JUDGMENT

Bharucha, J.-The appellants manufacture nylon yarn using a raw material known as caprolactam. The raw material is subjected to polymerisation. This is a reversible process. After polymerisation the resultant poly-caprolactam is spun to obtain nylon yarn. Waste in solid form containing poly-caprolactam is obtained at various stages of the process of manufacture. To fully use caprolactam, which is expensive and duty paid, the appellants have installed equipment by which caprolactam is recovered from the aforementioned waste and re-cycled into the process. The Excise authorities sought to treat the process of separation of caprolactam from the waste as an independent manufacturing process, and subjected it to duty. The claim of the appellants for refund of such duty was rejected. The Collector (Appeals) upheld the rejection, as did the Customs, Excise & Gold (Control) Appellate Tribunal. Hence this appeal.

2. Caprolactam in flakes is used as the original raw material. The caprolactam that is recovered from the waste as aforestated is in molten form and, according to the appellants, not a saleable commodity. The Tribunal in the principal judgment (in C.A. No. 4173-74 of 1984) came to the conclusion that caprolactam was manufactured when recovered from waste. It observed that the contention that "the recovered caprolactam is not bought and sold, even if true, cannot negate manufacture. When the tariff itself had specified caprolactam as an assessable product, it cannot be of any consequence that once it is manufactured it is not bought and sold in the market." In the subsequent matters under appeal, the Tribunal followed this judgment.

3. Learned counsel for the appellant drew our attention to the subsequent judgments of the Tribunal in Jagatjit Cotton Textile Mills Ltd. v. Collector of Central Excise1 and L.M.L. Ltd. v. Collector of Central Excise2. In both cases the Tribunal was concerned with facts identical to those involved in the appeals before us and, very rightly, recognised the importance of the marketability of the product for the purpose of levy of excise duty. The order of the Collector which was in appeal before the Tribunal in the case of Jagatjit Cotton Textile Mills Ltd. had followed the Tribunal s decision which is in appeal before us. In the case of L.M.L. Ltd. counsel on behalf of the Excise authorities had cited to the Tribunal its decision which is in appeal before us.

In the case of Jagatjit Cotton Textile Mills Ltd., the Tribunal said :

"We gave our anxious consideration to the arguments advanced on both sides and perused the records. It is evident from the record that both the authorities below have proceeded to determine the excisability of the product based on process of manufacturing activity, without considering the important point about marketability of the product in determining the goods for the purpose of levy of excise duty. The material which is sufficient for the purpose of holding that there is manufacturing activity and emergence of a separate product are not sufficient for the purpose of coming to the conclusion about the marketability of the product. The Department has not brought on record any evidence to show that these goods were either sold or marketable as such. On the other hand the appellants have taken this stand from the beginning and in support of their contention they have produced certificate from the Gujarat State Fertiliser Corporation who is sole manufacturers of caprolactum to show that Caprolactum in molten form is not marketable. The important piece of evidence was neither considered by the Department nor rebutted. Supreme Court has categorically held that marketability of the product is an essential ingredient in order to be dutiable under the Excise Law, in the Bhor Industries Limited (supra) and further same view was reaffirmed by the Supreme Court in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises, reported in 1989(43) ELT 214 (SC), wherein i