Goods that are not marketable commodities are not liable to excise duty under Section 3 of the Central Excise Act.

This writ petition is for the issue of a writ of certiorari to quash the order of the first respondent made in C.No. V/15A/3/65/79 dated 20-5-1981. Though the petitioner has narrated the sequence of events from 1977 onwards, I am of the opinion that it is sufficient to set out the facts from 6-10-1979, the date of the show-cause notice issued in C.No. V/15A/3/65/77. In and by the said show-cause notice, the first respondent has called upon the petitioner to show cause as to why the petitioner-company should not take out a licence under Rule 174 of the Central Excise Rules, 1944 for the manufacture of resin master falling under Tariff Item 15A and get a Classification list/Price list approved before effecting further clearance. In the show-cause notice, it is stated that the petitioner-company have been manufacturing resin master classifiable under Tariff Item 15A (i) of Central Excise Tariff Schedule and have been using the same in the manufacture of dipping solution falling under Tariff Item 68 and clearing both for captive consumption within the Mills without getting a proper licence and without filing a classification and price lists as required under Rule 174 read with Section 6 of the Central Excises and Salt Act, 1944. It is also stated in the show-cause notice that the duty payable as required under Rule 173-F read with Rule 9(1) of the Central Excise Rules, 1944 had not been paid. A reply to this show-cause notice was sent on 28-11-1979 stating that the goods in question are not liable to duty because they do not fall under Section 3 of the Central Excise Act. On 19-1-1980 a personal hearing was afforded to the petitioner-company. It was also stated by a letter dated 23-9-1980 that the resin mixture is not quantified or removed as such and the process being a continuous one, there is no possibility of maintaining any accounts for the same. Having heard the matter on 19-1-1980, the first respondent passed final orders only as late as 20-5-1981. The impugned order dated 20-5-1981 practically confirms the proposals made in the show-cause notice. While passing the final order, the first respondent observes as follows:

"...Marketability of the product may not have any relevance to this issue as excise duty is levied on manufacture/production of goods and not on the sale and it is not out of place to mention here that resin master is marketed and is also bought by a factory manufacturing tyres." *

The first respondent has also relied on the advice of the Board of Excise and Customs on the very same issue. The first respondent has also concluded that the petitioner-company had been manufacturing the resin master from 1-3-1975 onwards and duty is therefore payable from that date under Rule 9(2) of the Central Excise Rules. He has also held that the petitioner-company is liable for penal action under Rule 9(2) read with Rule 173-Q of the Central Excise Rules and has actually imposed a penalty of Rs. 250/-.

2.The respondents have not filed a counter-affidavit and Mr. N. Jothi, learned Additional Central Government Standing Counsel, appearing for the respondents says that he will argue the case without a counter-affidavit.

3.Mr. S. Govind Swaminathan, learned Senior Counsel, appearing for the petitioners has put forward two contentions: (i) that the goods are not marketable commodities and therefore excise duty is not payable under Section 3 of the Act; (ii) that the first respondent has no jurisdiction to issue the show-cause notice under Rule 10 and Rule 173-J of the Central Excise Rules.

4.Mr. N. Jothi, learned Additional Central Government Standing Counsel appearing for the respondents has sought to meet the arguments as follows:-

According to Mr. N. Jothi, learned counsel, the impugned order itself says that a person aggrieved by the order may appeal against the same to the Appellate Collector of Central Excise, Madras-34. Therefore, the petitioner should not be permitted to invoke the jurisdiction of this Court unde