Full Judgment Text
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PETITIONER:
NIRLON SYNTHETIC FIBRES &CHEMICALS LIMITED
Vs.
RESPONDENT:
THE COLLECTOR OF CENTRAL EXCISE
DATE OF JUDGMENT: 13/08/1996
BENCH:
BHARUCHA S.P. (J)
BENCH:
BHARUCHA S.P. (J)
MAJMUDAR S.B. (J)
CITATION:
1996 SCALE (5)833
ACT:
HEADNOTE:
JUDGMENT:
WITH
(Civil Appeal Nos. 3262-66/88 & 1587-90/90)
J U D G M E N T
BHARUCHA, J.
The-appellants manufacture nylon yarn using a raw
material known as caprolactam. The raw material is subjected
to polymerisation. This is a reversible process. After
polymerisation the resultant poly-caprolactam is spun to
obtain nylon yarn. Waste in solid form containing poly-
caprolactam is obtained at various stages of the process of
manufacture. To fully use caprolactam, which is expensive
and duty paid, the appellants have installed equipment by
which caprolactam is recovered from the aforementioned waste
and re-cycled into the process. The Excise authorities
sought to treat the process of separation of caprolactam
from the waste as an independent manufacturing process, and
subjected it to duty. The claim of the appellants for refund
of such duty was rejected. The Collector (Appeals) upheld
the rejection, as did the Customs, Excise & Gold (Control)
Appellate Tribunal. Hence this appeal.
Caprolactam in flakes is used as the original raw
material. The caprolactam that is recovered from the waste
as aforestated is in molten form and, according to the
appellants, not saleable commodity. The Tribunal in the
principal judgment (in C.A. No.4173-74 of 1984) came to the
conclusion that caprolactam was manufactured when recovered
from waste. It observed that the contention that "the
recovered caprolactam is not bought and sold, even if true,
cannot negate manufacture. When the tariff itself had
specified ‘caprolactam’ as an assessable product, it cannot
be of any consequence that once it is manufactured it is not
bought and sold in the market." In the subsequent matters
under appeal, the tribunal followed this judgment.
Learned counsel for the appellant drew our attention to
the subsequent judgments of the Tribunal in Jagatjit Cotton
textile Mills Ltd. vs. Collector of Central Excise, 1990
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(50) E.L.T. 379. & L.M.L.Ltd, vs. Collector of Central
Excise, 1992(59) E.L.T. 82. In both cases the Tribunal was
concerned with facts indentical to those involved in the
appeals before us and, very rightly, recognised the
importance of the marketability of the product for the
purpose of levy of excise duty The order of the Collector
which was in appeal before the Tribunal in the case of
Jagatjit Cotton Textile Mils Ltd. had followed the
Tribunal’s decision Which is in appeal before us. In the
case of L.M.L. Ltd. counsel on behalf of the Excise
authorities had cited to the Tribunal its decision which is
in appeal before us.
In the case of Jagatjit Cotton Textile Mills Ltd. the
Tribunal said:
"We gave our anxious
consideration to the arguments
advanced on both sides and perused
the records. It is evident from the
record that both the authorities
below have proceeded to determine
the excisability of the product
based on process of manufacturing
activity, without considering the
important point about marketability
of the product in determining the
goods for the purpose of levy of
excise duty. The material which is
sufficient for the purpose of
holding that there is manufacturing
activity and emergence of a
separate product are not sufficient
for the purpose of coming to the
conclusion about the marketability
of the product. The Department has
not brought on record any evidence
to show that these goods were
either sold or marketable as such.
On the other hand the appellants
have taken this stand from the
beginning and in support pf their
contention they have produced
certificate from the Gujarat State
Fertilizer Corporation who is sole
manufacturers of caprolactum to
show that Caprolactum in molten
form is not marketable. The
important piece of evidence was
neither considered by the
Department nor rebutted. Supreme
Court has categorically held that
marketability of the product is an
essential ingredient in order to be
dutiable under the Excise Law, in
the Bhor industries Limited (supra)
and further same view was
reaffirmed by the Supreme Court in
the case of Collector of Central
Excise Vs. Ambalal Sarabhai
Enterprises, reported in 1989 (43)
ELT 214 (S.C.), wherein it was
observed that test of marketability
should be satisfied even in respect
of transient item which is
captively consumed in the
manufacture of other finished
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product and in particular it held
that marketability is an essential
ingredient in order to be dutiable
under the Schedule to the Central
Excise Tariff Act. Simply because
certain articles fall within the
Schedule it would not be dutiable
under the Excise Law if the said
article is not goods known to the
market. It has also been held that
though actual sale is not
necessary, the evidence must be
produced by the Department that the
goods in fact are capable of being
marketed. The Department has not
adduced any such evidence in this
case. Under these circumstances,
following the ratio of the decision
of the Apex Court, we have no other
alternative except to hold that the
goods in question are not liable to
excise duty."
In the case of L.M.L. Ltd., the Tribunal followed its
order in the case of Jagatjit. In both cases it was held
that the caprolactam that was recovered from waste was not
liable to excise duty.
Learned counsel for the appellants submitted that the
respondents had rested content on the aspect of manufacture
of the recovered caprolactam and had led no evidence on the
aspect of its saleability. It was not enough that there
should be manufacture and the manufactured product should
find mention in the Excise tariff. It was necessary also to
establish marketability and this not having been done, no
Excise duty could be levied upon the recovered caprolactam.
Learned counsel for the Excise authorities submitted
that since the product was mentioned in the Schedule and it
was used as raw material, it should be assumed that it was
marketable and the onus to rebut such assumption should rest
on the appellants. In his submission, the onus had not been
discharged. He submitted that the appellants used the
recovered caprolactam as a raw material in the manufacture
of nylon yarn, as did Jagatjit & L.M.L., and there was no
reason shown why the one manufacturer could not transfer the
recovered caprolactam to the other. In his submission,
therefore, the matter should be remanded for ascertaining
the factual position.
Learned counsel for the respondents had not been
instructed about the Tribunal’s decisions in the Jagatjit
and L.M.L. cases and could not refute the submissions that
they had been accepted by the Excise authorities.
The Tribunal in the two subsequent decisions in
Jagatjit & L.M.L found as a fact that the recovered
caprolactam was not a saleable commodity upon the basis of
the assessee’s evidence and the failure of the Excise
authorities to prove the contrary. The Excise authorities
having made no attempt to disprove the evidence led by the
assessees in those matters and this and establish by
evidence of their own that the recovered caprolactam was
marketable, there is no reason why they should now be given
a second opportunity to do so by an order of remand.
For these reasons, the appeals are allowed. The
judgments and orders of the Tribunal under appeal are set
aside and it is held that the recovered caprolactam is not
excisable to excise duty.
There shall be no order as to costs.
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