Full Judgment
2. Shri B.C. Mahay, Ld. DR, submitted that all the respondents manufacture water storage tanks, in the manufacture of which, they get the impugned powder, which falls under Heading 39.01 of the Schedule to the Central Excise Tariff Act; that the respondents were availing of benefit of Notification No. 217/86-CE, dated 2.4.86 and subsequently Notification No. 67/95-CE, dated 16.3.95 in respect of impugned powder; that as the water storage tanks up to 300 Lt. is subjected to nil rate of duty, show cause notices were issued for disallowing the benefit of Notification No. 217/86/67/95-CE; that the Assistant Commissioner, however, withdrew the proceedings for demand on the ground that the process carried out on converting polymers granules into powder does not bring into existence a new and distinct commodity, as it is consumed captively in the continuous process for the manufacture of water storage tanks and further, impugned powder is not marketable because being hygroscopic in nature, it absorbs atmospheric moisture at a rapid rate resulting in the lump formation in the powder which makes it unusable for the manufacture of water storage tanks; that the Commissioner (Appeals) also under the impugned orders has upheld the Adjudication Orders. The Ld. DR, further, submitted that as per Note 6B to Chapter39 of the Central Excise Tariff Heading Nos. 39.01 to 39.14 shall also include primary forms obtained from conversion of another primary form, falling under the same Heading and such conversion shall amount to manufacture. He, therefore, contended that in terms of this Chapter Note, the process of conversion of granules into powder would amount to manufacture. He, further, mentioned that the impugned goods are marketable as another unit in Jaipur Commisssionerate, namely M/s.
Polycon International Ltd. (which is also a unit of same group of companies) is clearing the powder of LLDPE/LDPE/HDPE on payment of CE duty, which goes to show that the powder in question is marketable. He relied upon the decision in the case of Motil amniotes Pvt. Ltd. v.CCE, Ahmedabad wherein it was held that the goods are excisable if they are manufactured by the assessee and are marketable.
Reliance was also placed on the decision in the case of Laminated Packaging Pvt. Ltd. v. CCE wherein it was held that lamination of duty paid craft paper with polyethylene results in polyethylene laminated craft paper and the process amounts to manufacture.
3. Shri Punkaj Mullick, Ld. Advocate, on the other hand, submitted that the plea of marketability taken by the Ld. DR, as well as in the memo of Appeals, is not supported by any documents and it is in the shape of a bald statement; that further, no application has been filed by the Revenue for admission of additional evidence by the Appellate Tribunal as is required under the CEGAT (Procedure) Rules. He, further, submitted that it is not the case of the Department that the powder manufactured by said Polycon International Ltd. is quite the same as the powder which emerges in the respondents' units during the course of manufacture of water storage tanks; that, therefore, the fact that any kind of powder manufactured by any other unit is being marketable again does not lead to an inference that the impugned powder is also marketable as such; that the Asstt. Commissioner has given a very specific arid categorical finding that the impugned product is not marketable as it absorbs moisture and gets converted into lump form.
Ld. Advocate also claimed the benefit of Exemption under Notification No. 1/93-CE, dated 28.2.93; that Explanation VI to the said Notification provides that if any specific goods are used for further manufacture of a specified goods within factory of production, the clearances of said specified goods for captive use shall not be taken into account for the purpose of calculating the aggregated value of clearances under the Notification; that Explanation VI read with Explanation II provides that no duty will be chargeable if small scale unit consumes goods manufactured by it captively for the manufacture of another product. In support of his contention, he relied upon the decision in the case of Universal Electrical Co. v. CCE, New Delhi and CCE, New Delhi clearances captively consumed is not to be taken into account if the final product is not cleared under the Notification. Finally the Ld.
Advocate mentioned that if the impugned powder is held to be dutiable, the respondents would be eligible for availing of the Modvat credit of the duty paid on inputs as held in the case of Vivek Rerolling Mills v.CCE Chandigarh 4. We have considered the submissions of both the sides. The facts, which are not in dispute are that the granules of LLDPE/LDPE/HDPE are converted into powder form by all the respondents. In terms of Note 6(b) to Chapter 39 of the Central Excise Tariff, conversion from one primary form into another primary form amounts to manufacture.
Accordingly, the conversion of granules into powder form will amount to manufacture. It is well settled law that the marketability of the product is to be proved before any goods can be made chargeable to excise duty. We observe from the perusal of the Adjudication Orders that the product in question has been held to be not marketable only on the ground that it is of hygroscopic nature which absorbs atmospheric moisture at a rapid rate resulting in the lump formation which makes it unusable for the manufacture of water storage tanks. There are no details given in any of the Adjudication Order as to at what rate the powder absorbs atmospheric moisture and what is its shelf life. In absence of any detail, merely because the powder, in question, is hygroscopic in nature, it cannot be concluded that the product is not marketable. A very large number of products are hygroscopic in nature and they are marketed freely. We also observe that the Revenue, on the other hand, has contended that another manufacturer in Jaipur Commissionerate is manufacturing and marketing the said powder.
However, the Revenue has also not brought on record any evidence in the form of invoice etc. in which the said powder is being marketed. It is also required to be seen whether the powder manufactured by the said Polycon International Ltd. is the same powder, which is in dispute in these appeals. In view of all these facts and circumstances and in the interest of justice, we are of the view that there is no sufficient material on record to decide the matters and these matters should be remanded to the Adjudicating Authority for afresh adjudication after taking evidence from both the sides. The Adjudicating Authority will also consider the plea of the respondents that they are eligible for the benefit of Notification No. 1/93. In case the product is held to be chargeable to Central Excise duty, that Modvat availability has also to be considered by the Adjudicating Authority. Thus, all the appeals are allowed by way of remand.