1. This matter has come to the Tribunal as a result of Supreme Court's directions dated 13-11-1992 in Civil Appeal Nos. 2508-2509 of 1978.
Relevant extracts from the same are reproduced below :- "The question before us is whether the flat forms rolled out from zinc ingots by the appellant are liable to the payment of excise duty. The description of the commodity in question given by the High Court shows that they are rough rolled flat forms. In our opinion, in order that these products can be subjected to the levy of excise duty, decision must be arrived at that these rough rolled flat forms were marketable commodities. It appears that the Tribunal and the lower authorities did not consider the evidence on record in order to determine the question whether the said products were marketable commodities. The High Court judgment clearly states that the revisional authority did not deal with the question as to whether rough rolled flat forms were marketable commodities or not. The High Court also did not enter into the question whether the said products were marketable commodities or not in view of the decision of a Division Bench of the Allahabad High Court in Union of India v. Union Carbide India Lid. reported in 1972 A.L.J. 451. We find that the said judgment of the Allahabad High Court has been reversed by this Court in Union Carbide India Ltd. v. Union of India and Ors.
(reported in 1986 (2) SCC 547). In these circumstances, we set aside the impugned order and remand the case to the Customs, Excise and Central Excise Gold (Control) and Appellate Tribunal (CEGAT) to examine the evidence on record and determine whether the products in question are marketable commodities. It is clarified that the Tribunal will determine this question on the basis of evidence already on record and neither party will be permitted to lead further evidence." 2. Tribunal is required to determine the marketability of "rough rolled flat form" of zinc used for punching callots for conversion into cans for dry battery cells. 'Rough rolled flat form' of zinc is obtained by the appellant by melting duty paid zinc ingots purchased from the market in a furnace and then casting them in the form of 'slabs' which are rolled into the disputed product i.e. "rough rolled flat form".
Department wants to charge duty on the aforesaid 'flat form' as "zinc sheet" U/126B.3. Basic evidences regarding marketability of the aforesaid disputed product adduced by the department are - (a) The product itself which is in the form of zinc sheet, howsoever crude it is.
(b) Admission of the appellant in its letter dated 19-9-1974 to the Superintendent of Central Excise describing the goods as 'zinc sheet' and seeking permission from the Supdt. to get the 'zinc sheets' rolled from a rolling mill in Kanpur/Mirzapur. For proper appreciation, that letter is reproduced in full :- Our rolling mills producing zinc sheets is in the state of break down since 13-9-1974 and it is feared that it might take further 10 to 15 days to put it in operation.
Since zinc callots which are produced out of zinc sheets, are immediately required for continuation of production of dry cell battery, we have arranged for the time being to get the zinc slabs rolled into zinc sheets from a rolling mill from Kanpur/Mirzapur.
The name of the rolling mill shall be intimated to you on finalisation. We, therefore, intend to send zinc slabs (produced immediately after melting stage) to the said rolling mill and get back zinc sheets from them duty paid. These duty paid zinc sheets shall be stored in the place shown X in the enclosed ground plan "and will be issued for further processing i.e. punching callots.
We, therefore, request to kindly accord permission to store duty paid goods in factory premises as provided under Rule 173H read with Collectorate Notification No. 9-C.E/1969.
Keeping in view utmost urgency of the material without which the factory will face closure, we request that immediate permission may kindly be granted and oblige.
(c) Affidavit of Shri K. Sethi, Assistant Collector of Central Excise filed along with a miscellaneous application dated 24-10-1978 on the same day on which High Court of Allahabad heard the writ petition of the appellant herein and reserved judgment after hearing, without passing any order on the said miscellaneous application. He (SDR) submits that the Misc. Application is on 'record' of the High Court and therefore, Tribunal is bound to consider this as evidence in support of marketability of the 'disputed goods' as 'zinc sheet'. He relied on the definition of the word 'record' in Mukerjee's Law Lexicon 1989 Edition at page 539 which states as follows :- "Anything entered on the rolls of the Court" He also relies on 1992 (61) E.L.T. 521 (Mohan Lal Shamji Soni v. U.O.I. Relevant extracts from the affidavit dated 24th Oct. 1978 of Shri K. Sethi alongwith annexures thereto are reproduced below :- "1. That the deponent is the Assistant Collector, Central Excise, Allahabad and is as such well conversant with the facts of case deposed to below.
2. That one of the main points argued in the present writ petitions was as to whether the so-called rough rolled zinc sheets manufactured by the petitioners are marketable in the sense that they are actually bought and sold in the market.
3. That the case of the respondents has all along been that the so-called rough rolled flat form manufactured by the petitioners are capable of being marketed while the petitioners' contention has been that these sheets are not.
3.a That during the hearing of the petitions the respondents sent telex massages all over India in order to ascertain as to whether these zinc sheets out of which callots are punched for manufacture of dry cell batteries are actually sold in the market or not.
4. That in reply to the aforesaid massage, a reply was received from Collector, Central Excise, Chandigarh on 7-10-1978 stating that these zinc sheets were being actually sold in the market.
5. That since the aforesaid reply did not contain the names and details of the sellers and buyers of zinc sheets, a clarification was sought by the Assistant Collector, Central Excise, Allahabad vide his telegram dated 7-10-1978.
6. That a reply was received from Collector, Central Excise, Chandigarh vide his telex No. 41 dated 18-10-1978 giving the names and particulars of the concerned manufacturing zinc sheets and marketing the same for the punching of callots. The name of this concern, M/s. Everest Metals Rewari (Haryana).
7. That the names of the companies purchasing zinc sheets from M/s.
Everest Metals Rewari (Haryana) for punching callots are 8. That since all these materials were received after conclusion of the arguments, the same could not be produced before the Hon'ble Court which is very such regretted.
9. That it would, therefore, be expedient in the interest of the justice that the Hon'ble Court be pleased to take on record the accompanying supplementary counter-affidavit." (d) Apart from the basic evidences as stated above, the learned SDR has further relied upon the findings of the High Court, Central Govt., Appellate Collector and the original authority (Assistant Collector of Central Excise) in the various orders which culminated in the Apex Court's aforesaid directions dated 13-11-1992. These are also reproduced below :- "I have gone through their representation carefully and the arguments advanced therein and also having heard them through their representative Shri R.P. Agarwal on 9-2-1973.1 am of the view that M/s. Geep Flashlight Industries Ltd. Allahabad are actually manufacturing zinc sheets as defined under Tariff Item No. 28B (2) which reads as follows :- "Manufactures, the following namely, plates, sheets, circles, strips and foils in any form or size".
"As already mentioned above the rough zinc slabs received after they are melt are subjected to a process of rolling. These are rolled about 5 times to bring them to the proper dimensions. Under the circumstances it cannot be disputed that they undergo a process which is carried out for the manufacture of an excisable product.
Section 3 of the Central Excises and Salt Act, 1944, prescribed that there shall be levied and collected in such manner as may be prescribed duties of excise of all excisable goods which are produced or manufactured in India at the rate set forth in the first schedule. Under item 26B of the Central Excise Tariff being the schedule of the Act under sub-item (), thereof excise duty is leviable on zinc manufactures namely plates, sheets, circles, strips and foils in any form or size. The main points for consideration now is that so-called flat forms manufactured by the appellants fall under the above item.
According to the Brussels Nomenclature Chapter 79 under beginning para 79.03 wrought plates, sheet and strips it has been laid down that above articles are ten to apply inter alia to such products whether or not cut to shape, perforated, corrugated, fibbed channeled polished or coated provided that they do not thereby assume the character of articles or of products falling within other heading. The above definition takes into its scopes shapes which are perforated and whether or not cut. Under the circumstances, the flat products received after rolling in the factory of the appellants fall within the scope of this.
