M/S. HINDUSTAN ZINC LTD. versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

Citation: [2005] 2 S.C.R. 391 · Decided: 24-02-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Appeal(s) allowed

Judgment (excerpt)

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M/S. HINDUSTAN ZINC LTD. 
v. 
COMMISSIONER OF CENTRAL EXCISE, JAIPUR 
FEBRUARY 24, 2005 
[S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.] 
Central Excise Act, 1944-Section 2-/ntermediate product arising in 
manufacture of final product-Dutiability of -Held, duty is leviab/e thereon 
A 
B 
if such product can be sold or purchased in the market-Burden to prove C 
marketability is on the department which it failed to discharge-Duty not 
/eviable. 
Central Excise Tariff Act, 1985-Tariff Heading 28.43-Silver Chloride 
arising in the manufacture of Zinc-Test of marketability-Department not 
taking steps to collect evidence of marketability-Consequently assessee's D 
· appeal allowed for want of evidence-lethargy and reluctance on the part of 
department to collect evidence on marketability, deprecated. 
The question which aro~e for determination in the present appeal is 
whether the intermediate product 'silver chloride' produced in the course 
of manufacture of zinc in the assessee's factory is marketable and if it is E 
marketable then whether the product is classifiable under Tariff Heading 
28.43. 
Assessee contended that the silver chloride so produced has no 
market; that the silver c.hloride sold in the market at Rs. 9600 per kg. was 
a different product made from silver having purity of 99% and its silver F 
content is 75% whereas the silver content in the silver chloride produced 
in its factory is only 53% and that it would be very costly to purify such 
silver chloride to compete with silver chloride sold in the market and that 
the burden was on the department to prove that the silver chloride which 
is the residue of the treatment constituted "goods" in terms of manufacture G 
and marketability. · 
Allowing the appeal, the Court 
HELD: 1.1. Excise duty is leviable on an item, if two conditions are 
391 
H 
392 
. SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A cumulatively satisfied, namely, that the process by which an item is 
obtained is a process of manufacture and that the item so obtained is 
commercially marketable and bought and sold in the market or known 
to be so in the market. (394-A, BJ 
1.2. Applying the above twin tests to the facts of this case, the first 
B test of "manufacture" is satisfied. Marketability is essentially a question 
of fact. Silver chloride sold in the market had 75% silver content and 
purity level of 99%. In the present case, the department has made no 
efforts to ascertain whether silver chloride emerging from the treatment 
adopted in the assessee's factory, having 50% to 53% si_lver content, had 
C a market. The burden was on the department to prove such marketability 
which it has failed to discharge. (394-C, D; 396-B, D-EJ 
2. The question of excisability of silver chlorid-e -has_ been cropping 
up and yet till this day no steps have been taken by the department to go 
to the market and collect proper evidence of marketability. In most of the 
D matters, there is lethargy and reluctance on part of department to collect 
evidence on marketability and even in cases where market enquiry is made 
it is made in perfunctory manner. (396-F, GI 
Moti Laminates Pvt. Ltd. v. Collector of Cerltral Excise, Ahmedabad, 
-··(1995P6 ELT.241; Union of India v;Delhi Cloth &General Mills Co. Ltd., 
E (1997) 92 ELT 315; Cadila Laboratories Ltd. v. Commissioner of Central 
Excise, Vadodara, (2003) 152 ELT 262 and Hindustan Zinc Ltd. v. Collector 
of Central Excise, (1990) 45 ELT 155, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 430 of 2000. 
' . 
F 
·From the Judgment and Order dated 24.8.99 of the Central Excise, 
Customs and Gold (Control) Appellate Tribunal, New Delhi in F.O. No. 761/ 
99-C in A. No. E/223 of 1998-C. · · 
V. Lakshmikumaran, Alok Yadav, M.P. Devnath and V. Balachandran 
for the Appellant. · 
G 
, . ·-
R. Venkataramani, A.Subba Rao, Hemant Sharma, Ashok Panigrahi, 
Ms.V. Vijaylakshmi, P. Parmeswaran and B.K. Pras.ad for the Respondent. 
The Judgment of the Court ':Vas delivered .by_ , 
H 
KAPADIA, J. The short question which arises for determination in this 
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HINDUSTAN ZINC LTD. v. C.C.E. [KAPADIA. J.] 
393 
civil appeal filed by the assessee under section 35L(b) of the Central Excise A 
Act, 1944 is - whether the intermediate product produced in the manufacture 
of zinc in the assessee's factory is marketable and if it is marketable then 
whether the product is to be classified under tariff heading 28.43. 
Assessee is a fully owned Government 

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