Holding

Because the crude PVC films are not marketable goods, they are not liable to excise duty under Item 15A(2) of the Central Excise Tariff.

Summary

Bhor Industries Ltd., a manufacturer of crude PVC films used as intermediate inputs for leather cloth, laminated jute mattings and PVC tapes, claimed that the films were non‑marketable and therefore not liable to excise duty. The Appellate Collector (1974) accepted this view, but the Assistant Collector later re‑classified the films under Item 15A(2) of the Central Excise Tariff and issued a show‑cause notice. The Customs, Excise and Gold (Control) Appellate Tribunal held the films dutiable, stating that marketability was irrelevant. The Supreme Court held that for an article to be excisable it must be a “good” – i.e., known in the market or capable of being sold – and that the burden of proving marketability lies on the revenue. Since the films were proved to be non‑marketable intermediate products, they were not goods under the tariff and no excise duty could be levied. The Court allowed the appeal and set aside the Tribunal’s order.

Issues considered

Whether crude PVC films fall within Item 15A(2) of the Central Excise Tariff and are liable to excise duty.
Whether the concept of marketability is a necessary condition for an article to be deemed a ‘good’ under the Central Excises and Salt Act.
Who bears the burden of proving that the articles are marketable goods.

Legislation cited

Central Excise Rules, 1944s. 10-A, s. 173-J
Central Excises and Salt Act, 1944s. 2(d), s. 2(f), s. 3, s. 35-L, s. 35-P
Central Excise Tariff Act, 1985s. Item 15A(2)

Subjects

excise dutymarketabilitygoodsclassificationintermediate productCentral Excise Tariffburden of proofmanufacture

Judgment

A BHOR INUDSTRIES LTD., BOMBAY
v.
COLLECTOR OF CENTRAL EXCISE, BOMBAY

JANUARY 31, 1989

B [SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.J

Central Excises and Salt Act, 1944/Central Excise Rules, 1944:
Sections 2(d), 2(f), 3, 35-L and35-P/Rules, 10-A 173-1.

Excise duty-Excisable goods-Mere fact that an article falls
C within Tariff Schedule is not enough-Taxable event is 'manufacture of
goods'-Which are marketable or capable of being marketed-
Marketability is an essential element-Burden of proof on revenue that
goods are marketable.

Central Excise Tariff Act, 1985: Schedule Item 15-A(2)-
D Production of crude PVC films-Non-marketable-Intermediate
products-Used for captive consumption in end products such as
leather cloth-Laminated jute mattings and PVC tapes-Whether classi-
fiable and liable to duty.

Words and Phrases: 'Excisable goods'-'Manufacture'-Meaning
E of.

The appellant is a manufacturer of Crude PVC films for the
purpose of use in final products such as leather cloth and laminate jute

F
mattings and PVC tapes both insulation and adhesive. The films
manufactured by the appellant were subject matter of adjudication by
the Excise authorities during the period commencing from 1st March,
-1
1

1970 to 29th May, 1971. The Appellate Collector of Central Excise by
an order dated 14.1.1974 held that the appellant had produced suffi-
cient evidence to prove that the said Crude PVC films were not market-
able and were therefore not liable to excise duty. On 20.11.1975 the
appellant filed a classification list in respect of Crude PVC films used
G for lamination with jute and for tapes claiming that the said PVC films
were non-excisable on the ground that the same were non-marketable
intermediate products used exclusively for captive consumption. On ;..
9.U.1975 the classification list was approved by the Assistant
Collector, Central Excise.