According to the ISI standard rough rolled should have a standard width of 150 mm and length of 220 mm with 4 mm thickness with the permissible variations as prescribed. The products of the appellant have a width varying from 147 to 164 mm and a length of 1943 mm to 224 mm and thickness varying from 4 mm to 4.5 mm even though the products of the appellant do not have a clean and smooth surface it cannot be denied that they fall within the definition of strips or sheets in any form or size as prescribed in the tariff. The criterion of uniform cess section is specially applicable to iron and steel products. Also copper and alloy sheets and circles whether trimmed or not irrespective of having uniform cross section fall under the scope of excisable goods under the Central Excise Tariff.
In the judgment passed by the Allahabad High Court in a special appeal No. 307 of 1971 and special appeal No. 429/69 and writ petition No. 3649 of 1971 it was held that the term goods have been defined in the Constitution of India in article 366(2) which has been described to include all materials, commodities and articles.
It was, therefore, held that the term goods would attract the provisions of Section 3 of the Central Excises and Salt Act, 1944 which levies excise duty on manufacture and production of goods and not their sale. It was also held that the particular substance produced at an intermediate stage even if it is not put into the market for sale would not make any difference and this will be immaterial for its liability to duty. The court, therefore, held that the test of general marketability of the goods does not appear, to be sound and could not be accepted. Under the circumstances the appellants' contention that the rough unfinished sheets/strips manufactured by them as an intermediate product which was not capable of being marketed did fall within the scope of tariff item 26B(2) of the Central Excise Tariff and has no force and the rolled zinc sheets/strips manufactured by them are liable to pay duty at the appropriate rate prescribed." "Manufactures, the following namely, plates, sheets, circles, strips and foils in any form or size. The expression in any form or size is very wide and includes plates, sheets, strips etc. in any form or size. The petitioners' contention that sheets manufactured by them are not sheets as per IS specification since these are not free from all defects is rejected on the ground that the Central Excise Tariff does not make any distinction between sheets which are free from all defects and others. Their contention that as BIN wrought products and semi-manufacture and should be treated as such for Central Excise Tariff is also rejected as the Tariff entry does not admit of any such presumption, manufactures in the Tariff entry does not have the same meanings fully manufactured products as per BTN but only indicates manufactured out of zinc and no more. Any sheets whether rough or smooth manufactured out of zinc will be fully covered by the Tariff entry irrespective of the fact whether these conform to the special laid down in the Indian Standard or BTN or otherwise.
If this construction is not accepted the qualifying words in any form or size would become redundant and meaningless. Accordingly, therefore, the Government of India holds that the products manufactured by them are fully covered by the Tariff Entry 26B(2).
Regarding the petitioners' contention that these goods are used by them in the continuous process of manufacture and such goods are normally not sold in the market the Government of India observes that it is intermediate stage during the course of manufacture an excisable articles comes into existence the same is chargeable to duty irrespective of the fact whether in such condition the goods are sold normally in the market or not. This view was also held by the Allahabad High Court in Special Appeal No. 307 of 1971 and special appeal No. 429 of 1969 and Writ Petition No. 3649 of 1971.
The revision application fails and is rejected accordingly." The letter aforesaid does indicate that to the petitioner which is admittedly one of the few dry cell battery manufacturing units in the country, the flat form from which callots are punched and which is usually manufactured in its own factory process of rolling is admitted to be a product which can be obtained from a rolling mill by getting the same manufactured therein. This letter goes to establish the version of the respondents that the flat forms manufactured by the petitioner as an intermediate product during the process of manufacture of dry cell batteries in its factory, are such which are known as a sheet to the manufacture of dry cell batteries and can be obtained by getting the same manufactured from the factory. In his rejoinder affidavit to the counter affidavit of Shri K. Sethi with which the letter aforesaid has been appended as an annexure, Shri Tapan Malik, Works Manager of the Battery Unit of the petitioner Company has not disputed the contents of the authenticity of the letter but has attempted to explain that the term 'zinc sheet' used therein was a lease repetition of the description of the product as used by the Central Excise Department.
We are, however, of opinion that on the admission of the petitioner itself it is clear that the product described as flat form of 'Zicee' by the petitioner is one which is known as 'Zinc sheet' to a manufacturer of dry cell batteries and is a product which can be held to be known as 'zinc sheet' to the trade to which the petitioner belongs. It is not necessary for us, therefore, to go into the evidence adduced by the parties in these proceedings and thereafter to pronounce upon the question as to whether the product of the petitioner can be treated to be 'zinc sheets' or 'strips' as known to the general market." 4.1 The appellant has relied upon the following evidences, regarding non-marketability of the disputed product as 'zinc sheets' 6. That the process of manufacture of zinc cans for dry cell battery in the aforesaid factory of the above-named company is as below : Imported zinc in the form of ingot of specific purity are melted in a furnace and the molten zinc is poured into moulds to form zinc slabs. The zinc slabs are heated and rolled into rough flat-forms.
From these roughly rolled flat-forms of zinc, callots are punched, from callots, zinc cans are made, by impact extrusion process. The required chemicals are filled in the cans and after sealing and cladding, the cans take the shape of finished dry cell batteries. A chart showing the above process is annexed to this affidavit as Annexure I. 7 (a) That the process of manufacture including (a) compression of the imported zinc ingots, after melting and pouring, into rough zinc slabs, (b) conversion of these rough zinc slabs again into rough rolled flat-forms after several rollings, (c) feeding of these rough rolled flat-forms into presses for the punching of the callots, (d) conversion of the zinc callots into zinc cans with rough edges and varying length, (e) trimming of these cans to standard zinc, (f) assembly of the battery and (g) finally, assembly of the paper jacket with label and the plastic washer into the finished dry battery is a continuous one.
(b) It is being brought to the knowledge that, for the convenience and facility of working, hot rolling process is used in our factory for conversion of rough zinc slabs into rough rolled flat-forms and feeding of these rough flat-forms, where hot, into punching presses soon after, for which alone our presses are suited. In other words, the 'disputed' rough rolled flat-forms are produced and consumed IN QUICK SUCCESSION. They are not needed nor usable for any other purpose, and are not sold nor saleable, and the process followed by the said Company is itself opposed to and precludes any large scale production or storage of these rough rolled flat-forms materially in excess of the immediate day-to-day needs.
(c) It is also pointed out that these rough rolled flat-forms are produced after five successive rollings on the rolling press which is manually operated, and these forms finally are out invariably (a) in ununiform length, width, thickness (b) with cracked sides and also uneven and cracked ends with varying thickness, varying curvature and bands and (c) with neither clean nor smooth but with scratched, blistered and uneven surface.
(d) These rough rolled flat-forms are fed into punching presses in same uneven and un-uniform rough form in which they come out of the rolling press, without any trimming or finishing process, and without bringing them into any standard shape and size.
(e) For these reasons, some of the callots punched out from these rough rolled flat-forms varied in thickness and consequently CONTAINED VARYING QUANTITY OF THE METAL.
(f) The cans varied in length to some extent from one another, and this varying length of cans is due to varying thickness of callots, which in its turn, is due to corresponding varying thickness in the surface of the rough rolled flat-forms, both (a) in respect of each flat-forms and (b) in respect of one flat-form as compared to another.
(g) Out of the rough rolled flat-forms produced in this manner that 10 pieces at random were picked up by the deponent (being Engineer-in-Charge of Zinc Section) and their variations, inter se, had been furnished in the statement.
