IMPORTANT POINT
Plastic body used for making Electro Mosquito Repellant is not "goods" within the meaning of Tariff Act and therefore, it is liable to excise duty and fragrant meet did not answer to description under sub-heading 3307.49 of the Tariff Act but is classifiable under sub-heading 3307.41 (Agarbatti-Dhoop) and is not liable to excise duty.

Headnote:(i) Central Excise Tariff Act, 1985-Classification of plastic body of Electro Mosquito Repellant (EMR)-Whether liable to excise duty as manufacture of goods ? (No)-Test of Marketability (Central Excise Act, 1944-Section 11A).
       Held : The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the article known to the market for being bought and sold. The fact that the product in question is generally not being bought and sold or has no demand in the market would be irrelevant. The plastic body of EMR does not satisfy the aforementioned criteria. There are some competing manufacturers of EMR. Each is having a different plastic body to suit its design and requirement. If one goes to the market to purchase plastic body of EMR of the respondents either for replacement or otherwise one cannot get it in the market because at present it is not a commercially known product. For these reasons, the plastic body, which is a part of the EMR of the respondents, is not goods so as to be liable to duty as parts of EMR under para 5(d) of the said exemption notification. (Para 8)
       (ii) Central Excise Tariff Act, 1985 -Classification of the fragrant mat for EMR-Sub-heading 3307.41 (Agarbatti Dhoop)-Not subject to excise duty-Sub-heading 3307.49 (other) subject to 15% excise duty-High Court holding it falls under sub-heading 3307.41-Whether correct? (Yes) result-Appeals dismissed-Case law referred.
       Held : We have already mentioned above that not merely Agarbatti and Dhoop but preparations which are akin to Agarbatti and Dhoop and which can produce vapour on burning and spread perfume would fall within the meaning of that entry. From the process of manufacture of Fragrant Mat, noted above, it cannot but be held that preparation in Mat form is similar to that of Agarbatti . Therefore, Fragrant Mats are classifiable under Sub-Heading 3307.41 and not under 3307.49 of the Tariff Act. In this view of the matter, we do not find any illegality in the orders under challenge. The Civil Appeals are, therefore, dismissed. There shall be no order as to costs. (Paras 13 and 14)

ORDER

In these appeals, the short question that arises for consideration is: whether plastic body, a part of Electro Mosquito Repellant, and Fragrant Mat are chargeable to excise duty under Clause 5(f) of Notification 160/86-CE dated March 1, 1986 and Sub-Heading 3307.49, respectively, of the Central Excise Tariff Act, 1985.

2. Show cause notices were issued to the appellants under Section 11-A of the Central Excise Act, 1944 (for short, the Excise Act ] by the Superintendent, Central Excise Range II, Pithampur, raising demand of excise duty on plastic body of Electro Mosquito Repellant (for-short, E.M.R. ) [which falls within Domestic electrical appliances] classifiable under Sub-Heading 85.16 of the Central Excise Tariff Act, 1985 (for short, the Tariff Act ) and on Fragrant Mat. The respondents in Civil Appeal Nos.182 of 1995 and 108 of 1995 filed writ petitions, under Article 226 of the Constitution, before the High Court of Madhya Pradesh challenging the validity of the show cause notices. However, the respondent in Civil Appeal No.1649 of 1996 filed reply before the concerned authorities. The Collector of Customs and Central Excise, Indore, confirmed the demand which was assailed before Customs, Excise and Gold (Control) Appellate Tribunal in appeal. The High Court, in writ petitions, held that the plastic body is not goods within the meaning of the Tariff Act and, therefore, it is not liable to excise duty and that the Fragrant Mat, did not answer the description of Sub-Heading 3307.49 and, therefore, it quashed the show cause notices. Against the judgment and order of the High Court dated March 24, 1994, allowing in the writ petitions, the aforesaid two appeals, being Civil Appeal Nos.182 of 1995 and 108 of 1995, are filed before the Revenue. Civil Appeal No.1649 of 1996 arose from the order of the Customs, Excise and Gold (Control) Appellate Tribunal, dated April 6, 1995, allowing the appeal in the light of the said judgment of the High Court of Madhya Pradesh.

3. Mr. Mukul Rohtagi, learned Additional Solicitor General, argues that, so far as the plastic body is concerned, it is a finished product; it cannot be termed as an intermediate product and the fact that it is not being bought and sold in the market, will not militate against the marketability of the goods, therefore, it is liable to excise duty under clause 5(f) of Notification No.160/86-CE. In support of his contention, he relies upon the judgment of this Court in A.P. State Electricity Board vs. Collector of Central Excise, Hyderabad [1994 (2) SCC 428].

4. Mr. A.R. Madhava Rao, learned counsel appearing for the respondents-assessees, submits that the plastic body is manufactured to cater to the requirements of the respondents EMR. The plastic body is not a standardised item and is not known by any name in the market and as such the High Court has rightly found that it is not marketable.

5. It is a common ground that EMR is exempt under clause 5(d) of Notification No. 160/1986-CE dated March 1, 1986. The case of the Revenue is that under clause 5(f) of the said Notification, the plastic body, a part of EMR, is liable to excise duty.

6. To appreciate the contentions of the learned counsel, it would be apt to read the Notification in question, insofar as it is relevant, here:

"Electric motors, generators, appliances, etc., falling under specified headings of Chapter 84 or 85.

In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts the goods specified in column (3) of the Table hereto annexed and falling under the Heading No. or Sub-Heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rates specified in the corresponding entr

Click Here to Read the rest of this document

2002 Supreme(SC) 935

Cases Referred (1)