H On 15.2.1977, however, the Assistant Collector issued a show
382
BHOR INDUS. v. COLLECTOR OF CENTRTAL EXCISE 383

cause notice calling upon the appellant to show cause as to why the
A
aforesaid films should not be re-classified as excisable under Item
No. 15A(2) of the Central Excise Tariff Schedule and appropriate dnty·
not recovered under Rule 10 of the Central Excise Rules, as these then
stood, read with Rule 173-J. By a corrigendum, dated 23.2.1977, to the
said show cause notice Rule 10-A was substituted in place of Rule 10.
The appellant contested the notice but the Assistant Collector vide his B
order dated 16th February, 1978 confirmed the said show cause notice
by holding that the said PVC films were classifiable under Item
No. 15A(2) and directed the appellant to pay duty at the appropriate
rate on past clearances under Rule 10-A read with Rule 173-J.

The appeal filed against the aforesaid order was rejected by the
Appellate Collector of Central Excise on 10th October, 1979. A revision
c
was preferred before Customs, Excise and Gold (Control) Appellate
Tribunal. The Tribunal confirmed the order of the Apppellate
Collector and held that the goods in question fell under Tariff Item
No. 15A(2) and were dutiable in the intermediate list and the question
of marketability or being capable of being sold in the market was not D
relevant, but modified the order to the extent that duty in respect of
clearances prior to the issue of show cause notice was restricted to the
period permissible in terms of Rule 10 read with Rule 173-J viz. 12
months •.

In the statutory appeal to this Court under Section 35-L of the E
Central Excises and Salt Act, 1944 the question for consideration was
whether the Crude PVC film was dutiable under Item No. 15A(2).

Allowing the appeal,

t HELD: 1. In view of the Appellate Collector's order holding that
the Crude PVC films were not marketable goods and there being no
F

contrary evidence found by the Tribunal subsequent to the finding by
the Appellate Collector no excise duty should be charged under Item
No. 15A(2) of the Central Excise Tariff on the Crude PVC Sheets. The
Tribunal went wrong in not applying the proper test. The test of
marketability or capable of being. marketed was not applied by the G
Tribunal. [395D-E]

2. Under the Central Excise Act, as it stood at the relevant time,
hi order to be goods as specified in the entry the first conilltron was
that :as a result of manlifacture gooils must "ome into existence. For
articles to be goods these must be known in the market as such or thi!Se H
384 SUPREME COURT REPORTS [1989] 1 S.C.R.

A must be capable of being sold in the market as goods. Actual sale in the
market is not necessary, user in the captive consumption is not
+
' determinative but articles must be capable of being sold in the market
or known in the market as goods. Taxable event in the case of duties of
excise is the manufacture of goods and the duty is not directly on the
goods hut on the manufacture thereof. The manufacturer could not be
B taxed unless manufacturing process resulted in production 'of goods as
known in the market'. The expression "goods manufactured or pro·
duced" must refer to goods which are capable of being sold to the
consumer. [389B-C; 391F]

Union of India v. Delhi Cloth and General Mills, [1963] Suppl. 1
S.C.R. 586; South Bihar Sugar Mills Ltd. etc. v. Union of India & Ors,
C [1968] 3 S.C.R. 21; Union Carbide India Ltd. v. Union of India, [1986]
2 S.C.C. 547; Governor General in Council v. Province of Madras,
[1945] 7 F.C.R. 179; In Re. the Bill to Amend S. 20 of the Sea Customs
Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944, [1964]
2 S.C.R. 787; applied.
D
3. Simply because a certain article falls within the Schedule it
would not be dutiable under excise law if the said article is not 'goods'
known to the market. Marketability, therefore, is an essential ingre-
dient in order to be dutiable under the Schedule to the Central Tariff ~
Act, 1985. [392F-G]
E
3.1. In the instant case, the Crude PVC tilms as produced by the
appellant were not known in the market and could not be sold in the
market arid were therefore not capable of being marketable. [392G-H]

F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2820
of 1984.
+
1

From the Order dated 25.4.84/4.5.84 of the Customs Excise and
Gold (Control) Appellate Tribunal, New Delhi in Appeal No. F.D.
(SB)(T) A. 999/80-C in Order No. 223/84.

G Harish N. Salve, Mrs. P.S. Shroff, J.M. Patel and S.A.
Shroff for the apl"'llant.