8. That the deponent asserts that the ten sample pieces of rough rolled flat- forms of zinc picked up at random on 7/8th April, 1973 referred to above, were checked and the various dimensions were measured by the deponent personally, and the dimensions found on checking, were correctly recorded in the statement. Copy of the said statement is annexed to this affidavit as Annexure I. 9. That the deponent further asserts that the rough rolled flat-forms of zinc produced at the intermediate stage of manufacture of dry cell batteries in the aforesaid factory normally contains similar variations as were found and recorded by the deponent in Annexure II in respect of the 10 randomly selected sample pieces.
10. The deponent further asserts that none of the rough rolled flat-forms of zinc produced in the company's factory satisfies the standards laid down by ISI vide IS : 2258 : 1967 in respect of tolerance for thickness, width, length, bend or curvature and defects, as is evident from Annexure 2. None of them has rectangular cross-section - (i.e. neither uniform width nor uniform thickness), which is a necessary requirement for a "sheet" of any metal.
Similarly, none of them, has even and smooth surface on either side of the flat-form which is another essential requirement of a "sheet" of any metal.
11. The deponent further asserts that the flat-forms produced from a transitory and intermediary step in the manufacture of zinc cans and rough rolled forms as such cease to exist after punching of calots and their extrusion into cans. The forms are thus not used, nor usable as "sheets" of metal, i.e. for any purpose for which a "zinc sheet" is or can be commercially used, but are used in the continuous process of conversion of zinc ingots into zinc cans. The forms are neither stored nor sent out of the factory.
12. That, on careful assessment of the matter based on the deponents' technical knowledge and past experience in the field of manufacture of non-ferrous metal products, and personal practical knowledge in his present capacity, the deponent is of the opinion that :- (a) the aforesaid rough rolled flat-forms of zinc are not 'zinc sheets, in any form or size, technically or in the sense in which that term is understood in the commercial world. The marketable zinc sheets in various forms and sizes are usually of lesser thickness upto 0.080" with rectangular cross-section (i.e. uniform thickness and uniform width) and smooth and even surface on both sides.
(b) the rough rolled flat-forms of zinc remain in the form of 'zinc' only during and after the stage of rolling and are only a lengthened and flattened form of zinc ingot. They cannot be bought or sold into the market as "zinc sheets", and can only be dealt/disposed of as 'zinc'.
(c) the aforesaid rough rolled flat-forms of zinc constitute only a transitory and intermediary steps or "in process material" in the course of manufacture of zinc cans for dry cell battery which is the ultimate finished manufactured product, or a "semi-manufacture", but not in any case a "manufacture of zinc sheet" in commercial or technical sense or within the meaning of Item 26B(2) of the Central Excise Tariff.
I, the above-named deponent, do hereby verify that the contents of paragraphs I to 12 are true to my personal knowledge, which I believe to be true, that no part of this affidavit is false and nothing material has been concealed herein. So help me God.
Sd/-Dated 7-3-1975 DEPONENT [Emphasis supplied (b) Affidavit dated 5th April, 1978 of Natarajan Sreenivasan son of P.Natrajan 5. I have been connected with the said factory of Metals and Ores Company in various capacities since its inception in 1956. In the course of my association with the said factory, I have been responsible for developing new items of zinc products indigenously.
6. I am fully aware of the processes employed in the industry for the manufacture of zinc sheets/strips which are meant for various household and commercial purposes, e.g. as rolling in building, guttering, eyelets eg. garnets, etc, Highly finished zinc sheets are sold in tire market and are used by the printing industry for lithographic and photo engraving application. The metal has to undergo several mechanical processes successively for production of finished zinc sheets known as such and marketed.
7. From my experience I can say that such elongate processes applied for the manufacture of zinc sheets and strips known to the market and bought and sold in the market are not at all required for the production of zinc callots used for dry batteries. For the production of zinc callots only rough rolled zinc is required. This rough rolled zinc is produced in three stages. Zinc spelter which is unwrought zinc is first melted in a furnace, the molten zinc is poured into moulds and cast as billets or slabs. The billets or slabs are then rolled in a mill. This process of rolling which the metal passes through two metallic rollers flattens and elongates the slab and reduces its thickness to the desired and workable level required by the particular producer. At this stage the product is known as Rough rolled zinc from which the callots are punched out.
The scrap arising in this punching operation again goes back to the melting furnace along with fresh zinc spelter and the same process is repeated.
8. The rough rolled zinc being not a finish product has uneven and jagged edges and has wider width tolerances than specified for zinc sheet/strips. This item is not marketed or marketable as zinc sheet/strips. The material is only produced according to the special requirement of the particular dry battery manufacturer to suit the sizes of callots required for his dry batteries manufacture and the size of callots vary from one manufacturer to another depending upon the zinc can dimensions used by him for his dry battery production.
9. I say that this rough rolled zinc is not known to the market and is not a commodity which is bought and sold in the market and is not zinc sheet and strip is known to the market.
10. For production of zinc sheet/strip known and bought and sold in the market the rough rolled zinc is further rolled with the aid of more precise machinery called finish rolling, thereafter the material successively passes through slitting, shearing, levelling, trimming and polishing operations, depending upon the end-product, to ensure that the finish product known as zinc sheet/strips meets the exact specifications/standards and tolerances. Without these additional steps after rough rolling, the rough rolled zinc does not reach the stage of zinc sheets/strips known and bought and sold in the market.
11. I say that the rough rolled zinc as such having jagged, uneven edges and varying widths is not known to the market and is not bought and sold in the market as a recognised independent commodity as zinc sheet/strip. It has no distinctive use except as in process material in the manufacture of other intermediate products for ultimate manufacture of dry batteries." (c) Letter dated 27th December, 1974 from Indian Non-Ferrous Metals Manufacturers' (INFMMA) Association. It is set out below.
This has reference to your letter No. EX. APL (21)/7753 dated Nil.
We have also received the drawings of the Zinc forms and the callots.
In our view, zinc flat forms produced by battery manufacturers for punching of callots therefrom are usually in odd shapes and sizes with greater average thickness compared to zinc sheets. Such zinc flat is not a commodity bought and sold in the market but is an in-process material which arises at an intermediate stage of operation between zinc ingots and zinc sheets. This product is used by the manufacturers in the manufacture of other intermediate products in their own factories.
In our view, zinc flat forms cannot be termed as zinc sheets commercially and technically." 5.1. Appellant's learned advocate, Shri V. Sridharan has submitted that the affidavit of K. Sethi submitted alongwith the Misc. Application cannot be considered by the Tribunal because the said Misc. Application was not allowed by the High Court taking the affidavit of K. Sethi on 'record' of the High Court. Unless the additional evidence submitted by the 'Revenue' was formally taken on 'record' by an appropriate order of the Court, this cannot be said to be on 'record' of the High Court. He relies on Order 13, Rules 1 & 2 C.P.C.. He further submits that the appellant would be severely prejudiced by consideration of the aforesaid affidavit evidence of K. Sethi because the appellant has not been given the opportunity of rebutting the same. Now, no evidence to rebut it can be taken on record by the Tribunal, in terms of the Supreme Court's direction which directs that the matter is to be decided on the basis of evidence available on record without taking any fresh evidence from the parties.
5.2. Learned advocate has further submitted that High Court's finding that the disputed product is known as 'zinc sheet' to the industry of dry cell batteries and therefore, "it is not necessary ... to go into the evidence adduced by the parties in these proceedings and thereafter to pronounce upon the question as to whether the product of the petitioner can be treated as 'zinc sheets' or 'strips' as known to the general market" is neither binding on the Tribunal nor a valid finding on the question before the Tribunal for the following reasons :- (a) Supreme Court's direction dated 13-11-1992 has categorically held that none of the authorities below has examined the question of marketability and for this reason has directed the Tribunal to determine the question. Therefore, findings of all authorities and any observations whatsoever by any authority below the Supreme Court in the proceedings on this subject matter get aside.
