Civil Appeal No 22 15NA of 1988
From the Judgment and Order dated 21187 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No 478 of 86 D Order No 877 of 1987 D AK Ganguli TVSN Chari P Parmeswaran and Sushma Suri for the Appellant
Soli J Sorabjee R Narain Kamal Mehta P K Ram and DN Misra for the Respondent
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This is an appeal under section 35Lb of the Central Excises  Salt Act 1944 hereinafter referred to as the Act 
The appeal is directed against the order dated 2nd November 1987 passed by the Customs Excise and Gold Control Appellate Tribunal New Delhi hereinafter referred to as the Tribunal 
The respondent viz Ms Ambalal Sarabhai Enterprises manufacture sorbitol failing under item 68 of the erstwhile Central Excise Tar iff
There was a visit to the factory premises of the re spondent by the Central Excise Officers on 26th February 1985
It was 787 allowed that it was found that the respondent manufactured and captively consumed starch hydrolysate but the respondent had failed to take out a licence with reference to the said manufacture of starch hydrolysate and had been removing the same without according to the appellant payment of duty and without observing the necessary central excise formali ties
It was the view of the revenue that starch hydrolysate was glucose and therefore fell under Item 1 E of the Central Excise Tariff which covered glucose in whatever form including liquid glucose
Accordingly a show cause notice was issued to the respondent
A reply was filed on behalf of the respondent contending that starch hydrolysate was not goods since the same was not marketable and therefore no excise duty would be payable on the same
In those circumstances it was submitted that the proposed adjudication by the Collector following the aforesaid notice was without jurisdiction in view of section 11A of the Act
It was urged that starch hydrolysate is not glucose and that even if the same was liable for duty it would not be under item E
According to him starch hydrolysate was an interme diate product in the manufacture of sorbitol and no duty could be demanded on the same
There were adjudication proceedings thereafter
In the said proceedings affidavits were filed on behalf of the respondent witnesses on behalf of the revenue were cross examined and the Collector also cross examined the witnesses of the respondent
By an order dated 6th December 1985 the Collector of Central Excise Baroda rejected frae contention of the respondent
It was held by him that starch hydrolysate was glucose and fell under item 1 E of the Central Excise Tariff and that the respondent had suppressed the fact of manufacture thereof for consumption in the further manufacture of sorbitol
In the premises he ordered the respondent to pay excise duty amounting to Rs349255955 paise and imposed a penalty of Rs 10 lakhs
Aggrieved by the said order of the Collector the respondent preferred an appeal before the Tribunal
The Tribunal by its order dated 2nd November 1987 being the order under appeal held that starch hydrolysate manufac tured by the respondent is not and never was marketable commodity and hence that would not be goods on which excise duty could be charged
In the premises the Tribunal allowed the appeal filed by the respondent and set aside the order of the Collector
Aggrieved thereby the appellant has come up in appeal to this Court under section 35Lb of the Act
On behalf of the appellant Shri Ganguly contended that the Tribunal misdirected itself in applying the proper test for the determination of the question
He urged that the true test to determine in a 788 matter of this nature was to consider not only whether starch hydrolysate was actually marketable but also to consider whether conceptually the said goods in question were capable of being marketable
It was urged by Shri Ganguly that the Tribunal had misdirected itself in not appreciating this aspect of the matter and did not as such examine or view the evidence on record in the proper per spective
He urged that in the aforesaid light and in view of the findings made by the Collector there was no ground for the Tribunal to interfere with the order of the Collec tor
He further submitted that in any event if the Tribunal was not fully satisfied with the evidence on record to determine whether starch hydrolysate were goods in the sense of being marketable then the Tribunal should have in the facts and the circumstances of the case and in the interest of justice remanded the matter back for appraisement and examination in the light of the true principle or the Tribu nal should have examined or called for the fresh evidence to determine this question
The Tribunal not having done so has failed to render justice and as such the order of the Tribunal is bad according to Shri Ganguly
Shri Ganguly further submitted that in starch hydrolysate the percentage of dissolved solids present is 64
It was submitted that the criterion laid down in the IS Specification for liquid glucose or glucose syrup the two terms are being used synonymously by the Indian Standard Institution was not satisfied in this case
The IS Specification defines liquid glucose or glucose syrup as a refined and concentrated non crystalizable aqueous solution of d glucose maltose and other polymers of d glucose obtained by controlled hydroly sis of starch containing material
