Marketability is essential for excise duty; bespoke bus body components failed the test and penalty was also struck down.

Bus body components made to specific design for use in the appellant's own buses were held non-marketable because the department produced no evidence that they were commercially known goods capable of sale in the open market. Mere supply to the appellant's own divisions did not establish marketability, and the burden to prove that requirement lay on the department. A separate demand for the Aurangabad unit also failed because an earlier departmental order had already treated the same goods as non-excisable, with no material support for suppression of facts. As the goods were not excisable, the penalty also could not survive.

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Issues: (i) whether the bus body components manufactured for use in the appellant's own buses and supplied to its divisions were marketable and therefore excisable goods; (ii) whether the demand for the Aurangabad unit could be sustained on the basis of suppression and whether the penalty could survive.

Issue (i): whether the bus body components manufactured for use in the appellant's own buses and supplied to its divisions were marketable and therefore excisable goods.

Analysis: The components were made to specific design and requirement for particular buses and were not shown to be bought and sold in the market. The department produced no evidence that such components were commercially known commodities capable of sale in the market. The mere fact that similar goods were supplied to the appellant's own divisions did not establish marketability. The settled test required both manufacture and marketability, and the burden to prove marketability lay on the department.

Conclusion: The components were held to be non-marketable and hence not excisable.

Issue (ii): whether the demand for the Aurangabad unit could be sustained on the basis of suppression and whether the penalty could survive.

Analysis: An earlier departmental order had already held the same type of goods to be non-excisable, and that order had been accepted. The repeated demand was issued despite the earlier departmental acceptance, and the record did not support an allegation of suppression of facts. In view of the finding that the goods were not excisable, the foundation for penalty also failed.

Conclusion: The allegation of suppression was not sustained and the penalty could not stand.

Final Conclusion: The appeals succeeded, the duty demands were set aside, and the goods in question were not liable to central excise duty.

Ratio Decidendi: Goods are chargeable to central excise only if they are both manufactured and marketable, and the department must prove marketability by evidence that the product is a commercially known commodity capable of sale in the market.

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