(ii) Allahabad High Court has fallen into the same error of making a distinction between 'general marketability' and 'special or limited marketability' in this case which it had committed in its judgment in the case of marketability of aluminium cans in the matter of UOI v. Union Carbide India Ltd. - 1978 (24) E.L.T. (J 1) (All.) resulting in over-ruling of its opinion by the Apex Court 1986 (2.) E.L.T. 169 (SC) in Civil Appeal filed by the Union Carbide India Ltd. It is this error which has impelled the Appex Court to send the matter to the Tribunal for determining the question of fact, namely, marketability of the disputed product as 'zinc sheet'.
5.3. On merits the learned advocate for the appellant has argued that it is not denied that the disputed product is in a crude form of uneven thickness, of cut and broken edges and is taken to the process of punching callots out of it while it is still hot in a continuous process. At such a stage it cannot be considered to be marketable as 'sheet' in view of the expert affidavit evidence of Sorabjee, Natrajan Srinivasan and the letter dated 27th December of INFMMA. He relies on-Bhor Industries v. CCE (2) 1989 (43) E.L.T. 214 (SC) - CCE v. Amba Lal Sarabhai Enterprises.
6.1. Learned SDR for the Revenue has urged that the High Court of Allahabad has already come to a finding that the disputed product is known as 'zinc sheet' to a manufacturer of dry cell batteries to which category appellant belongs. He has further submitted mat this finding is binding on the Tribunal.
6.2. Learned SDR has further submitted that the Tariff Entry 26B is 'zinc sheet' in any form. Therefore, even sheet in crude form, so long as it is identifiable as sheet, is to be treated as marketable because of legislative intent of duty liability being clear. He relies on -CCE v. Oriental Timber Industries.
6.3 Affidavits of Sorabjee and Natrajan Srinivasan, are affidavits of interested persons who are either employees or ex-employees of the appellant. Further, learned SDR submits that the affidavit do not say that the disputed product is not known to the market as 'zinc sheet'.
INFMMA's letter dated 27-12-1974 is not of adequate evidentiary value.
First preliminary question to be decided is whether the evidence of affidavit dated 24-10-1978 of K. Sethi filed by the Revenue under Misc.
Application before Allahabad High Court can be considered by the Tribunal. While the provisions of C.P.C. do not apply to writ petitions filed before a High Court under Article 226 in view of Section 141 C.P.C., there is considerable force in the learned advocate, Shri Sridharan's plea for non-consideration of the same by the Tribunal because the High Court did not pass any order allowing the misc.
application, nor considered the said additional evidence in its judgment, nor could it be legally considered without giving the appellant/petitioner an opportunity to rebut the said additional affidavit evidence of K. Sethi, Asstt. Collector of Central Excise. In the aforesaid facts and circumstances, I am of the view that the said evidence cannot be considered to be on record of High Court of Allahabad and therefore, the Tribunal cannot consider the same in these proceedings in view of the prohibition placed by the Apex Court in its direction dated 13-11-1992 regarding consideration of fresh evidence by the Tribunal.
7.2 I am also inclined to agree with the submissions of the learned advocate, Shri V. Sridharan as set out above regarding the findings of Allahabad High Court on 'marketability' of the disputed product. If the findings of Allahabad High Court on the question of marketability of the disputed product had been considered adequate, Hon'ble Supreme Court would not have directed the Tribunal to determine this question over and above the High Court. Supreme Court, itself, would have determined that question. In fact the Supreme Court has already observed that High Court and other concerned authorities have not examined that question.
7.3 It is well settled that Central Excises and Salt Act is an enactment for levy of excise duty on manufacture of goods specified in the First Schedule to the Act (as applicable in this case). Meanings to various provisions and expressions therein albeit to 'goods' specified in the First Schedule have to be understood in the sense in which manufacturers/dealers of those 'goods' understand except where any goods have been specifically defined in First Schedule itself [C.C.E.v. Krishna Carbon Paper Co. -1988 (37) E.L.T. 480 (SC) paras 8,9]. We are required to assign the meaning to "zinc sheets ... strips ... in any form or size" made liable to duty under Item 26B. This expression has not been defined in any peculiar manner in the Act or the First Schedule. This expression, therefore, has to be given the meaning as it is understood by the industry and trade of 'zinc sheets or strips'. It is also further well settled by Supreme Court that burden of proving marketability has to be discharged by the Revenue [Ambalal Sarabhai, (supra)]. I find that no evidence has been adduced by the Revenue that the disputed product is marketed or marketable as 'zinc sheets or strips' as known to the market i.e. trade or industry of zinc sheets or strips. Revenue's reliance on the appellant's letter of 1974 to the Superintendent of Central Excise admitting the disputed product as 'zinc sheet' is not sufficient to prove the marketability of the disputed product as 'zinc sheet'. Further, as rightly pointed out by the learned advocate, this letter, at best, is an evidence of the disputed product being known as 'zinc sheet' to manufacturers of dry cell batteries and not to general industry and trade of zinc sheets.
From this angle, the disputed product has a limited marketability as 'sheet' in the industry of dry cell batteries. It has no general marketability as sheet. Such a test of marketability was adopted by Allahabad High Court in (supra) in the following words (paras 20 and 23 of the Report) :- "20. The test of general marketability does not appear sound. It would fail in a monopoly product. For such a product, the relevant entry would become nugatory.
23. Both the companies have emphasised that they are the only two manufacturers of torches in this country. They have repeatedly stated that no one else produces aluminium cans or torch bodies, because this article is exclusively usable for manufacturing flashlights. The companies do not deny that the aluminium cans are a necessary intermediate product in the manufacture of torches. In the trade of torch manufacturers, this product is well-known and well-used, because no torch can be manufactured without these cans.
This product may not be known to the general public or to the traders in general it is known and used by that trade which makes torches." This judgment of Allahabad High Court was reversed by Supreme Court in (supra) on analogous evidence namely crude aluminium cans, admission by the manufacturer, limited marketability to Torchlight manufacturers, as in the instant case. Reliance placed by the learned SDR on HUF Ramlal Mansukhrai and Oriental Timber, (supra) have no relevance because question of 'manufacture' was involved in those cases and not the question of 'marketability'. Although I have held that K. Sethi's affidavit dated 24-10-1978 cannot be considered, even if it is taken into consideration, it only proves the limited marketability of the disputed product to dry battery cell manufacturers and not to general market of zinc sheets or strips.
8. In view of the foregoing discussion, I hold that the disputed product is not marketable as 'zinc sheet or strip' and therefore, it is not liable to duty under Item 26B of the Central Excise Tariff as "zinc sheets or strips". Appeal is thus allowed with consequential relief to the appellant.
9. I have carefully considered the order prepared by my ld. brother Shri P.C. Jain, Member (T) but I could not persuade myself to agree with his findings.
10. My brother has already referred to most of the facts of the case, which I seek to rely to avoid repetition. The Hon'ble Supreme Court has clearly clarified that the Tribunal will determine "the question on the basis of the evidence already on record and neither party will be permitted to lead further evidence." My ld. brother has interpreted this to mean that the evidence which the department placed before the Bench of Allahabad High Court in the form of "affidavit of Shri K.Sethi, Asstt. Collector of Central Excise and the connected telex message etc." were not on the record of the Court. With utmost respect I beg to disagree with this finding. As the Hon'ble Allahabad High Court itself has referred to this evidence and had taken it for consideration, therefore it is not for us now to say that the same were not on record. This reference can be seen from the extracted at page 8 from the order of Hon'ble Allahabad High Court last line which reads : "It is not necessary for us, therefore, to go into the evidence adduced by the parties in these proceedings and thereafter to pronounce upon the question as to whether the product of the petitioner can be treated to be 'zinc sheets' or 'strips' as known to the general market".
