Excisability Of Intermediate Goods

With the finance minister Jaswant Singh exhorting revenue officials to fulfil the tax collection target, one of the steps the excise department must avoid is to indiscriminately introduce new items under the excise net.

In case of intermediate products, they should be more circumspect. They must not lose sight of the fact that unless the intermediate products are marketable, they are not goods and are not excisable.

Judging from the number of cases, where they are ignoring that plain hypothesis, one must remind them of the latest judgment of the Supreme Court. In the case of CCE vs Jagatjit Industries 2002 (141) ELT 303 (SC) it has been held that yeast propagated by the assessee having shelf-life of six-eight hours, which can be preserved in containers, is not liable to central excise duty because this intermediate product is not marketable.

 

Earlier in the CCE vs United Phosphorus Ltd case reported in 2000(4) SCC 18, the Supreme Court turned down the view that the intermediate products such as mercuric acetate, PCA chloride and PCA, which come into existence at a certain stage in the ultimate production of fungicide, weedicide and insecticide, are marketable goods and so they are goods for the purpose of levying excise duty.

Insecticide finds specific mention under the excise tariff head 3808.10. Even then the court had said they were not dutiable. It comes to saying that even if articles are mentioned by generic name, they are not chargeable to duty if they are not marketable.

The revenue department feels once Parliament enacts a law and mentions it under the tariff head