Excise exemption for pilot plant components applies where plant is immovable, non-marketable, and used in the same factory.

A pilot plant fixed to the ground in a factory's research and development department was treated as immovable property and not marketable goods, so it did not attract central excise duty under Item 68. The components manufactured in the same factory for assembling and erecting that plant were also held to fall within the main exemption in Notification No. 118/75-C.E., because they were used in the same factory and were not complete machinery of the kind excluded by the proviso. The incidental production of a small quantity of goods did not change the plant's essential research and development character.

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Issues: (i) Whether the pilot plant erected in the factory's research and development department was "goods" liable to central excise duty under Item 68 of the First Schedule to the Central Excises and Salt Act, 1944. (ii) Whether the components manufactured in the factory and used in the same factory for assembly and erection of the pilot plant were entitled to exemption under Notification No. 118/75-C.E. dated 30-4-1975.

Issue (i): Whether the pilot plant erected in the factory's research and development department was "goods" liable to central excise duty under Item 68 of the First Schedule to the Central Excises and Salt Act, 1944.

Analysis: The pilot plant was found to be a chemical plant fixed to the ground and, therefore, in the nature of immovable property. It was not marketable as such and could not be treated as movable goods for the purpose of central excise levy. Since duty under Item 68 applies only to goods, the plant did not fall within the charge.

Conclusion: The pilot plant was not excisable goods and no duty was leviable on it.

Issue (ii): Whether the components manufactured in the factory and used in the same factory for assembly and erection of the pilot plant were entitled to exemption under Notification No. 118/75-C.E. dated 30-4-1975.

Analysis: The components were not complete machinery and the second proviso to the notification, which excludes complete machinery meant for producing or processing goods, did not apply. The plant was designed for research and development, and the incidental production of a small quantity of goods did not alter its essential character. The main exemption applied because the components were manufactured in the factory and were used in the same factory in the assembly and erection of the plant; in that context, the relevant "use" contemplated by the notification was satisfied.

Conclusion: The components were entitled to exemption under the main part of the notification.

Final Conclusion: The appeals succeeded, and the appellants were held not liable to duty on the pilot plant or on the components used in its erection, with consequential relief granted.

Ratio Decidendi: A plant fixed to the earth and not marketable is not "goods" for excise purposes, and components manufactured in the same factory and used for assembly of such a plant are exempt where the exemption notification covers manufacture for use in the same factory and the exclusion for complete machinery does not apply.

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