Sukumar Mukhopadhyay: Shelf life not enough proof of manufacture

EXPERT EYE

In a recent case, the Supreme Court said a shelf life of 10 hours in case of a paint product was enough to call it marketable and so a manufactured product.

In the TN State Transport Corporation vs Commissioner of Central Excise, 2004 (166) 433 (SC), the court held that a mixture of aluminium paste, metal lacquer and thinner known as aluminium paint, was a distinct product and was marketable as it had a shelf life of 10 hours.

In fact, such a product was found to be sold in the market. The apex court called it a manufactured product leviable to central excise duty. The order resolved a controversy on marketability and shelf life.

In earlier orders, it was settled that if shelf life was so sort that the product was transient, then it was not marketable and not leviable to excise duty.

In the Bhor Industries case, 1989 (40) ELT 280 (SC), crude PVC sheets were held as transient in that they were meant for fusing with leather cloth in high temperature and so they were not marketable because not having a long enough shelf life.

So the question: How long is long enough to call an item marketable and how short is short enough to call the goods transient. The Supreme Court, in the Commissioner of Central Excise vs Ambalal Sarabhai case, 1989 (43) ELT 214 (SC), said the question was to be approached in a practical or "pragmatic" manner.

The court said the goods with unstable character could theoretically be marketable if there was a market for transient type of articles. But one should to take a practical approach.

Because starch hydrosylate was never marketed, it was improbable that such unstable goods could be marketed, it said.

The Supreme Court said if the producer could prove that the goods were unstable in character""they had a very short shelf life""and they had never been marketed in actual practice then it could be accepted that they were not marketable.

Thus it is a question of fact in each individual case. If it is found that the goods are unstable and they have never been marketed, then in an individual case it can be judged to be non-marketable and so non-excisable.

In the Union of India vs CEAT Tyres case, 1989 (42) ELT 565 (Bombay), the high court held that dip solution of phenolic or forma-ldehyde resin used in giving a coat on the tyre cord warp sheet was an unstable solution, had a very short shelf life, and it could not be taken as an excisable product.

Thus the proof of manufacture is not just the short shelf life. It has to be judged in the background of the "pragmatic" position about whether it has actually been marketed or not.

In the case of aluminium paint, it was established by the revenue department that such product had in fact been marketed. So it was taken as a manufactured product and excisable. But the burden of proving it is on the department.

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