Marketability and manufacture of fabricated saddles upheld; exemption denied, MODVAT credit allowed subject to verification.

Fabrication of saddles in the factory amounted to manufacture because the goods were capable of being bought and sold, and articles fixed by nuts and bolts did not lose excisable character where they could be removed without permanent assimilation to the earth. The appellant was treated as the manufacturer in a job-work arrangement since it supplied drawings, materials, premises and supervision. Exemption under Notifications 61/90-CE and 41/94-CE was denied because the saddles were not fabricated at a construction site for use in construction work. MODVAT credit was admissible subject to verification, while limitation was upheld for one demand and negatived for the other.

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Issues: (i) whether fabrication of saddles amounted to manufacture and whether the saddles were excisable goods; (ii) whether the appellant or the fabricators were the manufacturer; (iii) whether the appellant was entitled to exemption under Notification No. 61/90-CE dated 20.03.1990 and Notification No. 41/94-CE dated 01.03.1994; (iv) whether the demands were barred by limitation; and (v) whether MODVAT credit was admissible.

Issue (i): whether fabrication of saddles amounted to manufacture and whether the saddles were excisable goods.

Analysis: The saddles were fabricated in the factory and were capable of being bought and sold, even if they were not actually marketed. Marketability depends on the capability of being marketed and not on actual sale. The fact that the saddles were fixed to the earth by nuts and bolts did not make them immovable property, as they could be removed without permanent assimilation to the earth. Goods so fabricated remained excisable goods under the tariff.

Conclusion: The fabrication of saddles amounted to manufacture and the saddles were excisable goods.

Issue (ii): whether the appellant or the fabricators were the manufacturer.

Analysis: The appellant supplied the drawings, designs, raw materials, consumables and premises, and the fabrication was done under its supervision and control. In such a job-work arrangement, the fabricators supplied labour only and did not independently manufacture the goods on their own account. The appellant therefore answered the statutory description of manufacturer.

Conclusion: The appellant was the manufacturer of the saddles.

Issue (iii): whether the appellant was entitled to exemption under Notification No. 61/90-CE dated 20.03.1990 and Notification No. 41/94-CE dated 01.03.1994.

Analysis: Both notifications required that the goods under heading 73.08 be fabricated at the site of construction work and used in such construction work. The saddles were fabricated for storage of HR coils and the subsequent fastening to earth was only to make them stationary. That activity was not construction work within the meaning of the notifications. The necessary conditions for exemption were not satisfied.

Conclusion: The exemption claims were rejected.

Issue (iv): whether the demands were barred by limitation.

Analysis: For the first appeal, the true description of the saddles was not disclosed in the classification filings and the department was not put on notice of their manufacture and use in the factory. Extended limitation was therefore available. For the second appeal, the extended period was invoked again on the same issue for a subsequent period, and the demand was held to be time-barred in view of the earlier disclosure principle applied by the Court.

Conclusion: The demand in the first appeal was not barred by limitation, while the demand in the second appeal was barred by limitation.

Issue (v): whether MODVAT credit was admissible.

Analysis: Since duty-paid inputs were used in the fabrication of saddles, credit could not be denied merely for procedural lapses in filing declarations. However, the exact quantum required verification from the records and could not be determined finally at that stage.

Conclusion: MODVAT credit was held admissible, subject to verification of quantum.

Final Conclusion: The first appeal succeeded only to the limited extent of MODVAT credit and was remanded for re-determination of duty, fine and penalty, while the second appeal was allowed on limitation. The duty liability on saddles was otherwise upheld.

Ratio Decidendi: Marketability is satisfied if goods are capable of being bought and sold, and articles fixed to the earth without permanent assimilation remain excisable if they can be removed and retain their commercial identity.

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