M/S CADILA LABORATORIES PVT. LTD. versus C.C.E. VADODARA

Citation: [2003] 1 S.C.R. 1048 · Decided: 13-02-2003 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS CADILA LABORATORI.ES PVT. LTD. 
v. 
C.C.E. V ADO DARA 
FEBRUARY 13, 2003 
B 
[S.N: VARIAVA AND B.N. AGRAWAL, JJ.] 
Central Excise and Salt Act, 1944: 
Excise duty-Levy of-On intermediate products-Held, in order to be 
C excisable goods not only must be manufactured, but the same must be 
marketable-Burden to prove marketability is on the Revenue-Evidence Act, 
1872. 
'Marketable '.....,;.Meaning of-In the context of Central Excise and Salt, 
Act, 1944. 
E 
Show cause notice was issued to the appellant-manufacturer to pay. 
excise duty on the intermedia.te products derived in the process of · 
manufacture. 
The. case of the app'ellant-manufacturer was that the intermediate 
F products were not liable to excise duty as the same were in crude and 
unstable form and were not marketable; and that the claim was time 
barred .and extended period u/s 1 lA of Central Excise and Salt Act, 1944 
was not available to the Revenue as the appellant-manufacturer had not 
declared the goods under bona fide belief that the products were not 
excisable. 
G 
H 
Collector placed reliance on the report of chemical analyser. He also 
relied on a Customs Notification, as also on the facts that manufacturers 
st.ored their products in cans for some period, and had bought one of the 
products from the marke~. and held that the products could be sold to 
another industrial user who needed that kind of product. However, 
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CADILA LABORATORIES PVT. LTD ''· C.C E VADODARA 
] 049 
accepting the case of the appellant-manufacturers he dropped the show A 
cause proceedings. 
On reference, the Central Excise and Gold Appellate Tribunal 
accepted the reasoning of the Collector and held that purchase of some of 
the products from the market, their storage, weighment and storage 
indicated that the products were marketable and hence liable to duty; and B 
that the claim was not time barred. Hence the present appeals. 
Allowing the appeals, the Court 
HELD: 1.1. In order to be excisable, not only goods must be 
manufactured i.e. some new product brought into existence, but the goods C 
must be marketable. By marketable it does not mean that the goods must 
be actually bought and sold in the market. But the goods must be capable 
of being bought or sold in the market. Goods which are in the crude or 
unstable form and which require a further processing before they can be 
marketed, cannot be considered to be marketable goods merely because D 
they fall within the Schedule to Central Excise and Salt Act, 1944. 
[1053-H; 1054-A, B[ 
1.2. Customs Notification relied upon does not refer to all the 
products. Reliance on such a Notification may be relevant and may show 
marketability if the goods are identical. However, where a question is E 
raised that goods available in the market are finished or refined product 
whereas what is manufactured is in a crude and unrefined form, the 
burden would be on the department to show that what is available in the 
market is the same as the goods manufactured. In this case, no attempt is 
made to find out whether any of these products are bought or sold in the 
market and more importantly it has not been verified, by drawing samples F 
of Appellants' products and getting them chemically analysed, whether 
their claim is false. It has not been ascertained whether or not Appellants' 
products are in crude and unstable form and/or whether these products 
had a shelf life of only a few hours. Mere fact that they are stored in tins 
or cans for a short period would not ipso facto lead to the conclusion that G 
the products were stable. [1055-B-D) 
1.3. It is admitted that the Appellants had bought one of the products 
from the market at one stage. However, they have explained that what 
,was bought was in a purer form and the product they manufacture does 
·"'not have that purity. It was for the department to check this. The H 
1050 
SUPREME COURT REPORTS 
[2003] 1 S.C.R. 
A department has chosen not to do so. The burden being on the department 
it will have to be held that they have not discharged that burden. The 
Order passed only on the basis that those goods "can conceivably be sold" 
cannot be sustained. 11055-E-F) 
Union Carbide India Limitedv. Union of India and Ors., (1986] 2 SCC 
B 547; Bhor industries Ltd., Bombay v. Collector of Central Excise, Bombay, 
[1989) 1 SCC 602; Collector of Central Excise, Baroda v. Mis Ambalal 
Sarabhai Enterprises (P) Ltd. [1989) 4 SCC 112; Union of India and An

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