It therefore follows that the Hon'ble Allahabad High Court had taken notice of the affidavit of Shri Sethi and other materials filed after the closing of the hearing by referring specifically in the judgment in the words noted above. The word "thereafter" clearly implies that the Hon'ble Court had taken these documents on record. It is not for us to say at this stage as to whether these documents should have been taken or not. It was left to the appellants to have made a grievance regarding it before the Hon'ble Supreme Court. They have obviously not done so. It is now too late for the ld. Advocate to raise this issue.
The Hon'ble Supreme Court having referred the matter to the Tribunal to consider the 'evidence on record' it implies that all the evidence, which was before Hon'ble Allahabad High Court has to be seen by us.
11. There are number of letters of the appellants written to the department by which they have referred to the impugned goods as zinc sheets or plates. They are as follows : (i) Letter dated 19-9-1974 written by the Secretary of the Petitioner Company to the Superintendent of Central Excise, Allahabad in which the petitioner had itself acknowledged that it had sent zinc slabs produced immediately after the melting stage to a rolling mill and got them rolled into zinc sheets there for use in the factory for production of zinc callots. This letter had been produced by Shri Sethi, Asstt. Collector of Central Excise alongwith his counter affidavit before the Hon'ble Allahabad High Court. The Hon'ble Allahabad High Court has reproduced the said letter at page 20/21 of its judgment. The letter is reproduced herein below : "Geep Flashlight Industries Limited Regd. Office : 28, South Road, Allahabad (U.P.) Sub : Rough rolled zinc (zinc sheet) - permission to bring duty paid goods in the factory.
Our rolling mill producing zinc sheets is in the state of break down since 13-9-1974 and it is feared that it might take further 10 to 15 days to put it in operation.
Since zinc callots which are produced out of zinc sheets, are immediately required for continuation of production of dry cell battery, we have arranged for the time being to get the zinc slabs rolled into zinc sheets from a rolling mill from Kanpur/Mirzapur.
The name of the rolling mill shall be intimated to you on finalisation.
We therefore intend to send zinc slabs (produced immediately after melting stage) to the said rolling mill and get back zinc sheets from them duly duty paid. These duty paid zinc sheets shall be stored in the place shown in the enclosed ground plan "and will be issued for further processing i.e. punching callots".
We, therefore, request you to kindly accord permission to store duty paid goods in factory premises as provided under Rule 173H read with Collectorate Notification No. 9-CE/1969.
Keeping in view utmost urgency of the material without which the factory will face closure, was request that immediate permission may kindly be granted and oblige.
(ii) Shri Tapas Malik, Works Manager of the appellant filed rejoinder affidavit before the Hon'ble Allahabad High Court in which he did not dispute the contents of their company's letter or its authenticity of the letter but only offered to explain it.
(iii) Shri Sethi alongwith his affidavit (see page 395 onwards in paper book) referred to several companies purchasing zinc sheets from said rolling mill namely M/s. Everest Metals Rewari, Haryana.
(iv) Page 406 of paper book refers to telex message of Collector who has confirmed sale of zinc sheets and marketing for punching callots used in the manufacture of dry cell batteries and has given the names of battery manufacturers.
(v) Affidavit of Shri R.P. Mathur, Asstt. Collector of Central Excise at page 231 of Paper Book who has stated that large number of industrial units manufacturing dry cells which do not manufacture zinc slabs themselves purchase them for manufacturing callots. There is no counter to this assertion from the assessee in this affidavit.
(vi) The evidence relied by the assessee in the nature of the affidavit of Shri Natarajan Sreenivasan at page 267, of the paper book also does not emphatically deny that the use of the impugned product in the manufacture of callots either by Union Carbide or by assessee or by any other battery manufacturer.
(vii) In the affidavit of Shri Dinshaw Sorabji, it is admitted that the rough rolled flat-forms are produced after five successive rollings on the rolling press and a different product is obtained with different name and having a different use. The only assertion that it does not satisfy ISI vide IS : 2258 :1977. However, the ld. Collector (Appeals) has given a detail finding as to how the ISI Specification is not necessary. However, the ld. Collector has also referred to the ISI specification and nomenclature, Chapter 79 under the Brussels para 79.03 and given finding on this aspect of the matter.
(viii) The affidavit of Shri Mutki, Accounts Officer at pages (334-335) of the paper book, Assessee admits that the sample is an intermediate product.
(ix) The letter of Indian Non-Ferrous Metals Manufacturers' Association at page 339 admit that the impugned product arise at an intermediate stage of operation between zinc ingots and zinc sheets.
Further, they state "this product is used by manufacturers in the manufacture of other inter-mediate products in their own factories.
In our view, zinc flat forms cannot be termed as zinc sheet commercially and technically." 12. On the basis of these materials, we have to examine as to whether the goods are zinc sheets as per Tariff Item 26B (2) of the erstwhile tariff which is reproduced as below : 13. The assessee has attempted to show that the product is not zinc sheets and in that context have relied on the evidence of the Indian Non-Ferrous Metals Manufacturers' Association, affidavit of Shri Mutki, affidavit of Shri Dinshaw Sorabji, affidavit of Shri Natarajan Sreenivasan. From these affidavits, the assessee is attempting to show that the product which has emerged is not zinc sheet but "rough roll flat-forms of zinc". All these documents are self interested testimony in the face of their own admission made in their letter dated 19-9-1974 written to the Supdt. which is extracted above. The Department has also produced the affidavit of Asstt. Collector Sethi and also that of the affidavit of Shri Mathur. They have also verified and made enquiries with regard to the letter dated 19-9-1974, the name of the rolling mill and they have also independently ascertained that they are manufacturers of the zinc sheets which are used for producing callots for use in manufacture of cans by dry battery cell. Ld. Advocate has argued and contended that the counter affidavits of Sethi cannot be taken on record. However, as already indicated that Allahabad High Court has taken this on record and they have not raised any objection before the Hon'ble Supreme Court and in absence of any such direction from the Supreme Court and in the light of the knowledge of these materials to the assessee, it has to be presumed that this affidavit of Sethi and telex message has to be accepted as evidence.
14. The only contention of the assessee is that the impugned goods are not in zinc sheets within the category of description of items under Tariff Item 26B(2). They do admit that it is an intermediate product which is consumed inside the factory. It also admitted that Union Carbide and other battery manufacturers are manufacturing these sheets and also buying from outside. Admittedly, the assessee is also buying and getting it made from rolling mills from outside. The question is as to whether this has to be considered as zinc sheets or not. The assessee has attempted to show that product does not satisfy the ISI specifications. Further, it is noticed as per the findings of the Collector (Appeals) that the size of the zinc sheets manufactured by the assessee are more or less similar to ISI standards. The assessee has not produced any certificate from ISI to show that this product is not satisfying to its specifications. Moreover, in the case of Wetoco v. Collector of Central Excise - 1992 (62) E.L.T. 584 relying on earlier Supreme Court judgment, it has been held that ISI specification is meant for ensuring quality control and is not relevant for determining classification of goods and the classification of goods have to be done according to popular or commercial meaning. The fact that the product are being capitively consumed shows that they are goods as has been held in the case of Bhor Industries Ltd. v. Collector of Central Excise, 1989 (40) E.L.T. 280 as "actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or none in the market as goods." Therefore, there is no doubt that the impugned product is goods, as also marketable. It is not the case of the appellant that the impugned goods do not have shelf life and they cannot be retained for long. They also admitted that it is used by the battery manufacturers but there only contention is that it is not understood as zinc sheets in the market. The assessee has not produced any affidavit of market users. The assessee is relying on the letter of Indian Non-Ferrous Metals Manufacturers' Association. In this letter, they have clearly indicated that the product is used as an inter-mediate in the manufacture of re-battery cells. They have not indicated in the letter that goods have been examined by them.
