Case Note & Summary
The appellant, M/s Hitkari Hitech Fibres Pvt. Ltd., is a manufacturer of products under Chapters 56 and 57 of the Central Excise Tariff Act, 1985. The Department alleged that the appellant had not paid Central Excise Duty on an intermediate product, described as 'non-woven fabrics' falling under CETH 5603, which was used captively for manufacturing 'jute carpets' cleared at nil rate of duty. Fifteen show cause notices were issued for the period October 1991 to October 2002, claiming that the intermediate product was marketable and thus liable to duty. The appellant denied the allegation, asserting that the intermediate product was neither marketed nor marketable, and that the goods sold as 'non-woven fabric' on payment of duty were different from the impugned product. The show cause notices were adjudicated by the Commissioner, who confirmed the demand. The appellant appealed to the CESTAT, which remanded the matter for de novo consideration. On de novo adjudication, the Commissioner again confirmed the demand, and the CESTAT upheld that order. The appellant then filed the present appeal under Section 35G of the Central Excise Act, 1944, raising the substantial question of law regarding marketability. The High Court admitted the appeal and heard it finally. The court examined the submissions and found that the CESTAT had not considered the relevant records and material submitted by the appellant, particularly the evidence that the intermediate product was not marketable. The court held that marketability is essential for excisability and the department must prove it through positive evidence. Since the CESTAT failed to consider the appellant's evidence, the impugned order was set aside and the matter was remanded to the CESTAT for fresh consideration.
Headnote
A) Central Excise - Marketability - Excisability - Section 3 of Central Excise Act, 1944 - The issue was whether an intermediate product (loosely assembled fibre web) used captively for manufacture of exempted jute carpets is marketable and hence excisable. The court held that marketability is a prerequisite for levy of excise duty and the department must prove marketability through positive evidence. The CESTAT failed to consider the appellant's evidence that the intermediate product was not marketable. (Paras 1-3) B) Central Excise - Burden of Proof - Marketability - Section 3 of Central Excise Act, 1944 - The burden lies on the department to establish that the goods are marketable. Mere classification under a tariff heading does not prove marketability. The court found that the CESTAT did not properly appreciate the evidence and material submitted by the appellant. (Paras 4-5)
Issue of Consideration
Whether the loosely assembled fibre web in roll form emerging at an intermediate stage before the exempted finished jute carpet is marketable and therefore liable to excise duty, without considering the relevant records and material submitted by the appellant.
Final Decision
The appeal is allowed. The impugned order dated 6th November 2012 passed by the CESTAT is set aside. The matter is remanded to the CESTAT for fresh consideration in accordance with law, after giving the appellant an opportunity to produce all relevant evidence.
Law Points
- Marketability is essential for excisability
- Burden of proof on department to establish marketability
- Intermediate product not marketable if not capable of being sold in the market as such