The United States Phar meopeia XIX describes liquid hydrolysis of starch consist ing chiefly of dextrose dextrins maltose and water and in these circumstances and in view of the components and the dictionary meaning as discussed by the Tribunal in its order it is urged that it cannot be said that the said goods is the same thing as glucose or glucose syrup
In the premises it was contended that the Tribunal has not consid ered this aspect of the matter
We are concerned in this appeal with starch hydrolysate and therefore 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 arti cle known in the market as such comes into being then the use of such starch hydrolysate captively would attract duty on the part of the assessee even in captive consumption
It is not in dispute as the Tribunal noted in the instant case that starch is hydrolysed by the respondent
The operation of hydrolysis it is contended results in bringing into being starch hydrolysate which is utilised in the manufac ture of sorbitol
The question is whether 789 starch hydrolysate is goods
The case of the respondent was that the starch hydrolysate being wholly unstable and quickly fragmented and losing its character in a couple of days the same could therefore neither be stored nor marketed
In the premises it was the case of the respondent that starch hydrolysate was not marketable product and would not therefore be goods on the manufacture of which excise duty could have been demanded or would have been payable and therefore for non payment of duty there has been no negligence or failure on the part of the respondent and as such section 11 A of the Act was not applicable
In this connection it would be instructive to refer and it would be necessary to rely on the principles laid down by this Court in South Bihar Sugar Mills Ltd etc
vs Union of India  Ors
  There the appellant compa nies manufactured sugar by carbonation process and paid excise duty on sugar manufactured by them under Item I of Schedule I to the Act
According to one affidavit filed on behalf of the respondents filed in those proceedings these manufacturers employed a process of burning lime stone with coke in a lime kiln with a regulated amount of air whereby a mixture of gases was generated consisting of carbon dioxide nitrogen oxygen and a small quantity of carbon monoxide
The gas thus produced was thereafter compressed so as to achieve pressure exceeding atmospheric pressure and then passed through a tank containing sugarcane juice so as to remove impurities from it and to refine the juice
For that process of refining it was only the carbon dioxide in the gas which was used and the other gases ie nitrogen oxygen and carbon monoxide escaped into the atmosphere by a vent provided for the purpose
The carbon dioxide content in this mixture of gases ranged from 27 to 365
Similarly another company manufactured Soda ash by solvay ammonia soda process for which also carbon dioxide was required and this was produced by the petitioner therein by burning lime stone with coke in a kiln in the same manner as the appellant sugar manufacturing companies employing the carbonation process
The respondents therein regarded all the companies as manufacturers of compressed carbon dioxide and levied excise duty on them under Item 14 H in Schedule I to the Act
Writ petitions were filed in the High Court challenging the validity of the excise duty but the same petitions were dismissed
It was contended inter alia on behalf of the appellants therein that the lime kiln was maintained to generate a mixture of gases and not carbon dioxide and at no stage in the process of generating this mixture and passing it through the sugarcane juice was carbon dioxide which formed one of the contents of the mixture either com pressed liquidified or solidified
The mixture of gases so generated was not carbon dioxide as known to the market nor was it accord 790 ing to the specifications laid down by the Indian Standards Institution which required the carbon dioxide content to be at least 99
It was therefore contended that the excise duty sought to be recovered on the contend of carbon dioxide in the mixture of gases could not fall under Item 14 H
It was further contended that the duty being on goods it could be charged only on goods known as carbon dioxide in the trade and marketable as such
As is evident from the said narration of facts the contentions urged were more or less similar to the contentions involved in the instant appeal before us
It was held by this Court that the gas generated by the appellant companies was kiln gas and not carbon dioxide as known to the trade ie to those who dealt in it or who used it
The kiln gas in question therefore was neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore could not attract item 14 H in the First Schedule
This Court reiter ated at p 31 of the report that the Act in question charges duty on manufacture of goods
The word manufacture implies a change but every change in the raw material is not manu facture
There must be such a transformation that a new and different article must emerge having a distinct name char acter or use
The duty is levied on goods
As the Act does not define goods the legislature must be taken to have used that word in its ordinary dictionary meaning
The diction ary meaning of the expression is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market
It would be such an article which would attract duty under the Act