B. Dutta, Additional-Solicitor General, Ms. Indu Malhotra and
C. V.S. Rao for the respondent.

H The Judgment of the Court was delivered by
BHORINDUS. v. COLLECTOROFCENTRTALEXCISE (MUKHARJI,J.] 385

SABYASACHI MUKHARJI, J, This is an appeal under Section
A
35L of the Central Excises and Salt Act, 1944 (hereinafter referred to
as 'the Act') from the order passed and judgment delivered on 25th
April, 1984/4th May, 1984 by the Customs, Excise and Gold.( Control)
Appellate Tribunal, New Delhi (hereinafter referred to as 'the
Tribunal'). The question involved is whether the crude PVC film is
dutiable. The appellant is, inter alia, .a manufacturer of crude PVC B
films for the purpose of use in final products such as leather cloth and
laminate jute mattings and PVC tapes-both insulation and adhesive.
The said crude PVC films are manufactured by the appellant in a
continuous process in the factory premises of the appellant which are
licensed premises under the Act. The apppellant filed classification list
No. XIV/75 dated 20th November, 1975 in respect of crude PVC films
used for lamination with jute and for tapes claiming that the said PVC
c
films were non-excisable on the ground that the same were non-
marketable intermediate products used exclusively for captive
consumption. The said classification was approved by the Assistant
Collector, Central Excise on 9th December, 1977.
D
There was an order passed by the Appellate Collector on 14th
June, 1974 holding that crude PVC films were not marketable and
were not liable to excise duty. It is necessary to refer to the Tariff
)I\ Entry involved in this case. Tariff Item 15-A(2) of the Central Excise
Tariff reads as follows:
E
"Articles made of plastics, all sorts including tubes, rods,
sheets, foils, sticks, other rectangular or profile shapes,
whether laminated or not, and whether rigid or flexible,
including levy flat tubings and polyvinyl chloride sheets,
t not otherwise specified."

The same crude PVC films which have been manufactured by the
F

appellant and used in the manufacture of some other end product were
subject-matter of adjudication by the concerned authorities in the
period l.3.1970 to 29.5.1971. ·The Appellate Collector of Central
Excise in an order dated 14th January, 1974 held that the said PVC
films manufactured by the appellant are not marketable intermediate G
products and hence not liable to duty. The Appellate Collector,
Central Excise in his order noted the contentions of the appellant that
the appellant had produced sufficient evidence to prove that the crude
PVC sheets which were the subject-matter of the Show Cause Notice
in that case and which are also the subject-matter of the present show
cause notice were not known in the market as PVC sheets nor were H
386 SUPREME COURT REPORTS [1989] 1 S.C.R.

these marketable as PVC sheets. After. reference to the rival contentions,
A
the said Appellate Collector in his order held, inter a/ia, as follows:

"PVC films/sheets for the clearance of which demand
letters are issued are not marketable as the same are
neither embossed nor printed nor any finishing work is
B done when compared to PVC films/sheets which '. are
marketed by them. It was further stated that the tensile
strength of PVC sheets which is marketed by the appellants
is as per the international standards laid down by
A.S.T.M./l.S.I. and is much higher than the crude PVC
sheets manufactured by them as an intermediate product
for further manufacture of leather cloth. As such, it was
c contended that the product manufactured by the appellants
is not liable to central excise duty. Shri Patel further stated
that it was not necessary to prove from technical angle that
the curde PVC sheets manufactured by the appellants for
manufacturing leather cloth are different from PVC sheets
D which are manufactured by them and sold in the market as
such. Crude PVC sheets used in the appellants' factory for
further manufacture of leather cloth can be distinguished
from PVC sheets which are marketed by them as such by
naked eye. Moreover, all the processes which are required
in case of PVC sheets which are marketed by the appellants
E so as to make these sheets marketable are not carried out in
the case of crude PVC sheets which are used by the appel-
lants in their factory for the manufacture of leather cloth
,,

