Case: Bata India Ltd Vs. Commissioner of Central Excise, New Delhi

2. The above question came up for consideration before the Customs, Excise and Gold (Control) Appellate Tribunal (for short `the Tribunal). The Member (Judicial) took the view that the product would not attract duty unless it is established that the goods in question is marketable or capable of being marketed as a distinct product and that the Revenue has failed to discharge the burden to prove the marketability and dutiability of the intermediate product in the manufacture of rubber/canvas foot wear. The Member(Technical), however, disagreed with that finding and held that the Revenue has discharged its burden and took the view that the goods in question attracts duty.3. In view of the difference of opinions expressed by the two members, the matter was placed before a third member who concurred with the view expressed by the Member (Technical) and a final order was passed on the above issue by the Tribunal on 24.12.2001 holding that double textured rubberized fabric / unvulcanised sandwiched fabric is an excisable product liable to central excise duty. No opinion was expressed by any of the members on the question of exemption, applicability of notification and the quantum of penalty imposed and those issues were left to be considered when the appeal is finally posted for hearing.4. Aggrieved by the findings of the Tribunal dated 24.12.2001 the assessee has come up before us with this appeal.5. The Assessee is a well known manufacturer of foot wear. For the manufacture of foot wear, various raw materials are purchased by the assessee from the market and / or from their respective manufacturers such as fabrics, rubbers, chemicals, solvents etc. During the process of manufacturing of foot wear various chemicals / rubbers / solvents etc., are mixed together and a thin layer of such mixed materials is sandwiched in between two sheets of textile fabric, in running length, through a three bowl calendering machine. The product is later cut and stitched according to the assessees requirements and in-process materials are used as shoe-uppers in the foot wear. Such fabrics are also at times sent to job workers for stitching purposes only and the fabric sandwiched with the mixed materials are inputs of the intermediate stage during the course of manufacture of footwear. Vulcanisation of the foot wear takes place only after completing the entire process and then it would be a finished product as a footwear, made available in the market and acquires commercial identity and turns out to be a commercially known product.6. The Collector of Central Excise (in short the Collector) noticed that during the manufacture of foot wear the assessee manufactures an excisable product called double textured fabric which is further used as upper material in the manufacture of foot wear and this double textured fabric is nothing but rubberized, water proof fabric with a thin layer of rubber sandwiched between two sheets of cotton fabric in running length. As a result of that process a double textured fabric emerges as a distinct product with specific properties and character other than that of original fabric used as input which is known in commercial trade parlance as double textured fabric which is used in considerable quantities for making rain-coats, holdalls, hand bags etc.7. The Collector therefore, came to the conclusion that this double textured fabrics are marketable products fulfilling the requirement of the definition of excisable goods as per Section2(d) of the Central Excise 1944 (in short the Act) attracting the levy of central excise duty under the Act. The Collector then issued a show cause notice dated 29.03.1995 to the assessee stating it had manufactured and cleared double textured fabric valued at Rs.7,96,43,247/- for captive consumption in the manufacture of shoe-uppers used in 2,51,29,646 numbers of exempted canvas shoes without payment of duty amounting to Rs.88,80,782/- during the period from 01.04.1990 to 31.08.1994 without the cover of excise gate pass, without filing classification list, price list without accounting for production and clearance in the statutory central excise records and without observing other formalities prescribed under the Central Excise Rules, 1944. The assessee was directed to show cause why the above amount be not recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11(A) of the Act and also to show cause why penal action be not taken against them under Rule 173 Q(1) of the Central Excise Rule, 1944. Yet another show cause notice dated 30.03.1995 also was issued to the assessee claiming duty amounting to Rs. 5,95,181 during the period from 01.09.1994 to 06.12.1994 stating that the assessee had failed to pay duty for the rubberized fabric manufactured and cleared for captive consumption for the above period as well and to show cause why penal action be not initiated under Rule 173Q(1) of Rules 1944.8. The assessee filed detailed objections to the show cause notices on 22.09.1995 and 19.02.1996 respectively, and the matter was heard by the Commissioner, Central Excise who confirmed the demands made in both the show cause notices and a total amount of Rs.89,77,064 was demanded from the assessee. The Commissioner of Central Excise also imposed a penalty of Rupees 1 crore on the assessee under Section 173 Q(1) of the Central Excise Rules, 1944. Aggrieved by the above mentioned order the assessee approached the Tribunal and the Tribunal by a majority order held that double textured rubberized fabrics / vulcanized stitched fabric is an excisable product attracting duty the correctness or otherwise of that order is the issue that has come up for consideration before us.

Reasoning:
12. We have heard counsel on either side at length and have also gone through the show cause notices issued by the Collector, objections filed by the assessee and the order passed by the Commissioner, views expressed by both the members and the order passed by the Tribunal on the question of exigibility of the product. The process undertaken by the assessee has been elaborately dealt with in the above mentioned orders and it is unnecessary to reiterate the same. Suffice it to say that the product in question is used as an intermediate product, goes to make the component for the final product. The burden to show that the product in question is marketed or capable of being bought or sold in the market so as to attract duty is entirely on the Revenue.Revenue in this case has not succeeded in establishing that the product in question was either marketed or was capable of being marketed. The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. No evidence has been produced by the Revenue to show the product unvulcanised sandwiched fabric as such is capable of being marketed, without further processing. The question is not whether there is an hypothetical possibility of a purchase and sale of the commodity but whether there is sufficient proof that the product is commercially known. The mere fact that the product in question was entrusted outside for some job work such as stitching is not an indication to show that the product is commercially distinct or marketable product. Without proof of marketability the intermediate product would not be goods much less excisable goods. Such a product is excisable only if it is a complete product having commercial identity capable of being sold to a consumer which has to be established by the Revenue.19. The test report dated 25.10.1994 of the Chemical Examiner, SPB hand book of rubber products and the statement of the Superintendent (Supply and Transportation) of the assessees company do not show that the product in question is capable of being marketed. The mere theoretical possibility of the product being sold is not sufficient but there should be commercial capability of being sold. Theory and practice will not go together when we examine the marketability of a product. On the other hand materials produced by the assessee i.e. affidavit of Mr. Shomnath Chokravarty, Consultant - Rubber and Plastic Technology, affidavit of the Production Manager of the assessee Company, certificate of Prof. C.K.Das, IIT, Kharagpur, affidavit of Ms. Parvati Pada Mukherjee, certificate from Footwear Design and Development Institute, Ministry of Commerce, Government of India and The Vanderbilt Rubber Handbook, would show that the product in question is only an intermediary product generally used for captive consumption which has no commercial identity as such.20. We are also of the view that no reliance can be placed on the Division Bench Judgment of the Calcutta High Court reported in Union of India (UOI) vs. Bata India Ltd. 1993 (68) ELT,756 (Cal) since this Court while dismissing SLP(C)No.6146 of 1993 filed by the assessee against the above judgment clearly opined that the merits of the case was not being looked into since the operative portion of the judgment was in favour of the assessee herein and hence the question as to whether the product was excisable or not was not decided.