This Court referred to the previous decision in the case of Union of India vs Delhi Cloth  General Mills Ltd 1963 Suppl
1 SCR 586
Therefore in this instant appeal in order to determine whether starch hydrolysate was goods or not it is necessary to determine whether there was any application of process to the raw materials and as a result of that application there emerged new and different article having a distinctive name character or use and the resultant product being goods in the sense of being marketable or marketed
In this connection Shri Soli Sorabjee referred us to the observations of this Court in Union Carbide India Ltd vs Union of India and Ors There this Court reiterated that in order to attract excise duty the article manufactured must be capable of being sold to a consumer
Entry 84 of List I of Schedule VII to the Consti tution specifically speaks of duty of excise on tobacco or other goods manufactured or produced in India and it is now well accepted that excise duty is an indirect tax in which the burden of the imposition is passed on to the ultimate consumer
This Court held that in that context the expres sion goods manufactured or produced must refer to articles which 791 are capable of being sold to a consumer
To become goods an article must be something which can ordinarily come to the market to be bought and sold
The Court found in that case that aluminium cans prepared by the appellants therein were employed entirely by it in the manufacture of flash lights and were not sold as aluminium cans in the market
It also appeared from the records that aluminium cans at the point of levy of excise duty existed in a crude and elemen tary form which were incapable of being employed as a compo nent in a flashlight
These cans had sharp uneven edges and in order to use them as a component in making flashlight cans these cans had to undergo various processes such as trimming threading and redrawing
After that these were reeded beaded and anodized or painted it was at that point only that these became distinct and complete component capable of being used as flashlight cans for housing battery cells and having a bulb fitted to the can
This Court noted that it was difficult to believe that the elementary and unfurnished form in which these existed immediately after extrusion sufficed to attract a market
The assertion of the appellant on affidavit that aluminium cans were unknown in that form in the market had not been proved to the contrary by any satisfactory material by the respondents therein
This Court further found that not a single instance had been provided by the respondents domenstrating that such alumini um cans had a market
The conduct of the appellants in the past having regard to the circumstances of the case would not serve as evidence of the marketability of the aluminium cans it was in that case
This Court noted that record disclosed that whatever aluminium cans were produced by the appellants were subsequently developed by it into a complet ed and perfected component for being employed as flashlight cans
In those circumstances the aluminium cans produced by the appellants were not liable to excise duty under section 3 of the Act read with Item 27 of the Central Excise Tariff
In the case of Bhor Industries Ltd Bombay vs Collector of Central Excise Bombay   this Court had to deal with the liability to duty on intermediate products and it was reiterated that liability to excise duty arises only when there is manufacture of goods which is marketable or capable of being marketed
It was held that excise is a duty on goods as specified in the Schedule
The taxable event in the case of excise duties is the manufacture of goods
Under the Act in order to be goods as specified in the Entry it was essential that as a result of manufacture goods must come into existence
For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods
Actual sale 792 is not necessary
User in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods
It is there fore necessary to find out whether these are goods that is to say articles as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule
Marketability there fore is an essential ingredient in order to be dutiable under the Schedule to 
In that case the Court found that crude PVC firms as produced by the appellant were not known in the market and could not be sold in the market and was not capable of being marketa ble
The Court further reiterated that it was the duty of the revenue to adduce evidence or proof that the articles in question were goods
The Tribunal went wrong it was held in not applying the test of marketability
There being no contrary evidence found by the Tribunal in that case it was held that in those circumstances no excise duty should be charged
It is in this light therefore that the evidence dis cussed by the Tribunal in this case have to be viewed in order to test the validity of the order impugned
The case of the respondent had always been that starch hydrolysate was not being marketed and is not capable of being marketed in view of its highly unstable character resulting in fer mentation even if kept for a day or two
Shri Ganguly ap pearing for the revenue sought to urge that the Tribunal was wrong in approaching the problem in that light
The test was not whether the starch hydrolysate was not of a highly unstable character and resulted in fermentation even in a day or two but whether it was capable of being marketable