The Appellate Collector further held in the said order that from the
F technical point of view, crude PVC sheets are different from market-
able PVC sheets inasmuch as the tensile strength of crude PVC sheets
is much lower than that of marketable PVC sheets. He further held
that:

"This is so because marketable PVC sheets are passed
G through the calender at very high temperature and at a slow
speed to that gelation/curing fusion takes place while in the
case of crude PVC sheets, the same are passed through the
calender at very fast speed and lower temperature with the
result that gelation fusion in the course of heating and
ageing is not formed resulting in lower tensile strength.
H When these crude PVC sheets are coated with textile
BHOR INDUS. v. COLLECTOR OF CENTRTAL EXCISE [MUKHARJI, J .1 387

+ fabrics, the two layers are passed through the rollers at
slow speed and at high temperature and it is only at this
A
stage that the GEL is properly formed and resin particles
become swollen by diffusion of plasticizer into them that
they touch each other. As heating progresses, the swollen
particles begin to weld together, resulting in the required
degree of strength." B

Thereafter, the Classification List was filed in respect of crude
PVC films manufactured for use in adhesive tapes on 9th December,
1975 and the said list was approved by the Assistaqt Collector of
Central Excise after making an inquiry in that behalf. On 15th
February, 1977, however, a Show Cause Notice was issued by the
Assistant Collector, calling upon the appellant to show cause as to why c
crude PVC films should not be classified under teriff Item 15A(2) and
appropriate duty not recovered under Rule 10 of the Central Excise
Rules, as these then stood, read with Rule 173-J of the Central Excise
Rules. There was a corrigendum issued on February 23, 1977 to the
said Show Cause Notice dated 15th February, 1977 substituting the D
words 'Rule 10' by the words 'Rule lOA'. A reply was given by the
appellant to the said Show Cause Notice. Jn the said reply, the appellant
stated as follows:

"We have repeatedly pointed out that the issue of "Crude
Film" has been decided by the Appellate Collector and E
also by the Assistant Collector while approving classifica-
tion. However, the Superintendent persisted in pressing us
for giving information about production figures of 'Crude
Film' possibly with a view to raise demand. We had re-
quested the Superintendent to let us know the provision
under which he required us to give the information in F·
regard to a product which was non-excisable. He was not
able to clarify this and tried to invoke wrong sections and
rules according to us. The present action of re-classifi-
cation, in order to make the product excisable some how or
other, seems to us to be a continuation of the matter which
the Superintendent was not able to enforce on us. There is G
no change in the market terminology of "PVC Film". Our
product is not known in the market as "PVC Film". Even
technically also a further process is required to be carried out
on our product before it is "PVC Film" as is known to the
market. The various decisions of Supreme Court on this
point are well-known to the Department. It is also known H
388 SUPREME COURT REPORTS [1989] 1 S.C.R.

A
that the Appellate Collector's decision is binding on you. +
The principles of natural justice cannot be served by
serving a show cause notice on us in order to change the
Appellate Collector's decision in some manner or other.
We have an uneasy feeling that an attempt is being made to
some how bring the product under excise duty."
B
There was an order passed on 16th February, 1978 by the Assistant
Collector confirming the Show Cause Notice. On 10th October, 1979
an appeal was preferred by the appellant against the order of the
Assistant Collector dated 16th February, 1978 which was rejected by
the Appellate Collector of Central Excise. On 6th February, 1980 a
revision application was preferred. by the appellant to the Joint
c Secretary, Government of India. That was transferred to the Tribunal
and by the impugned order, the Tribunal has rejected the appeal under
challenge.

