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PETITIONER: UNION OF INDIA & ANR.

       Vs.

RESPONDENT: DELHI CLOTH & GENERAL MILLS CO. LTD. & ANR.

DATE OF JUDGMENT:       06/05/1997

BENCH: S.P. BHARUCHA, S.C. SEN, M. JAGANNADHA RAO

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.P. BHARUCHA, J.      This civil  appeal arising  upon the judgment and order of a  Division Bench of the Delhi High Court was referred to a larger bench on 11th March, 1997 (1997(91) E.L.T. 230).      The respondent  company manufactured  and sold  calcium carbide in  the market  until the  year 1967. Thereafter it, utilised the  calcium carbide  that it  manufactured in  the process of  the production of acetylene gas in its acetylene gas plant.  The calcium  carbide that  was manufactured  wax tapped from  the furnace  in liquid  form, placed  in trays, allowed to  cool and  solidify and  thereafter  broken  into cakes of  the required  size. Called upon to pay excise duty on such  calcium carbide,  the respondent  contended that it was not excisable being an intermediate product used for the generation of  acetylene gas  in the factory of manufacture. The  order   of  the  Superintendent  Central  Excise,  Kota Division, being  against the  respondent,  it  preferred  an appeal to  the  Appellate  Collector,  Central  Excise,  New Delhi. He  enquired into  the process  of manufacture of the calcium carbide  in the  respondent’s factory  and  observed that the  enquiry had  confirmed the respondent’s contention that the  calcium carbide  produced in  its factory  was  an intermediate product and was not marketed by the respondent. The enquiry  also revealed  that the  calcium carbide, which was 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 added:      "This  confirms   their  contention      that the  calcium  carbide  is  not      produced to  the purity as required      in the  specification laid  down by      the Indian  Standards  1040/60  nor      the  carbide   is  packed   in  any      containers  for   the  purpose   of      storage for any length of time.      The Appellate  Collector noted that the calcium carbide which  was  sold  in  the  market  was  packed  in  airtight containers  and  conformed  to  the  I.S.I,  specifications.

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However, he  declined to  accept the respondents’ contention that the  calcium carbide produced by it, being not marketed as such,  was not  an  excisable  commodity.  In  his  view, calcium carbide  as occuring  at Tariff Item 14AA(1) had not been qualified  by  any  description  so  that  the  calcium carbide produced  in the respondents’ factory was excisable. The  order   of  Appellate   Collector  was  upheld  by  the Government of  India in  revision.  It  was  found  that  in chemical  description   and  physical  properties  what  was manufactured  by   the  respondent   was   calcium   carbide irrespective  of   whether  or   not  it  conformed  to  any specification.  The   respondent  thereupon   filed  a  writ petition before the Delhi High Court and, by the order under appeal, the  writ petition  was allowed, it being found that the calcium  carbide manufactured by the respondents was not marketable.      When this  civil appeal  against the Delhi High Court’s judgment reached  hearing before  a  bench  of  two  learned Judges, counsel  on behalf of the respondent relied upon the judgment of a bench of three learned Judges of this Court in the case  of Moti  Laminates  Pvt.  Ltd.  vs.  Collector  of Central  Excise,   Ahmedabad,  1995  (76)  E.L.T.  241,  and contended that goods which were not marketable or acceptable in the  market  as  a  commercial  commodity  could  not  be subjected to  excise duty.  The bench  was of the view that, reliance having  been placed on the Moti Laminates judgment, this appeal  should be  heard by  d larger bench. The papers having been placed before the Hon’ble the Chief Justice, the appeal is now placed before us.      The first  question to  which we  address ourselves  is whether the  Moti Laminates  judgment requires  to be looked into again.  Sahai, J.,  speaking for  the  bench  of  three learned Judges,  noted that excise duty was levied by virtue of the  provisions of  Entry 84  of List  1 of  the  Seventh Schedule  of   the  Constitution   on   goods   which   were manufactured or  produced, which  was why  the charge  under Section 3  of the  Central Excise  and Salt  Act was  on all excisable goods  produced or  manufactured.  The  expression "excisable goods"  had been defined by clause (d) of Section 2 to mean goods specified in the Schedule. The scheme in the Schedule was  to divide  goods into  two  broad  categories, those for which rates were mentioned under different entries and goods  under the  residuary entry.  The word ‘goods’ had not been defined in the said Act but it had to be understood in the  sense in  which it  had been used in Entry 84 of the Schedule,  That  was  why  Section  3  levied  duty  on  all excisable goods mentioned in the Schedule provided they were produced and manufactured. The learned Judge added:      "Therefore,  where  the  goods  are      specified in  the Schedule they are      excisable goods  but  whether  such      goods  can  be  subjected  to  duty      could depend  on whether  they were      produced  or  manufactured  by  the      person on  whom duty is proposed to      be levied. The expression "produced      or manufactured"  has further  been      explained by  this  Court  to  mean      that the  goods  so  produced  must      satisfy the  test of marketability.      Consequently it  is always  open to      an  assessee  to  prove  that  even      though the  goods in,  which he was      carrying on business were excisable      goods  being   mentioned   in   the

