IMPORTANT POINT
Excise duty is not payable on the impugned intermediate products of appellant. The extended period of limitation under the proviso to Section 11-A of Central Excise and Salt Act, 1944 is not available to Revenue.

JUDGMENT

S.N. Variava, J.-Civil Appeal No. 6745 of 1999 is against the judgment of the Customs Excise & Gold (Control) Appellate Tribunal (CEGAT) dated 20th July, 1999, whereas Civil Appeal No. 6922 of 1999 is against the judgment of CEGAT dated 30th July, 1999.

2. The Appellants in these Appeals manufacture various drugs. In Civil Appeal No. 6745 of 1999 the concerned drugs are Mebendazole, Thrimethoprim, Tinidazole and Dexa-methazone. In the process of manufacture of above drugs certain intermediate products come into existence. For the purposes of this Appeal the intermediate products are Thiourea Derivatives, 3-4 Diamino Benzophenone, Anilino Compound, Brown Oil and Epoxy Derivatives. In Civil Appeal No. 6922 of 1999 the concerned drug is Ethnmbutol Hydrochroride. In the process of manufacture an intermediate product viz. D-2 Aminobatanol Tartrate is also manufactured.

3. The question in these two Appeals is whether excise duty is payable on these intermediate products and whether the Respondent were entitled to the extended period under Section 11A of the Central Excise and Salt Act, 1944. The questions being common in both the Appeals they are being disposed off by this common Judgment. In both the cases it has been held by the CEGAT that the Appellants were liable to pay excise duty and that the claim was not time barred. Before the Orders of the Tribunal are considered it is necessary to set out the law on the subject.

4. In the case of Union Carbide India Limited vs. Union of India and others reported in 1986 (2) SCC 547 the question was whether excise duty was payable on Aluminium cans produced from aluminium. The cans were in a crude and elementary form. By a further process they were then made into torch bodies. It was held that in order to attract excise duty the article must be manufactured and it must be capable of sale to a consumer. It was held that the expression goods in the Central Excise and Salt Act, 1944 only covers an article which can ordinarily come to the market to be bought and sold. It was held that the burden of showing that the goods are marketable was on the department. In this case the department had shown that on one occasion, the Appellants (therein) had ordered such aluminium cans from one M/s. Krupp Group of Industries. It had also been shown that in the past the Appellant had submitted a price list to the department, which price list included a margin of profit. It was held that this was not sufficient to show that the product was marketable. It was held that the instance of purchase from M/s. Krupp Group of Industries was a works contract and nothing more. It was held that merely because the Appellant had submitted a price list under a mistaken belief would not show that the goods were marketable. It was held that as there was no sufficient material to show that the goods were marketable excise duty was not payable on the aluminium cans.

5. In the case of Bhor Industries Ltd., Bombay vs. Collector of Central Excise, Bombay reported in 1989 (1) SCC 602, the Appellants manufactured leather clothes, laminated jute mattings and PVC tapes. In the process of manufacture of such products, an intermediate product viz. a PVC film was manufactured. The question was whether the Appellant (therein) was liable to pay excise duty on such PVC film. The department had shown that PVC films or sheets were available in the market. However, what was available in the market was a finished, embossed and printed PVC films whereas what was manufactured by the Appellant was a crude PVC film which had much less tensile strength than that of the PVC film available in the market. On behalf of the department it was submitted that if the good was one which fell within the Schedule, then excise duty would be payable. This argument was repelled. It was held that for the goods to be excisable they must be known in the market and must be capable of being sold in the market as goods. It was held that actual sale in the marke