The Tribunal in the order has set out the contentions and ob-
D served t~at the question for determination was whether crude PVC
film fell for classification under Item 15A(2) of the Central Excise
Tariff or not. A submission was made that the Appellate Collector had
held that the crude PVC sheets were not marketable and had not
acquired the character and status of PVC films as known to the )i..
market. It was contended on behalf of the appellant that only market-
E able PVC film would fall within the said item. On the other hand, the
Department's contention was that there was nothing to show that the
film/sheet was crude and the test of marketability was not relevant.
According to the Tribunal, the crude PVC films/sheets would fall

F
under the Tariff Item. The Tribunal was of the view that the tariff
entry did not spell out whether it covered only finished film/sheet or
whether it covered also crude film/sheet. The Tribunal came to the
-t
conclusion that the tariff item covered all types of films/sheets. The
Tribunal also came to the conclusion that the concept of marketability
was not relevant and all sorts of crude films would be covered by the
entry.

G The Tribunal was of the view that the Appellate Collector's·
observations were made entirely in different context. In that view of
the matter, the Appellate Collector's order was confirmed subject to ~
the modification that duty in respect of clearances prior to the issue of
the Show Cause Notice was restricted to the period permissible in
terms of Rule 10 read with Rule 173-J, that is to say, for 12 months. In
H other words, the Tribunal's view was that if the description of the
BHOR INDUS. v. COLLECTOR OF CENTRTAL EXCISE [MUKHARJI, J.] 389

+ list
goods in question fell into the entry, it was dutiable in the intermediate
and as such the goods had become goods as known to the market
A
and the question of marketability or being capable of being sold in the
market was not relevant.

In support of this appeal, on behalf of the appellant, it was
contended by Shri Harish Salve that it was only the 'goods as specified B
.... in the Schedule' to the Central Excise that could be subject to the
duty. It appears to us that under the Central Excise Act, as it stood at
the relevant time, in order to be goods as specified in the entry the first
~--~
condition was that as a result of manufacture goods must come into
existence. For articles to be goods these must be known in the market
as such or these must be capable of being sold in the market a goods.
Actual sale in the market is not necessary, user in the captive con-
c
sumption is not determinative but the articles must be capable of being
-1' sold in the market or known.in the market a goods. That was neces-
sary. This has been clearly spelt out by this Court in Union of India v.
Delhi Cloth & General Mills, [1963] Supp. 1 SCR586. There this Court
held that excise duty being leviable on the manufacture of goods and D
not on their sale, the manufacturer could not be taxed unless
manufacturing process resulted in production 'of goods as known in
the market' (empahsis supplied). In that case, the respondents, who
were manufacturers of vegetable products known as Vanaspati, were
~- assessed to excise duty under Item 23 of the First Schedule to the
Central Excises and Salt Act, 1944, on what the taxing authorities E
called the manufacture of 'refined oil' from raw o.il which according to
• them fell within the description of "vegetable non'essential oils, all
sorts, in or in relation to the manufacture of which any process is
ordinarily carried on with the aid of power". The common case made

t by the respondents in their petition under Article 226 of the Constitu-
tion challenging the imposition was that for the purpose of manufac- F
luring Vanaspati they purchased groundnut and til oil from the
market and subjected them to different processes before applying
hydrogenation to produce Vanaspati and that nothing that they pro-
duced at any stage was covered by that item. Affidavits by experts
were filed by both the parties and the High Court found in favour of
the respondents and allowed the petitions. The Union of India G
appealed. It was urged on its behalf before this Court that before
~~ finally· producing Vanaspati the respondents produced at an inter-
mediate stage what was known as 'refined oil' in the market and
although they might not sell it and although Vanaspati, when pro-
duced, was liable to excise duty under another item, that could not
affect their liability. It was held that excise duty being leviable on the H
390 SUPREME COURT REPORTS I 1989] I S.C.R.
manufacture of goods and not on their sale, the petitioners in that case
A
no doubt be liable if they produced 'refined oil', as known in the
market, at an intermediate stage. But the Court found that it was clear
that there could be no 'refined oil' as known in the market without
deodorisation according to the specification of the Indian Standards
Institute and the affidavits of the experts. Since, however, the process
B of deodorisation was admittedly applied in the respondents' factories
only after hydrogenation was complete, they could not be said to pro-
duce 'refined oil' at any stage. Nor could the respondents be held to
manufacture some kind of 'non-essential vegetable oil'. K.C. Das
Gupta, J., who spoke for the Court, at page 595 of the report,
observed as follows:
c "On a consideration of all these materials we have no
doubt about the correctness of the respondents' case that
the raw oil purchased by the respondents for the purpose of
manufacture of Vanaspati does not become at any stage
"refined oil" as is known to the consumers and the com-
D mercial community."

