IMPORTANT POINT
Intermediate products, even if captively consumed and not actually sold, may be liable to levy of excise duty if they satisfy the test of both manufacture and marketability.

JUDGMENT

Dr. Mukundakam Sharma, J. —

1. The short question which arises for determination in this Civil Appeal filed by the Assessee under Section 35L(b) of the Central Excise Act, 1944 is whether “Vitamin A Acetate Crude” and “Vitamin A Palmitate” (hereinafter referred to as the product in question) or “Crude Vitamin A” is excisable to duty.

2. The present appeal filed by the appellant - assessee herein under Section 35L(b) of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’) arises out of an order dated 16.05.2002 passed by the Customs, Excise Gold Control Appellate Tribunal, West Zonal Bench at Mumbai (hereinafter referred to as ‘the CEGAT’) in appeal No. E/2404/96-Bom holding that “crude vitamin A” is marketable and hence liable to duty.

3. The appellant - assessee is engaged in the manufacture of Vitamin A in a finished and marketable form. These are cleared on payment of applicable excise duties under Heading 29.36 of the Schedule to the Central Excise Tariff Act, 1985. The assessee is also engaged in the manufacture of animal feed supplements with the brand name ‘Rovimix’ (now called ‘Endomie’) and ‘Rovibe’ (now called ‘Endobee’).

4. During the intermediate stage of manufacture of vitamin A, “Vitamin A Acetate Crude” and “Vitamin A Palmitate” or Vitamin A in its crude form emerges. The crude Vitamin A acetate is subjected to further process of crystallization using Methanol and the crystals centrifuged and dried to obtain finished Vitamin A, which is marketed by the appellant.

5. Five show cause notices were issued to the appellant demanding excise duty on the product in question consumed by the appellant in the manufacture of animal feed supplements. Adjudicating upon these five show cause notices issued to the appellant, the Commissioner confirmed the liability to duty for the goods manufactured and cleared between December 1989 and February 1995 and imposed a penalty on the appellant. The relevant portion of the finding of the Commissioner is reproduced herein :

“SOURCE: MARTINDALE - THE EXTRA PHARMACOPOEIA

From the above it can be seen that this is a commercially known and marketable product. Merely because it is unstable at room temperature does not exclude it from commercial marketability.

Intermediate goods of distinctly and differently known in the commercial sense of the word constitute manufacture under Section 3 of Central Excises & Salt Act, 1944. Vitamin A acetate crude and Vitamin A Palmitate are different commercial item from that of Rovimix and Rovibe. It is also known in different pharmacopoeia as such. Merely because the company has not sold the product does not exclude it from the purview of commercial marketability. It has to be kept in an oxygen free environment to prevent oxidizing by other agents which similarly is the case in many drugs and chemical compositions. The fact that it has no standard specification and potency does not exclude it from distinct commercial entity as it still remains Vitamin A acetate and Vitamine A Palmitate.

Apart from the aforesaid the Tariff head 2936.00 of Central Excise Tariff Act, 1985 covers “Provitamins and Vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as Vitamins and intermixtures of the foregoing whether or not in any solvent and Vitamin A acetate and Vitamin A Palmitate clearly falls within the parameter of this Tariff head. This clearly indicates that there are commercially marketable entities and supports the earlier arguments of distinct commercial entity”

6. The Tribunal considered the entire facts and the records and on appreciation thereof, upheld the finding of the Commissioner. The Tribunal also considered the fact that nobody would manufacture a pharmaceutical of such purity unless the manufacturer was interested in its sale. The Tribunal however remanded the matter back to the adjudicating authorities for the purposes of determining the valuation of the products in ques