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High Court Of Delhi
INDOFIL CHEMICALS COMPANY - Appellant
Versus
UNION OF INDIA - Respondent
Civil Writ 1652 of 1982
Decided On : 03/01/1994
CENTRAL EXCISE - GOODS - IN-PROCESS-MATERIAL - WHETHER GOODS - MARKETABILITY - EXPLANATION TO RULE 9 OF CENTRAL EXCISE RULES, 1944 - SCOPE.
Fact of the Case:
The petitioner, a manufacturer of Plexol-150, challenged the validity of Rule 9 of the Central Excise Rules, 1944, and sought the quashing of certain orders made by the respondents under the Central Excise and Salt Act, 1944. The petitioner contended that the in-process-material, an intermediate stage in the manufacturing process of Plexol-150, was not "goods" covered by the provisions of the Act as it had no independent identity and was not marketable.
Finding of the Court:
The Court held that the in-process-material was not "goods" within the meaning of the Act as it was not marketable. The Court observed that the marketability of an article is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff, 1985. The Court further held that the explanation to Rule 9, which deemed intermediate products to be removed from the place of manufacture, did not apply as it was intended to create a legal fiction only for the purpose of levy of duty on intermediate products that were consumed or utilized in the manufacture of end-products.
Issues: 1. Whether the in-process-material was "goods" within the meaning of the Central Excise and Salt Act, 1944? 2. Whether the explanation to Rule 9 of the Central Excise Rules, 1944, applied to the in-process-material?
Ratio Decidendi: 1. The Court held that the in-process-material was not "goods" within the meaning of the Act as it was not marketable. The Court observed that the marketability of an article is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff, 1985. 2. The Court held that the explanation to Rule 9, which deemed intermediate products to be removed from the place of manufacture, did not apply as it was intended to create a legal fiction only for the purpose of levy of duty on intermediate products that were consumed or utilized in the manufacture of end-products.
Final Decision: The Court allowed the writ petition and directed the CEGAT to dispose of the petitioner's revision application within six weeks. The Court also permitted the petitioner to seek a review of the order passed by the Assistant Collector of Central Excise, Bombay, Division IV.
( 1 ) THE petitioner has sought several reliefs,mainly challenging the validity of Rule 9 of the Central Excise Rules, 1944 (Rules forshort ). The petitioner also sought the quashing of certain orders made by therespondents under the provisions of the Central Excise and Salt Act, 1944 (hereinafter REFERRED TO to as the Act ). The petitioner manufactures a commodity calledplexol-150 which is an oil editive used extensively in the petroleum industry as apour-point depresent and also as a de-waxing aid in solvent de-waxing process. Inthe process of manufacturing this commodity (REFERRED TO hereafter as the endproduct), there is an intermediate stage at which a resin type commodity emergeswhich is the subject-matter of this writ petition. For the sake of convenience thiscommodity or article may be REFERRED TO as in-process-material, though according tothe petitioner this in-process-material has no independent identity and it is notmarketable and therefore, it is not "goods" covered by the provisions of the Act. Petitioner has described the entire process as follows:-
"the entire process of manufacturing Plexol-150 takes place in a large kettle. Different monomers are added into the kettle and after regulating thetemperature and adding certain catalysts to the kettle and diluting the contentof the kettle with dilution oil, the end-product Plexol-150 is obtained. Theentire process from the beginning to the final stage is carried out in the samekettle in a continuous, uninterrupted and integrated process. "
( 2 ) THE petitioner asserts that this is not resin known to the market at all andis never bought and sold. This in-process-material, though is a molten liquid,comes into existence as such at an intermediate stage in a continuous and integrated process. In para 5 of the writ petition the petitioner has described theprocess as follows:-
"the entire process of manufacture of Plexol-150 is carried out in a single unitin a continuous, uninterrupted and integrated process. In the processdifferent monomers are weighed and charged into the kettle. The chain-length control agent is then added to this kettle. At this stage, the kettle isinerted and stirring is started. After about half an hour s heating of the kettlethe temperature taken to 122c using steam in the kacket. Chaser, catalystsare added in four different lots after every half hour. The reaction is allowedto proceed for another 40 minutes at a temperature of 122c to 124 C. Dilution oil is then added to the kettle to dilute the contents of it. After all thequantity of dilution oil is added, the kettle is kept at a temperature of 115cto 120c for one hour. After checking the viscosity and solidity content, theplexol-150 is ready for packaging. "
( 3 ) THE petitioner also has produced the affidavit of an expert in the field, byname Dr. S. P. Potnis. He was a Professor of Polymer Technology, Head of Plasticsand Paints Division and Director of Department of Chemical Technology, University of Bombay. He has visited several renowned foreign Universities for technicaldiscussions and collaborative works as could be seen from para 3 of his affidavit. The process is described by him in paras 7 to 10 of his affidavit as follows:-
"in order to obtain the end product Plexol-150, the starting raw materials aredescribed as monomers. Two types of monomers are taken as the startingraw materials. These monomers are subjected to the process of polymerization. It may be mentioned that the term monomer represents a single unit. When several of such single units are linked together, they are described aspolymers. The term polymer means many units. As such, this process of polymerization results in linking many monomers to form polymers. In order to carry out the aforesaid process of polymerization, after monomers areadded to the Kettle, NDDM (Normal Dodecyl Marcaptam) is added. This acts asa chain length regulator or chain control agent. It ensures that the desired chainlength of a p
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