After considering the definition of the word 'manufacture' and
several authorities and Words and Phrases, Permanent Edition, Vol.
18, from a judgment of the New York Court and also other relevant
authorities, this Court held that the definitions made it clear that to
E become "goods" an article must be something which can ordinarily
come to the market to be bought and sold. (Emphasis supplied). In that
view of the matter this Court agreed with the High Court and dismis- ...
sed the appeal. Therefore, the first principle that emerges is that excise
was a duty on goods as specified in the Schedule. In order to be goods
an article must be something which can ordinarily come to the market
p and is brought for sale and must be known to the market as such.
Therefore, the marketability in the sense that the goods are known in
the market or are capable of being sold and purchased in the market is
essential. This principle was again reiterated by this Court in South
Bihar Sugar Mills Ltd., etc. v. Union of India & Ors., 11968] 3 SCR 21,
where this Court held that the gas generated by the appellant-
G companies in that case was kiln gas and not carbon dioxide as known to
the market, i.e., to those who deal in it or who use it. Therefore, the
kiln gas in question is neither carbon dioxide nor compressed carbon
dioxide known as such to the commercial community and could not
attract duty under Item 14-H of the First Schedule. It was held by this
Court that the duty being on the manufacture and not on the sale, the
H mere fact that kiln gas generated by those concerns was not actually
BHOR INDUS. v. COLLECTOROFCENTRTALEXCISE [MUKHARJJ,J.I 391.

+ their
sold did not make any difference if what they generated and used in A
manufacturing process was carbon dioxide. Justice Shefat
speaking for the Court at page 31 of the report observed:

"The Act charges duty on manufacture of goods. The word
"manufacture" implies a change but every change in the
raw material is not manufacture. There must be such a B
transformation that a new and different article must
emerge having a distinctive name, character or use. The
duty is levied on goods. As the Act does not define goods,
the leg;,lature must be taken to have used that word in its
ordinary, dictionary meaning. The dictionary meaning is
that to become goods it must be Something which can ordi- C
narily come to the market to be bought and sold and is
known to the market. (emphasis supplied). That it would be
such an article which would attract the Act was brought out
in Union of India v. Delhi Cloth & General Mills Ltd ...
I1963 I Suppl 1 SCR 586."
D
In that view of the matter, the Court came to the conclusion that the
gas generated by these concerns was kiln gas and not carbon dioxide as
known to the trade; i.e., to those who deal in it or who use it. It must be
capable of being sold in the market and known in the market as such.
Then only it would be dutiable.
E
This view was reiterated again in Union Carbide India Ltd. v.
Union of India, [1986) 2 SCC 547 where Pathak, J. as the learned Chief
Justice then was, speaking for the Court observed that in order to
attract excise duty the article manufactured must be capable of sale to
a consumer. The expression "goods manufactured or produced" must
refer to goods which are capable of being sold to the consumer. This F
Court observed as follows:

"It does not seem to us that in order to attract excise duty
the article manufactured must be capable of sale to a con-
sumer. Entry 84 of List I of Schedule VII to the Constitu-
tion specifically speaks of "duties of excise on tobacco and G
other goods manufactured or produced in India .... ", and
it is now well accepted that excise duty is an indirect tax, in
which the burden of the imposition is passed on to the ulti-
mate consumer. In that context, the expression "goods
manufactured or produced" must refer to articles which are
capable of being sold to a consumer. In Union of India v. H
392 SUPREME COURT REPORTS [19891 I S.C.R.

