketed under controlled conditions to arrest the rate of deterioration. The syrupy liquid which is marketed, as stated in the passage aforesaid, is corn syrup which is stated to be usually not pure glucose as it contains some dextrins and maltose. There is no material on record to show that the present goods are the same thing as corn syrup or akin to it. We have also seen the notes on "Glucose" and "Glucose syrup" at p. 500 of the 10th edition of the Condensed Chemical Dictionary by Gessner G. Hawley as also the relevant passages in Kirk Othmer's "Encyclopaedia of Chemical Technology" and the "Merck Index". We have not been able to see any material in these books to support the department's contention that wet dextrose and mother liquor are products which are capable of being marketed under controlled conditions to arrest the rate of deterioration.
12. In the circumstances, we set aside the impugned order and allow the appeal.