Therefore, their opinion that the goods are not zinc sheets, is not acceptable evidence. On the other hand, the Department has adduced the evidence in the form of the affidavit of Sethi and has also shown through the admission of the assessee by their letter dated 19-9-1974 and also shown that there are other battery manufacturers who are getting these items manufactured from roller mills as zinc sheets. The question is as to whether these goods can be considered as zinc sheets.
As the tariff item reads "plates, sheets, circles, strips and foils in any form or size". Therefore, it follows that sheets need not be in the form in which it is understood by the user but it can be in any form or size. In the case of Collector of Central Excise v. Oriental Timber Industries -1985 (20) E.L.T. 202, Tariff Item 16B of the erstwhile tariff came in for interpretation. The Hon'ble Supreme Court held that Plywood even though not trimmed or sand attracted duty within the said Tariff Item. The similar analogy has been drawn in respect of coated or laminated paper all sort as held to be dutiable under Tariff Item 17(2) of the erstwhile tariff as in the case of Union of India v. Babu Bhai Nyalchand Mehta as reported in -1991 (51) E.L.T. 180 as well as in the case of Laminated Packages Pvt. Ltd. v. Collector of Central Excise -1990 (40) E.L.T 326. The larger bench in the case of Guardian Plasticote Ltd., Calcutta v. Collector of Central Excise and Ors. -1986 (24) E.L.T. 542 (Tri.) analysed the tariff Item 17 dealing with the paper, all sorts and held Bituminized paper also to be coming in the category of paper. In the case of LML v. Collector of Central Excise - 1991 (51) E.L.T. 434, the Tribunal held that yarn or multi-filament yarn captively consumed by the assessee was dutiable under Item 18-11(1)(a) of erstwhile duty. In this case also the assessee contended that they were not selling the goods. The Bench held that the propensity of the goods being marketed is determinable factor and on various other grounds held it to be dutiable.
15. Therefore, it follows that the appellant having captively consumed these items and the fact that the item is being used by the dry battery cell manufacturers clearly indicated that the same can come within the category of "zinc sheets in all forms or size". It is not necessary that the zinc sheets should be in the form in which it is sold in the market. The Department has proved that they are goods and they come within the Tariff Item 26B(2) of the erstwhile Tariff and hence in the light of my findings, I reject the appeal.
16. In view of difference of opinion between two members, the matter may be referred by Hon'ble President to the third Member to resolve the following difference of opinion: 1. whether the impugned goods fall within the description of Tariff Entry 26B(2) of the erstwhile tariff as zinc sheets.
3. whether the appeal to be allowed as held by Member (T) or appeal to be dismissed as held by Member (J).
17. Shri V. Sridharan, the learned Counsel for the appellants arguing on the points of difference submitted that the Supreme Court direction in its remand order to the Tribunal have to be borne in mind. The Tribunal is to examine the evidence on record and determine whether the product in question is marketable commodity. This is to be done on the basis of evidence already on record and neither party will be permitted to lead further evidence. The learned Counsel contended that the application dated 23-10-1978 moved by the Department before the High Court was made after the close of the hearing in this case. The affidavit dated 21-7-1988, Shri V. Sridharan, the learned Counsel urged cannot be looked into as it has been filed subsequent to the closing of the hearing and reserving of judgment on 6-10-1978. No notice of the application had been given to the appellants. No order has been passed by the High Court allowing the application. It was pointed out by the learned Counsel that 7-4-1978 when they made an application for taking on record, the affidavit of one Natarajan Sreenivasan, a notice was given to the other side who had filed a counter affidavit and the High Court passed an order on 6-10-1988 taking the affidavit on record.
Since no such procedure had followed the Department application to take Shri K. Sethi's affidavit as an evidence on record cannot be permitted, the learned Counsel contended. Referring to para-10 of the order proposed by the learned Member (J), the learned Counsel submitted that the word "thereafter" occurring in the High Court's order as quoted by the Member (J), would appear to be an improbable inference. The learned Counsel contended that once the hearing is over no further evidence can be produced and relied upon the Supreme Court decision Jain Exports Pvt. Ltd. v. Union of India, reported in 1993 (66) E.L.T. 537. Simply because it has been filed, it will not form evidence on record but the documents have to be admitted by the Court. See AIR 1961 Patna 242. The learned Counsel further argued that their letter of 19-9-1974 cannot be used against the appellants because this letter has been referred to by the High Court whose order has now been set aside by the Supreme Court.
The rough rolled zinc called by the Department as zinc sheet is the description used in their Central Excise Licence and classification list. Therefore the reference to zinc sheet in this letter is only a term used by the Department. The question to be decided is whether the condition in which the goods emerged in their factory whether the goods are marketable in that condition. The contents of their letter of 19-9-1974 does not at all help in answering this question. The learned Counsel submitted that in fact the work as proposed in the letter was never got done because no rolling mill was found capable of taking of the job. The learned Counsel submitted that the Assistant Collector of Central Excise not being the person familiar with the trade, his affidavit cannot be relied upon for which he cited the case of South Bihar Sugar Mills Ltd. and Anr. Etc. v. Union of India and Anr. Etc., reported in 1978 E.L.T. (J 336). The appellants have also denied the Assistant Collector's averment. It has been clearly brought out in the affidavit of Shri Dinshaw Sorabji that the product is not meeting the ISI specification. The tariff description of the goods to cover those not in uniform size would also require that it should be in marketable form. The learned Counsel relied upon the case law reported in 1984 (17) E.L.T. 559 in the case of Bhor Industries Ltd., (Bombay) and also Supreme Court judgment in the case of Bhor Industries Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 280 (SC). The learned Counsel also pointed out that their letter of 19-9-1974 contains no names of rolling mills. This information is contained only in the Assistant Collector's application to the Court after the hearing was over. The learned Counsel referred to the evidence produced by the appellants of Natarajan Sreenivasan's affidavit. He is a qualified and experienced person in the field and his evidence cannot be brushed aside as interested testimony. Letter of 27-12-1974 of Indian Metals Association has been given after seeing the sample as is evident from the affidavit of Shri R. Mukti filed before the Assistant Collector.
Therefore, the learned Counsel urged that the evidence on record is entirely in favour of the appellants to show that the rough rolled zinc emerging in their factory, for the manufacture of zinc callots is not marketable and, therefore, not excisable goods under Item 26B(2) of the Central Excise Tariff as zinc sheets.
18. Shri B.K. Singh, the learned Senior Departmental Representative arguing for the Collector on the points of difference pointed out that the Collector (Appeals) in the order has clearly shows the closeness of the appellants' product 'rough rolled zinc' to ISI specification. The learned Senior Departmental Representative contended that what the appellants are doing is to punch out callots from the rough rolled zinc sheets, for which purpose, it is not necessary that the sheets should be fine finished. The learned Departmental Representative referred to the affidavit of Natarajan Sreenivasan and urged that it is giving the quality of zinc sheets required for making articles for use of the house-hold purposes and is not relevant when we are considering the sheets that are required by a battery manufacturer for making callots in the manufacture of batteries. The mere fact that such sheets are not fit for use of domestic purposes will not take it out of the coverage of 26B(2) of Central Excise Tariff. The learned Senior Departmental Representative argued that their letter of 19-9-1974 is crucial evidence indicating the capability of the goods to be marketed. It shows clearly that there are rolling mills which can produce the goods and that these sheets after rolling are excisable goods on which duty is to be paid. The Senior Departmental Representative contended that in this context that the fact that the appellants did not actually send the material to the other rolling mills is irrelevant for the purposes of determining excisability. It also shows that their own understanding of the material as excisable goods. The learned Senior Departmental Representative relied upon the Calcutta High Court judgment Union of India v. Bata India, reported in 1993 (68) E.L.T. 756. The High Court held that the criterion of marketability was satisfied in the case of components used only in the shoes manufactured at a intermediate stage and that these components are excisable goods even though used at the intermediate stage in the process of manufacture of a final product.