He submitted that the test applied was not the true test
He urged that even transient items of articles can be goods provided that these were known in the market as distinct and separate articles having distinctive and separate uses these would still become goods if these were capable of being marketed even during short period
From a conceptual and jurisprudential point of view Shri Ganguly is right
But we are concerned with the question whether actual goods in question were marketed or in other words if not wheth er these are marketable or not
It is true that the goods with unstable character can be theoretically marketable if there was a market of such transient type of articles which are goods
But one has to take a practical approach
The assessee produced evidence in the form of affidavit
One Shri Khandot
who filed an affidavit in support of the case of the respondent had stated in his affidavit that com pletely hydrolysed starch would start fermenting and decom posin and at higher concentration it would start crystaliz ing out within two or three days
This is evidence indicat 793 ing propensity of its not being marketed
It is good evi dence to come to this conclusion that it would be unlikely to be marketable as it was highly unstable
There was evi dence as noted by the Tribunal that it has not been marketed by anyone
There is also an admission of the Superintendent of the appellant that no enquiry whatsoever was conducted by the Department as to whether starch hydrolysate was ever marketed by anybody
It was pointed out by the revenue that even according to the respondent it stored starch hydroly sate in tanks before transporting it through pipes but according to the appellant the storage of starch hydroly sate was only for a period of a few hours only as a step in the process of transfer thereof to sorbitol
It therefore appears to us that there was substantial evidence that having regard to the nature of the goods that this was unlikely that the goods in question were marketable
This should be judged in the background of the evidence that the goods have not been marketed in a pregmatic manner
All this again would have to be judged in the light of the fact that revenue has not adduced any evidence whatsoever though asked to do so
It was pointed out that if the Department was to charge duty of excise on this starch hydrolysate as one form of glucose it would be the burden on the Department to establish that starch hydrolysate was not merely marketable but was being marketed as glucose in some form
This would be so since what is liable for duty under item E is glucose in any form and therefore in order to demand duty under that section the Department must establish that the product on which duty was demanded was known in the market as glu cose in one form or the other
There is no such evidence as observed by the Tribunal
The Tribunal noted and in our opinion rightly that revenue cannot be said to have dis charged its burden of establishing that by applying the process of hydrolysis to starch for production of starch hydrolysate the respondent manufacturers any excisable goods in the sense of being goods known in the market and being marketed or marketable
Our attention was drawn to the affidavit of Shri PD Khander Chemist who was a Food Technologist and was holding a degree of BSc
Chemistry
He was carrying on business of dealing in glucose
He stated in his affidavit as follows 
I have been the starch hydroly sate made by Sarabhai M Chemicals
It is completely hydrolysed starch
It appears as aqueous syrup containing about 66 71 reduc ing sugars expressed as Dextrose
It is nei ther glucose or dextrose in any form nor glucose in liquid state nor liquid glucose
In order to find out the market for completely hydrolysed starch as is made in Sarabhai M Chemicals at 794 their instance I had made trade inquiries
However there is no market for such sub stance
Since it can act only as an intermedi ate product for the manufacture of Sorbitol
Dextrose or Glucose and Fructose and every manufacturer of Glucose Dextrose Sorbitol and Fructose would have his own plant for hydrolysing starch it is commercially not a viable proposition both the manufacturers of Glucose Dextrose Sorbitol or Fructose or the persons undertaking the process of hydrolysing starch either to purchase completely hydroly sed starch from the market or sell or under take process of hydrolysing starch for the purpose of sale in the market because at lower concentration starch which is complete ly hydrolysed would start fermenting and decomposing
At higher concentration it would start crystallising out within two or three days
 This affidavit evidence remains uncontradicted Shri Ganguly however drew our attention to an order of the Tribunal in Ms Anil Starch Products Ltd Ahmedabad vs The Collector of Central Excise Ahmedabad being Appeal No EDSBT 153481 D arising out of the Revision Order No 82081
He referred to the observations at page 117 of the Paper Book which dealt with the evidence of one Shri Khabho lia where according to Shri Ganguly the Tribunal came to a different conclusion
But the Tribunal in that case relied on the decision of the Allahabad High Court in the case of Union of India vs Union Carbide India Ltd There the Allahabad High Court held that things would be nevertheless goods even these did not have a general market where they can be easily bought and sold
