Case Note & Summary
The dispute arose between the Collector of Central Excise, Baroda and Ambalal Sarabhai Enterprises regarding the excise duty on starch hydrolysate, a product manufactured by the respondent. The respondent contended that starch hydrolysate was not marketable and therefore not subject to excise duty. The Central Excise Officers found that the respondent manufactured and consumed starch hydrolysate without proper licensing and issued a show-cause notice. The adjudicator ruled in favor of the appellant, stating that starch hydrolysate was glucose and liable for duty. However, the Tribunal reversed this decision, asserting that starch hydrolysate was not a marketable commodity. The appellant appealed to the Supreme Court, arguing that the Tribunal misapplied the test for marketability. The respondent maintained that starch hydrolysate was unstable and could not be marketed. The Supreme Court dismissed the appeal, emphasizing that the burden of proof lay with the Revenue to establish marketability, which they failed to do. The court reiterated that for an article to be classified as goods, it must be capable of being sold in the market. The evidence indicated that starch hydrolysate was not marketed, leading to the conclusion that it was not dutiable under the Act. The appeal was dismissed without costs.
Headnote
A) Excise Duty - Definition of Goods - Marketability Requirement - Central Excises and Salt Act, 1944, Sections 3, 4, 11-A - The court held that for an article to be considered goods, it must be marketable or capable of being marketed. The evidence presented indicated that starch hydrolysate was not marketable due to its unstable nature, thus excise duty could not be levied (Paras 788-795).
Issue of Consideration
Whether starch hydrolysate is 'goods' liable for excise duty under the Central Excises and Salt Act, 1944.
Final Decision
The Supreme Court dismissed the appeal, affirming the Tribunal's decision that starch hydrolysate was not marketable and therefore not subject to excise duty under the Central Excises and Salt Act, 1944.
Law Points
- Excise duty
- marketability
- goods definition
- burden of proof
- captive consumption
Case Details
Civil Appeal No. 2215(NA) of 1988
Sabyasachi Mukharji, B.C. Ray
1990 AIR 59, 1989 SCR (3) 784, 1989 SCC (4) 112, JT 1989 (3) 341, 1989 SCALE (2) 255
A.K. Ganguli, T.V.S.N. Chari, P. Parmeswaran, Sushma Suri, Soli J. Sorabjee, R. Narain, Kamal Mehta, P-K. Ram, D.N. Misra
Collector of Central Excise, Baroda
Ambalal Sarabhai Enterprises
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Nature of Litigation
Dispute over excise duty on starch hydrolysate.
Remedy Sought
Appellant sought to impose excise duty on starch hydrolysate.
Filing Reason
Allegation of non-payment of excise duty on manufactured goods.
Previous Decisions
The Tribunal ruled that starch hydrolysate was not marketable and thus not subject to excise duty.
Issues
Is starch hydrolysate 'goods' under the Central Excises and Salt Act, 1944?
What is the standard for determining marketability for excise duty?
Submissions/Arguments
Appellant argued that the Tribunal misapplied the marketability test and should have considered the potential for marketability.
Respondent contended that starch hydrolysate was not marketable due to its unstable nature.
Ratio Decidendi
For an article to be classified as goods liable for excise duty, it must be marketable or capable of being marketed, and the burden of proof lies with the Revenue to establish this marketability.
Judgment Excerpts
If the process or activity of the assessee brings into existence an article different and distinct from what it was before the process and a new identifiable article known in the market as such comes into being, then the use of such article in the instant case starch hydrolysate--would attract duty on the part of the assessee even in captive consumption.
The word 'manufacture' implies a change but every change in the raw material is not manufacture.
It was the duty of the Revenue to adduce evidence or proof that the articles in question were goods.
Procedural History
The appeal was filed against the order of the Customs, Excise and Gold (Control) Appellate Tribunal dated 2nd November, 1987, which had set aside the Collector's order imposing excise duty on starch hydrolysate.
Acts & Sections
- Central Excises and Salt Act, 1944: 3, 4, 11-A, 35L