Therefore, the learned Senior Departmental Representative argued that the criterion is as to how the product is known in the trade which uses the goods in question which will determine marketability. On the question whether the Departments' evidence filed before the Allahabad High Court on 24-10-1978 is evidence on record, the learned Senior Departmental Representative referred the case law in AIR 1969 CAL. 451 - State of West Bengal v. Sardar Bahadur Singh and Ors. and the question was whether the affidavit of Shri Sethi was taken on record by a formal order of the High Court. The learned Senior Departmental Representative contended that no such formal order is required if the document is presented before the Bench and a number is given to the application. The record would show that the application was presented before the Bench and taken on record and has been numbered. Another argument of the learned Senior Departmental Representative that this was among the record of the case forwarded by the High Court to the Supreme Court and hence it forms the part of the record. It was further argued that the Supreme Court direction to the CEGAT is to consider the evidence on record and it is not necessary to consider only the admitted evidence on record. Another plea put-forth by the learned Senior Departmental Representative was that the proceeding before the Court start with the filing of the case and ends with the delivery of the judgment. On every step an action taken by the litigants in these proceedings would form part of the proceedings. He relied upon the AIR 1967 Patna 102 - in the case of Collector Monghyr v. Pratap Singh Bahadur on what constitute proceedings. It would refer to the prescribed course of action for enforcement of a legal right and necessarily embraces the requisite steps by which judicial action is invoked. In the present case, the learned Senior Departmental Representative pointed out that the High Court has not chosen to go into the evidence adduced by the parties before it, in the view the High Court had taken on the issue. Further, the learned Senior Departmental Representative pointed out that the provisions of Civil P.C. for evidence is not applicable for Writ proceedings in the High Court. These are guided by the rules of the High Court. He relied upon the case of Radha Krishna and Anr. v. The State of Rajasthan and Ors., reported in AIR 1977 Rajasthan 131. Rule 8 of the Allahabad High Court Rules makes it clear that all questions will be decided on the basis of the affidavits. In the affidavit filed by Shri Sethi, there is clear evidence that the rough rolled zinc sheets produced by the appellants is marketable. This has been obtained on a specific enquiry made in this regard. On the classification of the goods, the learned Senior Departmental Representative submitted that Sub Item (2) of Item 26B Central Excise Tariff covers sheets, strips, foils in any form or size.
The description of the product in the present case and the process of manufacture available in the records would show that the goods answer the description in the Tariff Item. ISI specification, the learned Senior Departmental Representative pleaded is only for the purposes of quality control. It is also well-settled with reference to Supreme Court judgment in the case of South Bihar Sugar Mills Ltd. and Anr.
etc. (supra) that even defective and sub-standard goods can be classified as excisable goods provided they are covered by the tariff description. Therefore, that the rough rolled zinc sheets in this case are rough and irregular sizes will not be material. The order of the Allahabad High Court in the present case also clearly indicates that the goods flat form rough rolled zinc is known as zinc sheets to a battery manufacturer. This observation of the High Court has not been repelled by the Supreme Court in its remand order. On the marketability of the goods, the learned Senior Departmental Representative referred to the Tribunal decision in the case of L.M.L. Ltd. v. Collector of Central Excise, reported in 1991 (51) E.L.T. 434 (Tribunal) that among other things even the propensity of the goods to be marketed will be sufficient to satisfy the criterion of marketability. Their letter of 19-9-1974 is clear indication of such propensity in respect of the present goods.
19. The submissions made by both the sides have been carefully considered. The rough rolled flat form of zinc is obtained by the appellants by melting duty paid zinc ingots in a furnace and then casting them in the form or slabs which are rolled to rough rolled flat form. The Department seeks to charge the goods has zinc sheet under Item 26B(2). The Supreme Court in its remand order as observed that the Tribunal and the lower authorities did not consider the evidence on record to determining the marketability of the goods. The High Court also, the Supreme Court found, did not enter into the question in view of the decision of the Allahabad High Court in Union of India v. Union Carbide India Ltd., reported in 1972 ALJ 451 but the Supreme Court noted that this Allahabad High Court judgment has been reversed by the Supreme Court as reported in 1986 (2) SCC 547 - Union Carbide India Ltd. v. Union of India and Ors. In these circumstances, the Supreme Court has set aside the order and remanded the matter to the Tribunal to examine the evidence on record and determine whether the products in question are marketable commodity. The Supreme Court further clarified that the Tribunal will determine this question on the basis of evidence already on record and observed that neither party will be permitted to lead further evidence. The order of Hon'ble Member (T) Paras-3 and 4.1 has listed out the evidence relied upon by both the parties in this regard. Further, the evidence in the shape of an affidavit of Shri Sethi, Assistant Collector of Central Excise filed on 24-10-1978 on which date the High Court heard the Writ Petition and reserved the judgment, is now involved in a controversy as to whether this affidavit can be taken as evidence on record. Elaborate arguments have been addressed by both sides on this issue. Examining this issue, it is seen that in the proceedings before the High Court, there is some indication as to the procedure by which the High Court allows additional evidence to be taken on record. It is found in respect of an application dated 17-4-1978 for taking on record the affidavit of Natarajan Sreenivasan a specific application was moved, notice was given to the other side, the other side filed a counter affidavit and thereafter the High Court passed a specific order on 6-10-1978 taking the affidavit on record. In the face of such procedure, having been followed by the High Court it will be difficult to assume that the application filed on the day when the High Court closed the case for orders should be taken as evidence on record by the mere fact that it was presented before the Bench and numbered and when the procedure of notice to the other party on the application which the High Court had followed in the very same proceeding had not been adhered to. This has also to be looked in the context of the High Court Rules whereby the evidence in Writ proceedings is by way of affidavits. In such a view of the matter, it is also not possible to assert that sentence in the Allahabad High Court at Page-8, "It is not necessary for us, therefore, to go into the evidence adduced by the parties in these proceedings and thereafter to pronounce upon the question as to whether the product of the petitioner can be treated to be 'zinc sheets' or 'strips' as known to the general market", is a sentence which would mean that the evidence adduced by the parties after the proceedings have also been, considered by the High Court, when clearly the other party had not been put on notice regarding the application for adducing such evidence and had not been given an opportunity to file a counter. Therefore, on this aspect, the view expressed by the Hon'ble Member (T) in para-7.1 that this evidence cannot justifiably be looked into by the Tribunal in the present remand proceedings, is concurred with. The other evidence of both the parties has already been listed in the orders (supra). This has now to be considered and among them one is the appellants letter of 19-9-1974 to the Superintendent of Central Excise which has been extracted in the orders of the Hon'ble Member (T) (supra). This is a clear evidence on record and can be looked into and cannot also be discarded having regard to the terms of the remand order by the Supreme Court. The Allahabad High Court had made the following observation of this letter : "The letter aforesaid does indicate that to the petitioner, which is admittedly one of the few dry cell battery manufacturing units in the country, the flatform from which callots are punched and which is usually manufactured in its own factory by process of rolling is admitted to be a product which can be obtained from rolling mill by getting the same manufactured therein. This letter goes to establish the version of the respondents that the flatforms manufactured by the petitioner as an intermediate product during the process of manufacture of dry cell batteries in its factory, are such which are known as a sheet to the manufacturers of dry cell batteries and can be obtained by getting the same manufactured from another factory.