The High Court hold that the fact that products might not be known to the general public or to the traders in general would not change the position and therefore the test did not appear to be sound
This decision of the Allahabad High Court which was relied upon by the Tribunal was set aside by this Court in Appeal in the case of Union Carbide India Ltd vs Union of India  Ors
supra
In view of the test laid down and in view of the evidence discussed it is difficult to sustain the order of the Tribunal
In this connection it appears that there was no market enquiry by the Revenue
Reference may be made to the crossexamination of Shri Shukla Superin tendent Central Excise by Shri Nanawati as appears at pp
235 237 of the present paper book
In view of the fact that there was positive evidence that starch hydrolysate was never marketed and in view of further fact that in the light of the nature of the goods being highly unstable it is highly improbable that the goods were capable of being marketed and there being in spite of 795 the opportunities no evidence produced at all that the goods in fact were capable of being marketable in our opinion it must be held as did the Tribunal that the starch hydrolysate were not dutiable under the Act
In the premises the revenue has failed to discharge its onus to prove that starch hydrolysate was dutiable
In the premises the Tribunal cannot be said to have committed any error
The appeal must therefore fail and is accordingly dismissed
In the facts and the circumstances of the case there will however be no orders as to costs
RSS Appeal dis missed


Summary:
The respondent and employee in the Posts and Telegraph Department was retired from service under Rule 22 of the Liberalised Pension Rules 1950 which empowered the Govern ment to retire a servant at any time after he had completed 30 years of qualifying service
The respondent s writ peti tion in the Allahabad High Court was dismissed by the learned Single Judge holding that there was no infirmity in the Rule
The Division Bench however accepted the Special Appeal filed by the respondent and declared Rule 22 in valid
Before this Court it was contended on behalf of the appellant that the Government of India had issued instruc tions dated July 11 1955 and February 8 1956 which laid down that the retirement under Rule 22 of the Pension Rules should be effected when such retirement was necessary in public interest
It was further contended that the Minis try of Home Affairs Memorandum dated November 30 1962 which was issued in the name of the President of India was statu tory and had the effect of amending Rule 22 of the Pension Rules and reading the rule and the memorandum together the power under Rule 22 could only be exercised to weel out unsuitable employees
Dismissing the appeal this Court HELD 1 Central Government servants superannuate at the age of 58 years
The Government has the absolute right under Rule 56j of 797 Fundamental Rules to prematurely retire a servant in Public Interest  after he has attained the age of 55 years
The Government has also the power under Rule 22 of the Libera lised Pension Rules to retire a servant at any time after he has completed 30 years of qualifying service
798H 799A 2 Fundamental Rule 56j while granting absolute right to the Government provides that such power can only be exercised in Public Interest 
This guide line is suffi cient safeguard against the arbitrary exercise of power by the Government
The object of this Rule is to chop off dead wood
Rule 22 of the Pension Rules on the other hand provides no guide line and gives absolute discretion to the Government
There is no requirement under the rule to act in Public Interest 
799E F 3 Although the rules are mutually exclusive and have been made to operate in different fields but the operational effect of the two rules is that a Government servant who has attained the age of 55 can be retired prematurely under FR 56j only on the ground of Public Interest  whereas anoth er Government servant who is only 51 and has completed 30 years of qualifying service can be retired at any time at the discretion of the Government under Rule 22 of the Pension Rules
Any Government servant who has completed 30 years of qualifying service and has not attained the age of 55 years can be picked up for premature retirement under Rule 22
Since no safe guards are provided in the Rule the discretion is absolute and is capable of being used arbitrarily and with an un even hand
Rule 22 of the Pension Rules is therefore ultra vires Articles 14 and 16 of the Constitution of India
799G 800B C 4 A statutory rule cannot be modified or amended by executive instructions
A valid Rule having some lacuna or gap can be supplemented by the executive instructions but a statutory rule which is constitutionally invalid cannot be validated with the support of executive instructions
The instructions can only supplement and not supplant the rule
800E 5 The Ministry of Home Affairs Memorandum dated November 30 1962 has not been issued under Article 309 of the Constitution of India and as such cannot be statutory
The memorandum is in the nature of executive instructions issued in the name of the President of India as required under Article 771 of the Constitution of India
801D 798 Union of India  Ors
vs R Narasimhan AIR 1988 SC 1733
distinguished