- Bookmark
- Share
- CaseIQ
Commissioner Of Central Excise, Chandigarh-I v. Markfed Vanaspati & Allied Industries .
Factual and Procedural Background
These appeals challenge a judgment of the Larger Bench of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) concerning whether “spent earth” is liable to excise duty. Prior to an amendment to the tariff in 1985, it had been consistently held under the earlier tariff regime that “spent earth” was not dutiable. After the new tariff came into force in 1985, conflicting CEGAT bench decisions emerged: some benches maintained that “spent earth” remained non-excisable, while others held it became excisable because it was included under a specific sub-heading. Due to this conflict, the matter was referred to the Larger Bench, which held that “spent earth” was still not dutiable, leading to the present appeals.
Legal Issues Presented
- Whether goods become excisable merely because they fall within a tariff entry, particularly after Tariff Item 1507.00 (post-1985) covering “residues resulting from the treatment of fatty substances”.
- Whether the “twin tests” of manufacture and marketability cease to apply when an item is specifically covered by a tariff entry.
Arguments of the Parties
Revenue/Appellants' Submissions (as reflected in the opinion)
- After 1985, Tariff Item 1507.00 includes “residues resulting from the treatment of fatty substances”.
- “Spent earth” is submitted to be such a residue and therefore excisable under the specific tariff entry.
- The core submission is that if “spent earth” falls within the tariff item, it becomes excisable even absent proof of manufacture.
- Reliance was placed on Lal Woollen & Silk Mills (P) Ltd. v. CCE (1999) 4 SCC 466, where the Court observed that distinct tariff heads with different duty rates recognize separate goods and support a finding of manufacture.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Lal Woollen & Silk Mills (P) Ltd. v. CCE (1999) 4 SCC 466 | Observation that where “dyed yarn” and “grey yarn” fall under separate tariff heads with different duty, this recognizes them as distinct goods and supports a conclusion of manufacture. | The Court acknowledged that the authority appears to support the Revenue’s contention, but treated the relevant observations as per incuriam in light of earlier/larger bench authority. |
| Union of India v. Indian Aluminium Co. Ltd., 1995 Supp (2) SCC 465 | Rejects the argument that goods become excisable merely because they are covered by a tariff entry. | Used to hold that coverage under a tariff item is not, by itself, sufficient; the decision in Lal Woollen did not note or consider this larger bench ruling. |
| BPL Pharmaceuticals Ltd. v. CCE, 1995 Supp (3) SCC 1 | Merely because there is a change in the tariff item, the goods do not become excisable. | Relied on to reinforce that tariff changes do not dispense with the need to satisfy excisability requirements. |
| (2003) 4 SCC 12 (judgment dated 13-2-2003 in Civil Appeal No. 6745 of 1999) | Merely because an item falls in a tariff entry, it does not become excisable unless there is manufacture and the goods is marketable. | Applied directly to affirm that the “twin tests” of manufacture and marketability remain necessary even where a tariff entry exists. |
Court's Reasoning and Analysis
The Court framed the controlling question as whether goods become excisable merely by falling within a tariff item, particularly after the post-1985 entry (Tariff Item 1507.00) for “residues resulting from the treatment of fatty substances.” It treated the decisive legal inquiry as whether the established “twin tests” of excisability—manufacture and marketability—continue to apply notwithstanding a specific tariff description.
The Court noted the consistent pre-1985 position that “spent earth” was not “manufactured”: it remained “earth” even after processing, with only its absorptive capacity reduced. It also noted the finding that duty had already been paid on “earth,” and levying duty again on “spent earth” would amount to double duty on the same product. The Court emphasized that, even after 1985, no new evidence was placed to show that “spent earth” is the result of manufacture.
Although Lal Woollen & Silk Mills appeared to support the Revenue’s position (by reasoning from distinct tariff headings to manufacture), the Court held that the relevant observations were per incuriam because a larger bench decision in Union of India v. Indian Aluminium Co. Ltd. was not noted or considered. The Court also relied on BPL Pharmaceuticals Ltd. and the later decision reported in (2003) 4 SCC 12 to reaffirm that mere inclusion in a tariff entry (or changes in tariff structure) does not itself make an item excisable.
The Court concluded it could not accept the contention that a tariff entry deems manufacture to exist. It reiterated that the burden to prove manufacture (and that what is manufactured is marketable) lies on the Revenue. On the facts recorded, “spent earth” remained duty-paid “earth” even after processing, and imposing duty again would result in double levy.