In this rejoinder affidavit to the counter affidavit of Shri K. Sethi with which the aforesaid has been appealed as an annexure, Sri Tapas Malik Works Manager of the Battery Unit of the petitioner company has not disputed the contents or the authenticity of the letter, but has attempted to explain that the term "zinc sheet" used therein was a loose repetition of the description of the product as used by the Central Excise Department. We are however, of opinion that on the admission of the petitioner itself it is clear that the product described as flatform of by the petitioner is one which is known as 'zinc sheets' to a manufacturer of dry cell batteries and is a product which can be held to be known as 'zinc sheet' to the trade to which petitioner belongs." The above analysis clearly brings out that having regard to the nature of the goods these are likely to be marketed. In other words the goods have propensity for being marketed. No doubt the goods rough rolled forms for punching out callots are of use only to dry cell battery manufacturers and such goods may not be considered zinc sheets for commercial or domestic purposes, but that is not a criteria for deciding marketability, as it is now well settled that it is not necessary that the goods in question should be generally available in the market and it is also well-settled by now that even if there is only one purchaser of the article, it must be said that there is a market for the article. The affidavit of Shri Dinshaw Sorabji dated 7-3-1975 says that the rough rolled forms of zinc produced by the appellants will not satisfy ISI standards and also that it has to be used in quick succession and will not be suitable for long storage.
However, the fact that the article has no conformity with ISI will not debar its classification under the excise tariff. As has been observed by the Supreme Court in South Bihar Sugar Mills Ltd. and Anr. etc. 1968 (3) SCR 21 -1989 (25) ECR 447 it cannot be taken to mean that if an article fails to satisfy ISI specification, it will not be a excisable product. Similarly in the case of Ambalal Sambhai Enterprises (supra), the Supreme Court observed even transient items of articles can also be goods. Further, the affidavit of Natarajan Sreenivasan is on the requirements of finish and specification for zinc sheets which are meant for various household and commercial purposes. It is further stated by Shri Sreenivasan in the affidavit that the material rough rolled zinc sheets is only produced according to the special requirement of the particular dry battery manufacturer to suit the callots required for dry cell battery manufacturer. Further evidence of letter of 27-12-1974 from Indian Non-Ferrous Metals Manufacturers Association is to the effect that the rough rolled sheets is used by the manufacturers of battery for punching callots. Having set out the evidence in the case as above which is on record, the question of whether these goods satisfy the marketability condition, has to be looked into and for this purpose a recent judgment of the Supreme Court in the case of A.P. State Electricity Board v. Collector of Central Excise, Hyderabad, reported in 1994 (70) E.L.T. 33 (SC) is of significance. The Supreme Court observed therein that the requirement of marketability has been evolved by a process of judicial interpretation and the Supreme Court went on to note the relevant decisions of the Supreme Court in this regard namely :-Union of India v. Delhi Cloth & General Mills and Ors. -1977 (1) E.L.T. (J 199) (SC)South Bihar Sugar Mills Ltd. Etc. v. Union of India and Ors.
-1978 (2) E.L.T. (J 336) (SC)The Union Carbide India Limited v. Union of India and Ors. -1986 (24) E.L.T. 169 (SC)Bhor Industries Ltd., Bombay v. Collector of Central Excise, BombayCollector of Central Excise, Baroda v. Ambalal Sarabhai Enterprises Paras 9 and 10 of the Supreme Court are important. The following observations have been made in the later part of para-9 :- "This Court observed that while even transient items of articles can also be goods, one has to take a practical approach and decide on the basis of material before the Court whether the particular goods were marketable. After referring to the characteristics of the said product (starch hydrolysate), the Court came to the "conclusion that it would be unlikely to be marketable as it was highly unstable".
The test, therefore, is the "marketability"; this test has to be applied and the matter decided in a pragmatic and practical sense." Again in Para-10, the following observations of the Supreme Court occurring in that para are also significant :- "The "marketability" is thus essentially a question of fact to be decided in the facts of each case. There can be no generalisation.
The fact that the goods are not in fact marketed is of no relevance.
So long as the goods were marketable, they are goods for the purposes of Section 3. It is not also necessary that the goods in question should be generally available in the market. Even if the goods are available from only one source or from specified market it makes no difference so long as they are available for purchasers...
Even if there is only one purchaser of these articles, it must still be said that there is a market for these articles. The marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of this country." In the present case, applying the above principles laid down by the Supreme Court on the evolution of the concept of marketability based on earlier Supreme Court decisions it is clear that for establishing marketability, the fact that the goods are not in fact marketed is of no relevant nor it is a requirement that the goods in question should be generally available in the market and even if there is only one purchaser of the article, it must still be said that there is a market of the article. From the evidence discussed above in the present case, the rough rolled flatform are likely to be available for purchase by dry cell battery manufacturers who have to make callots out of them.
The fact that the rough rolled flatforms which are used by the dry cell battery manufacturers do not have the high finish that is required generally for other commercial and domestic uses will, therefore, make no difference, and, equally, the fact that there is no general availability of these goods in the market and the absence of number of buyers will also be not material applying the criteria already laid down by the Supreme Court in the above decisions. The evidence on record is, therefore, sufficient in the facts and circumstances of this case to hold that the rough rolled zinc sheet is marketable. It may be useful to recall in this regard that the Supreme Court observation in the case of Collector of Central Excise v. Ambalal Sambhai Enterprises, reported in 1989 (43) E.L.T. 214 (SC), the propensity of the goods to be marketed, is also relevant factor and further the contents of the appellants own letter of 19-9-1974 shows that the rough rolled zinc sheets is not so very transient because they have stated that they have already arranged to get the zinc slabs rolled into sheets from another rolling mill, get them back on payment of duty and thereafter to store the sheets for subsequent issue for punching callots. Surely, the appellants would not have made all these arrangements without first examining the technical feasibility thereof for which they do have sufficient expertise. This also brings out the propensity to the goods for being marketed. Having come to this conclusion, the description of Tariff Item 26B(2) Central Excise has to be seen which covers manufactures, the following, namely, plats, sheets, circles, strips and foils in any form or size. The arguments that the zinc sheets which are meant for commercial and household purposes are required to have a high finish, will not make the rough rolled flat form for zinc fall outside the purview of the item in view of the wording of the tariff item which is in wide terms to include zinc plate, sheets etc. in any form or size. In this context, the observation of the Larger Bench of the Supreme Court in the case of Collector of Central Excise, Hyderabad v.Fenoplast (P) Ltd., reported in 1994 (72)' E.L.T. 513 (SC) is significant. Para-9 of the Supreme Court judgment is as follows :- "It is argued by Shri Sorabjee that after coating, the cotton fabric no longer retains its identity as cotton fabric and that a new distinct commodity emerges. It is submitted that if the degree and extent of lamination or coating is such that it ceases to retain its identity as cotton fabric and a new commodity emerges as a result of such coating or lamination, the resultant product cannot be regarded as cotton fabric within the meaning of Tariff Item 19.
This argument does not take into account the fact that the Parliament has chosen to include the coated/laminated fabrics within the ambit and purview of "cotton fabrics" - and the Parliament's power to do so is not questioned and probably cannot be questioned." 19A. In the result, agreeing with the order proposed by the Hon'ble Member (J), it is held that there is sufficient evidence on record to show that the goods rough rolled flat forms of zinc sheets are marketable being used by dry battery cell manufacturers and dutiable under Item 26B(2) Central Excise Tariff as zinc sheets in any form or size. The order proposed by the Hon'ble Member (J) is concurred with.
(i) rough rolled flat forms of zinc ingots are liable to the payment of excise duty under TI. 26B(2) of the erstwhile Schedule of Central Excises & Salt Act, 1944 as 'Zinc Sheets in any form or size'.