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    Schedule  but  they  could  not  be      subjected to  duty as they were not      goods, either because they were not      produced or  manufactured by  it or      if  they   had  been   produced  or      manufactured they were not marketed      or capable of being marketed.      9. 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.  The  obvious      rationale for  levying excise  duty      linking  it   with  production   or      manufacture is  that the  goods  50      produced   must   be   a   distinct      commodity known  as such  in common      parlance  or   to  the   commercial      community for  purposes  of  buying      and seling.      Reliance was  placed for  the  above  findings  on  the judgments of  this Court in Union of India vs. Delhi Cloth & General Mills Co. Ltd., AIR 1963 S.C. 791, South Bihar Sugar Mills Ltd.,  vs. Union of India, AIR 1968 S.C. 922, A.P. Seb vs. C.C.E.  1994 (2) S.C.C. 428, Union Carbide India Ltd. v. Union of  India, 1986  (2) S.C.C.  547, Bhor Industries Ltd. vs. C.C.E.,  1989 (1)  S.C.C. 602,  Hindustan  Polymers  vs. C.C.E. 1989  (1) S.C.C.  323, and  Indian  Cable  Co.  Ltd., Calcutta vs.  Collector of  Central Excise,  Calcutta & Ors. 1994 (6) S.C.C. 610.      We have  perused the  Moti Laminates judgment with care and have  heard learned  counsel.  We  find  that  the  view expressed in the Moti Laminates judgment is based on earlier judgments. It has been affirmed by this Court thereafter. We may refer  to one such later judgment, Dharangadhra Chemical Works Ltd.  vs. Union  of India,  1997 (91)  E.L.T. 253, and that is  also by  a bench of three learned Judges. We do not entertain any  doubt as  to the  correctness of the ratio of the Moti  Laminates judgment.  We proceed with the appeal on the basis that it lays down the correct law.      Learned counsel  for the  appellant submitted  that the calcium  carbide   manufactured  by   the  respondents   was marketable and  he relied  in this behalf upon the orders of the Appellate Collector and Government of India, to which we have made  reference. He  also submitted  that  the  calcium carbide manufactured by the respondents was in fact marketed till 1967.      The order  of the  Collector  shows  that  the  calcium carbide that  was manufactured by the respondent for further utilisation 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. This  is a  finding of fact. Applying the ration of the  Moti Laminates  judgment thereto,  we must hold that the calcium  carbide manufactured  by the respondents is not excisable.      Learned counsel for the appellant submitted that Tariff Entry 14AA(1)  was attracted,  whatever might be the further process  that   the  calcium  carbide  manufactured  by  the respondent might  have to  undergo by way of purification or

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packaging for  that  would  not  be  tantamount  to  further manufacture. We  are unable  to agree  for the simple reason that the  commodity which  is sought  to be  made liable  to excise duty  must be a commodity that is marketable as it is and not  a commodity  that may by further processing be made marketable.      In the result, the appeal is dismissed with no order as to costs.