A
Delhi Cloth & General Mills, this Court considered the +
meaning of the expression "goods" for the purposes of the
Central Excises and Salt Act, 1944 and observed that "to
become 'goods' an article must be something which can
ordinarily come to the market to be bought and sold", a
definition which was reiterated by this Court in South
B BiharSugar Mills Ltd. v. Union of India."

It is necessary in this connection to reiterate the basic fundamen-
tal principles of excise. The Judicial Committee of the Privy Council in
Governor General in Council v. Province of Madras, [1945] F.C.R.
179, this Court observed at page 1287 of the report that excise duty was
primarily a duty on the production or manufacture of goods produced
c or manufactured within the country. This Court again in In Re The Bill
to Amend S. 20 of the Sea Customs Act, 1878, And Section 3 of the
Central Excises and Salt Act, 1944, [1964] 3 SCR 787 at page 822 of the
report referring to the aforesaid observations of the Judicial Commit-
tee reiterated that taxable event in the case of duties of excise is the
D manufacture of goods and the duty is not directly on the goods but on
the manufacture thereof. Therefore, the essential ingredient is that
there should be manufacture of goods. The goods being articles which
are known to those who are dealing in the market having their ide-
ntity as such. Section 3 of the Act enjoins that there shall be levied and
collected in such manner as may be prescribed duties of excise on all
E excisable goods other than salt which are produced or 'manufactured'
in India. "Excisable goods" under section 2(d) of the Act means goods
specified in the Schedule to the Central Tariff Act, 1985 as being
subject to a duty of excise and includes salt. Therefore, it is necessary,
in a case like this, to find out whether there are goods, that is to say;
articles as known in the market as separate distinct identifiable com~
F modities and whether the tariff duty levied would be as specified ip the
Schedule. Simply because a certain article falls within the Schedule it
would not be dutiable under excise law if the said article is not "goods"
known to the market. Marketability, therefore, is an essential ingre-
dient in order to be dutable under the Schedule to Central Tariff Act,
1985.
G
It appears from the facts as aforesaid before that the crude PVC ~
films as produced by the appellant in this case were not known in the
market and could not be sold in the market and was not capable of
being marketable.

H The learned Solicitor General submitted before us that the Tri-
BHORINDUS. v. COLLECTOROFCENTRTALEXCISE [MUKHARJI,J.] 393

+ bunal was right in considering that as the article fell within the Entry A
the marketability was irrelevant and the Tribunal was right in not
considering whether the articles in question, namely, crude PVC films
used in this case, were marketable or capable of being sold and used in
the market.

Mr Harish N. Salve on the other hand submitted that as it was B
found that the goods were not marketable by the Appellate Collector
in the order of 1974 and no evidence was adduced before the Tribunal
to the contrary and the Tribunal refused to consider the question of
marketability no useful purpose would be served in remanding the
matter to the Tribunal. The appeal should be allowed and no duty
should be charged.
c
As mentioned before, the Appellate Collector has on 14.1.1974
held that the crude PVC sheets/films which formed the subject-matter
of the appeal are manufactured by the appellant for the production of
leather doth in the factory are not marketable as PVC sheets and had
allowed the appeal because he found that: D

