Madan B. Lokur, J.
The Petitioner is aggrieved by an order dated 22nd March, 1982 passed by the Government of India in a revision filed by the Petitioner under the provisions of the Central Excises and Salt Act, 1944 (the Act).
2. The Petitioner manufactures mineral fibres and yarns in its factory in Thimapur. The end product is the following:-
(a)Chopped strand mat glass fibre.
(b)Chopped strand glass fibre.
(c)Roving glass fibre.
(d)Yarn spun wholly out of glass fibre; and
(e)Woven roving glass fibre.
3. These goods are cleared by the Petitioner under Item 22F of the First Schedule to the Act.
4. The jurisdictional Assistant Collector was of the view that the Petitioner was also manufacturing glass fibres as an intermediary product but the Petitioner wrongly did not show this in its classification list.
5. The Petitioner did not accept the view of the Assistant Collector and filed an appeal before the Appellate Collector who confirmed the view of the Assistant Collector.
6. In the revision petition before the Government, it was contended by the Petitioner that glass fibre is an intermediate product, which arises in a continuous process in the manufacture of the five items mentioned above. It was contended that the plant of the Petitioner is integrated and the glass fibre in question is not a marketable commodity. It was contended that in view of this, it is not exigible to central excise duty.
7. The Government held that since glass fibre was manufactured and consumed by the Petitioner, it was liable to excise duty. It was, therefore, held that there was no error committed by the jurisdictional Assistant Collector as well as the Appellate Collector.
8. The only issue that has been urged by learned counsel for the Petitioner in this case is that the glass fibre said to have been manufactured in a continuous and integrated process is not a marketable commodity and, therefore, cannot be classified as excisable goods within the meaning of the Act. Learned counsel for the Petitioner also raised a question of discrimination inasmuch as it was contended that in respect of a plant of another concern M/s FGP Ltd. in Thane, a similar question had arisen and the jurisdictional Assistant Collector in that case, by an order dated 31st October, 1990 had accepted the contention of M/s FGP Ltd. and concluded that glass filament at the bushing stage and cake stage are not marketable goods and, therefore, not liable to excise duty. It was submitted that the Government has accepted the order of the Assistant Collector and there was no reason why the Petitioner should be made liable to excise duty in respect of an identical commodity.
9. The Courts have, time and again, accepted that marketability of goods is of crucial importance for the purpose of levy of excise duty. In Bhor Industries Ltd. vs. Collector of Central Excise, 1989 (40) ELT 280 (SC), the question was whether crude PVC films produced by the appellants therein were liable to excise duty. On the basis of the facts available before the Supreme Court, it was held that crude PVC films were not known in the market and could not be sold in the market and were not capable of being marketable. The Supreme Court was of the view that the Tribunal did not, erroneously, apply the test of marketability. This test of marketability was reiterated by the Supreme Court in Collector of Central Excise vs. Ambalal Sarabhai Enterprises, 1989 (43) ELT 214 (SC).
10. A Division Bench of this Court in Indofil Chemicals Ltd. vs. Union of India, 1994 (73) ELT 9 (Del.) once again dealt with this issue and in paragraph 19 of the Report, it was held that the theoretical possibility of an article being marketable will not convert it into excisable goods. In other words, the goods have to be marketable as such before they can be held liable to excise duty.
11. Recently, in FGP Ltd. vs. Union of India, 2004 (168) ELT 289 (SC), the Supreme Court reiterated the view that marketability of goods is an essential ingredient for manufactured goods being subject to excise duty (paragraph 14 of the Report).