Holding and Implications
DISMISSED: The Court found no infirmity in the Larger Bench CEGAT judgment holding that “spent earth” was not dutiable, and dismissed the appeals. No order as to costs was made.
The direct effect is that “spent earth” remained not liable to excise duty on the reasoning that inclusion in a tariff entry alone does not establish excisability absent satisfaction of manufacture (and marketability), and that a second levy would amount to double duty on the same product in the circumstances described. The opinion does not state any broader implications beyond applying these principles to the case.
Variava, J.— These appeals are against the judgment of the larger Bench of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The question for consideration is whether “spent earth” is liable to excise duty or not. Under the tariff, prior to its amendment in 1985, it had been consistently held that “spent earth” was not liable to duty. However, with the enforcement of new tariff in 1985, a conflict arose between various Benches of the Tribunal. Some Benches held that “spent earth” was still not excisable, whereas other Benches held that, as it now stood included by a specific sub-heading, it became excisable. In view of these conflicting decisions, the matter was placed before the larger Bench of CEGAT which by the impugned judgment has held that “spent earth” was still not dutiable. Hence these appeals.
2. The only question for consideration for us is whether a goods becomes excisable merely because it falls within a tariff item. After 1985 Tariff Item 1507.00 reads as “residues resulting from the treatment of fatty substances”. It is submitted that “spent earth” is a residue resulting from treatment and is thus now excisable. What we have to consider is whether the well-settled twin tests of “manufacture and marketability” cease to apply if a goods falls within a tariff entry.
3. Prior to this entry being introduced in 1985, it had been consistently held that “spent earth” was not manufactured. It had been consistently held that “spent earth” remained “earth” even after processing. It had been consistently held that all that happened was that its capacity to absorb was reduced. It had been consistently held that duty having been paid on “earth”, no duty was leviable on “spent earth” as it remained the same product. It had been held that to levy duty on “spent earth” would amount to levying duty twice. It is on this ground that it has been held that “spent earth” was not excisable. Even now it has not been shown that there is manufacture. The only submission is that “spent earth” is a residue resulting from the treatment of fatty substances. The submission is that now that there is a specific entry which makes “residue resulting from the treatment of fatty substances” excisable, duty has to be paid on “spent earth”. In other words, what is submitted is that merely because a goods falls within one of the tariff items it becomes excisable.
4. In support of their submission, reliance is placed on the case of Lal Woollen & Silk Mills (P) Ltd. v. CCE (1999) 4 SCC 466. In this case the question was whether excise duty was to be paid on dyed worsted woollen yarn made from duty-paid worsted woollen grey yarn. It was argued that there was no manufacture. The Court, however, held as follows:
“Admittedly both ‘dyed yarn’ and ‘grey yarn’ are covered by two separate distinct heads of tariff items with different duty. So this itself recognizes them to be two different goods with separate levy. In view of this it cannot be urged that there is no manufacture of ‘dyed yarn’ from the ‘grey yarn’.”
Undoubtedly this authority appears to support the contention which is raised.
5. However, it appears to us that the observations made in this authority are “per incuriam”. In so observing, the decision of a larger Bench of this Court in the case of Union of India v. Indian Aluminium Co. Ltd. 1995 Supp (2) SCC 465 has not been noted or considered. In this case an argument that a goods becomes excisable because it is covered by tariff entry, has been negatived. In the case of BPL Pharmaceuticals Ltd. v. CCE 1995 Supp (3) SCC 1 it has also been held that merely because there is a change in the tariff item the goods does not become excisable. Subsequently in a judgment dated 13-2-2003 in Civil Appeal No. 6745 of 1999 (2003) 4 SCC 12 it has been held that merely because an item falls in a tariff entry, it does not become excisable unless there is manufacture and the goods is marketable. In Lal Woollen & Silk Mills case (1999) 4 SCC 466 it has not been held that the twin tests of manufacture and marketability are not to apply. It is not possible to accept the contention that merely because an item falls in a tariff entry it must be deemed that there is manufacture. The law still remains that the burden to prove that there is manufacture and that what is manufactured is on the Revenue. In this case no new evidence is placed to show that there is manufacture. “Spent earth” was “earth” on which duty had been paid. It remains earth even after the processing. Thus if duty was to be levied on it again, it would amount to levying double duty on the same product.
6. Under the circumstances, we find no infirmity in the impugned judgment. The appeals stand dismissed. There shall be no order as to costs.
Alert