" .... because PVC sheets of the gauges manufactured by
the appellants are invariably either embossed or printed or
both. The nature of embossing may be with an engraving
roll or with a mirror finished roller or a mat finish. The
manufacture or PVC sheets marketable as such involves E
the following processing sequences, namely: Polyvinyl
chloride resin is formulated with plasticizer, colorants, heat
stabilizers, etc. and the formulation is thoroughly mixed.
When homogeneous, this mix is fed through a two roll mill
to give heavy sheet stock, which in turn is fed to the calen-
der, where it is reduced to the desired width, thickness etc. F
The temperature at which PVC sheets which are marketed
as such are passed through the calender is about 178° C
(330 - 350°) and the speed of the roller is adjusted accor-
dingly. The speed of the roller and the temperature at
which the sheets are passed through the calender are
important factors in order to achieve the minimum stan- G
dard of tensile strength of the sheets. Gelation, i.e., the
change of state from the liquid to the solid condition that
occurs during the heating and/or ageing, when the plasti-
cizer has been absorbed by the resin to an extent resulting
iii a dry but weak and crumbly mass, and thereafter within
riclhilal prop0rlions of resin and plasticizer, this state is H
394 SUPREME COURT REPORTS [19891 1 S.C.R.

attained when the resin particles have become so swollen
A
by diffusion of plasticizer into them that they touch each
other, is an important process in the case of PVC sheets
which are marketed as such. As heating progresses the
swollen particles begin to weld together, resulting in some
degree of strength. After the GEL is formed in such PVC
B sheets and resins get fused yth plastisizer, they are further
subjected to the processing of finishing, embossing/print-
ing. On the other hand, crude PVC sheets manufactured by
the appellants for production of leather cloth in their
factory are passed through the rollers at a temperature of
130° - 1400 (280"F) and the speed of the roller is, therefore,
faster. Due to low temperature and faster speed of the
c rollers fusion is not completed in such crude plasticizers
thus resulting in the tensile strength of such crude PVC
sheets which is much less than the tensile strength of the
PVC sheets which are marketable as such. The tensile
strength of PVC sheets which are marketed as such and the
D crude PVC sheets which are used by the appellents in their
factory for the manufacture of leather cloth are as under:

(1). Marketable PVC sheets

Thickness Tensile strength Per cm. sq.
E in Kgs. Longitudinal Transverse

0.08mm 239 185
O.lOmm 230 201
0.15mm 268 213
0.20mm 230 200
F
(2) Crude PVC sheets

Thickness Tensile strength Per cm. sq.
kgs. Longitudinal Transverse

G O.llmm 127 98
0.22mm 144 107

The thickness of crude PVC sheets of 0.11 mm ultimately
comes to 10 mm when it is coated with textile fabrics and
rolled. Similarly, the thickness of crude PVC sheets of0.22
H mm ultimately comes to when it is coated with fabrics and
rolled.
BHORINDUS. v. COLLECfOROFCENTRTALEXCISE IMUKHARJl,J.] 395

The idea behind producing crude PVC sheets at low A
-~ temperature and at high speed of the rollers is that when
such crude PVC sheets are coated with textile fabrics and
passed through a coating machine, high temperature is re-
quired to be maintained and the speed at which the rollers
move has also got to be slow so that these partially fused
B
,.. crude PVC sheets are eventually fully fused at the time of
coating these sheets with textile substrates. No finishing,
embossing or printing is done in case of such crude PVC
'!
sheets. I, therefore, hold that the crude PVC sheets

;-- manufactured by the appellants are used by them in the
manufacture of leather cloth in their factory are not
marketable as PVC sheets and as such the same are not
liable to duty under Item 15A(2) of the said Schedule."
c
,,. In view of the Appellate Collector's order dated 14.1.1974 it was
the duty of the revenue to adduce evidence or proof that the articles in
question were goods. No evidence or proof was produced. The
Tribunal went wrong in not applying the proper test. The test of D
marketability or capable of being marketed was not applied by the
Tribunal.

In that view of the matter that there being no contrary evidence

'* found by the Tribunal in this case subsequent to the finding by the
Appellate Tribunal, we are of the opinion that the appeal should be
allowed and no excise duty should be charged under section 15A(2) of
E

the Central Excise Tariff on the Crude PVC sheets. In the facts and
circumstances of the case, there will be no order as to costs.

T.N.A. Appeal allowed.
t F