12. After adverting to this aspect of the matter, learned counsel for the Petitioner drew our attention to an affidavit filed by K.V. Gopalakrishnan before the Government during the pendency of the revision petition. It was submitted that the Government did not take this affidavit into consideration. On a reading of the affidavit, it is quite clear that glass filament, which is manufactured by the Petitioner as an intermediate product, is not marketable. It is stated in the affidavit as follows:-
"The manufacturing process in our plant is the direct melt process for manufacture of continuous filaments which is different from a staple filament plant where shorter noncontinuous filaments are manufactured. A flowchart of the process is annexed. Ra materials consisting of clay, limestone, boric acid and some other ingredients are melted in an electrical furnace to form glass. The molten glass is refined and drawn through platinum bushings when continuous filaments are obtained. The glass flows through the bushings under gravity and fine filaments are drawn mechanically downwards from the glass as it exudes from the tips of the bushings. Drum winders below the bushings accelerate the glass to a speed of several thousand metres per minute, attenuating the filament as it cools until it is barely visible. The filaments pass over a size applicator roller, then on to a collecting point to form one or more strands. These strands are wound on to the drum as a package or 'cake' and are the basic material from which all forms of Fibreglass reinforcements are produced.
3. The continuous filament after it is drawn is immediately taken up for further processing. Different chemicals are applied to the glass filaments in the size applicator roller as mentioned in Para 2 above and the continuous filament package or cake is passed for different types of processing depending upon the nature of the chemical application in the size applicator. The continuous filament package at this stage is devoid of strength, is wet and the chemicals applied tend to migrate towards outer surface instead of remaining uniformly distributed causing damage to the filaments in strength and appearance over a passage of time. Also filamentisation of filament takes place if they are kept for a longer time endangering the strength of the filament. The package is processed immediately and within a period of 12 hours at the maximum. If for some reason further processing is not possible beyond this time the continuous filament package is scrapped.
4. To the best of my knowledge this is the process adopted in all continuous filament manufacturing plants in India and elsewhere in the world. It is not possible to store or market continuous filament strand packages at this stage of its processing because of the technical problem connected with the migration of the size and other chemicals on the filaments.
5. The continuous filament packages intended for being twisted into spun yarn are directly taken to the high speed ring frames for conversion into spun yarns of different twists in a process similar to conventional spinning for giving strength to the yearn. This spinning is done in the wet stage without curing. If the cakes are dried they cannot be twisted causing breakage on the yarn. The continuous filament packages for making Chopped strand Mat, Chopped Strand, Rovings and Woven Rovings are cured in aoven. The packages are taken out of the oven, cooled and processed in a Chopped Strand Machine to make Chopped Strand Mat, in Roving Winders for making Rovings and on the Strand Chopper Machine to make Chopped Strands. Woven Rovings are made in a loom using rovings which have been specially treated for making woven fabrics."
13. It has been mentioned in the impugned order that during the course of personal hearing, the Petitioner's consultant did not deny that filament yarn was first cured thereafter taken in for production of other excisable goods and that the cured product appeared as a distinct product which was stable and could be stored for a long period of time. Learned counsel for the Petitioner submitted that this finding is totally inaccurate and does not reflect the correct factual position. Reliance in this regard has been placed upon an affidavit dated 2nd August, 1982 of one M.M. Mathew who had appeared before the revisional authority. He says in his affidavit that the marketability of filament yarn was discussed before the revisional authority and the Petitioner was directed to file an affidavit on this very issue and that the affidavit of Gopalakrishnan was filed in response to the query raised by the revisional authority.
14. The Respondents have filed a counter affidavit of V.V. Hariharan, Assistant Collector but no reply has been given to the averment that glass fibre is not a marketable product. All that is said in thi
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s regard, apart from a bald denial, is that marketability is not a criterion for levy of excise duty. As already noted hereinabove, this is contrary to the law as interpreted by the Supreme Court. 15. Consequently, in the absence of any effective reply by the Respondents, the case of the Petitioner must be accepted that glass fibre which is manufactured by it as an intermediate product in a continuous integrated process is not a marketable commodity and is, therefore, not exigible to excise duty. 16. The Respondents have not denied that under similar circumstances M/s FGP in Thane is not been subjected to excise duty in respect of glass fibre manufactured by it in a continuous integrated process. 17. In view of the above, there is no option but to set aside the impugned order dated 22nd March, 1982 and hold that the glass fibre manufactured by the Petitioner in its factory at Thimapur is not liable to excise duty. 16. The writ petition is allowed. No costs.