PETITIONER:
NIRLON SYNTHETIC FIBRES &CHEMICALS LIMITED
Vs.
RESPONDENT:
THE COLLECTOR OF CENTRAL EXCISE
DATE OF JUDGMENT: 13/08/1996
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)
JUDGMENT 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 polycaprolactam 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 (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
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.