http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 2  

PETITIONER: COLLECTOR OF CENTRAL EXCISE, BARODA

       Vs.

RESPONDENT: UNITED PHOSPHORUS LTD.

DATE OF JUDGMENT:       07/04/2000

BENCH: R.C.Lahoti, S.R.Babu

JUDGMENT:

     R.C.  Lahoti, J.

     The  respondents  are  engaged in the  manufacture  of insecticides,  fungicides, weedicides and pesticides falling under  Tariff sub-heading 3808.10 and excisable  thereunder. During  the process of manufacturing Mercuric Acetate  (MA), Para  Chloro Phenyl Valeric Acid (PCA), and Chloro Synthemic Acid   Chloride  (CSA  Chloride)   came  into  existence  as intermediate  products.   The  Collector of  Central  Excise passed  orders  of adjudication holding the abovesaid  three intermediate products liable to payment of excise duty.  The respondents preferred appeals before the Collector (Appeals) who  has  allowed  the appeals exonerating  the  said  three intermediate products from levy of excise duty.  The appeals preferred  by  the  Revenue against the order  of  Collector (Appeals)  have  been  dismissed by a common  order  by  the CEGAT.   The  aggrieved Revenue has come up by filing  these appeals to this Court.

     It  is  well settled by a series of pronouncements  of this  Court  from  Bhor Industries Ltd.  Vs.   Collector  of Central  Excise  1989 (40) ELT 280 SC to Union of India Vs. Delhi  Cloth and General Mills Co.Ltd.   1997 (92) ELT  315 SC  that  excise  is  a duty on goods as  specified  in  the Schedule.   The taxable event in the case of excise duty  is the  manufacture  of goods.  In order to be excisable  goods (i) there must be goods (ii) having come into existence as a result  of  manufacture, and (iii) to be goods, the  article must  be known to the market as such and as would ordinarily come  to the market for being bought and sold.  Actual  sale of  the  article is not required but it must be capabale  of being  bought  and  sold.   Intermediate  products  even  if captively  consumed may be liable to levy of excise duty  if they  satisfy  the test of being goods on the touchstone  of marketability.  In Union of India Vs.  Delhi Cloth & General Mills  Co.   Ltd.    1997 (92) ELT 315 (SC)  the  following statement  of  law  from  Moti  Laminates  Pvt.   Ltd.   Vs. Collector  of Central Excise, Ahmedabad  1995 (76) ELT  241 (SC)  has  been re- affirmed:- The duty of excise being  on production  and  manufacture which means bringing out a  new commodity,  it  is implicit that such goods must be  usable, moveable,   saleable  and  marketable.    The  duty  is   on manufacture  or production but the production or manufacture is  carried on for taking such goods to the market for sale.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 2  

The  obvious  rationale for levying excise duty  linking  it with production or manufacture is that the goods so produced must  be  a  distinct  commodity known  as  such  in  common parlance  or  to  the commercial community for  purposes  of buying and selling.

     (underlining by us)

     Though the intermediate goods so coming into existence may be specified in the Schedule as excisable they would not be  subjected  to  duty  unless they  satisfy  the  test  of marketability.  In the case of Delhi Cloth and General Mills Co.Ltd.(supra) the intermediate product was calcium carbide, which  initially  produced in the form of cakes, was  broken into   smaller   pieces  after   the  cakes  attained   room temperature  and  the broken pieces were forthwith put  into use  for  the  production of acetylene gas.   The  Appellate Collector  had found that the calcium carbide which was sold in  the  market  was  packed   in  airtight  containers  and conformed  to  ISI  specifications  which  the  intermediate product  of  DCM did not.  Their Lordships held that as  the calcium   carbide  manufactured  by   the  DCM  for  further uitilisation in the production of acetylene gas was not of a purity that rendered it marketable nor was it packed in such a  way as to make it marketable, that is to say, in airtight containers  it  was  not  excisable on  the  ratio  of  Moti Laminates.   As  held in Collector Vs.  Amba Lal  Sara  Bhai Enterprise   1989 (43) ELT 214 (SC) onus to establish  that an article is goods and marketable, is on the department.

     In  the case at hand the Collector (Appeals) has found that  the  abovesaid three intermediate products  came  into existence  at a certain stage of a multiple stage integrated chemical process leading to the final products and therefore they  could  not  be  held  to be  goods  as  understood  in commercial  parlance because they were not marketable.   The department had failed in showing if any facility existed for separation  of  the said three products and whether  in  the form in which the said three products came into existence in the  reaction  process were capable of being marketed.   The finding  of fact so arrived at has not been challenged  much less  dislodged  before  the Tribunal.   The  only  argument advanced  before the Tribunal was that the three items  were mentioned  as  goods in the dictionary and in  the  excise tariff  and Mercuric Acetate (MA) was also mentioned as  one of  the  items entitled to drawback in Duty Drawback  Rules. The  Tribunal  has  observed  that   these  facts  and  mere mentioning  of an item in Drawback Rules with reference to a different  context  was  not enough to satisfy the  test  of marketability  unless  it  was shown that  the  intermediate products  were  capable of being taken to market and  bought and  sold.  No fault can be found with the view taken by the Tribunal.  The appeals are devoid of any merit and hence are dismissed though without any order as to the costs.