1994 (2) TMI 56 - SC - Central Excise

Prestressed cement concrete poles held 'goods' under Section 3 because single-source sale can prove marketability

SC upheld that prestressed cement concrete poles are 'goods' under Section 3 because they are marketable. The court held marketability is a question of ... Goods - excisable goods - marketability - manufacture for captive consumption - intermediate product not known to market - test of marketabilityGoods - excisable goods - marketability - manufacture for captive consumption - Whether the prestressed cement concrete poles manufactured for the appellant's own use are 'goods' within the meaning of Section 3 of the Central Excises and Salt Act, 1944. - HELD THAT: - The Court surveyed precedent establishing that 'marketability' is the determinative test for treating an article as 'goods' for the purposes of the Act, and that this is essentially a question of fact to be decided pragmatically in each case. Decisions cited (Delhi Cloth & General Mills; South Bihar Sugar Mills; Union Carbide; Bhor Industries; Ambalal Sarabhai Enterprises) show that intermediate or captive-use products which are not marketable as known to the trade are not 'goods'. Conversely, if an article is marketable it is dutiable even if not actually sold by the manufacturer or if purchasable from only one source. Applying these principles, the Court relied on the appellant's own earlier contention before lower authorities that such poles are manufactured by independent contractors and purchased by electricity boards (as in the Kerala case), which demonstrates the existence of a market for such poles. The Court held that the fact that the appellant does not itself sell the poles does not negate their marketability; number of purchasers or territorial limits are irrelevant so long as a market exists. On this basis the Tribunal's conclusion that the poles are marketable and hence 'goods' within Section 3 was upheld. [Paras 10, 11]The prestressed cement concrete poles are marketable and constitute 'goods' within the meaning of Section 3; the Tribunal's conclusion is upheld.Final Conclusion: The appeals are dismissed; the poles are held to be marketable goods within the meaning of the Act and excisable accordingly. No costs. Issues Involved:1. Whether prestressed cement concrete poles manufactured by the appellant are 'goods' within the meaning of Section 3 of the Central Excises and Salt Act, 1944.2. The relevance of marketability in determining whether an item is considered 'goods' under the Act.Detailed Analysis:1. Whether prestressed cement concrete poles manufactured by the appellant are 'goods' within the meaning of Section 3 of the Central Excises and Salt Act, 1944:The primary issue in this case is whether the prestressed cement concrete poles manufactured by the Andhra Pradesh State Electricity Board are 'goods' as defined under Section 3 of the Central Excises and Salt Act, 1944. Section 3 levies duties of excise 'on all excisable goods ... which are produced or manufactured in India.' The term 'excisable goods' is defined in Section 2(d) of the Act, but the term 'goods' is not explicitly defined.The appellant contends that the poles are not 'goods' because they are not marketable. They argue that the poles are manufactured for their own use and not sold in the market, thus lacking marketability.2. The relevance of marketability in determining whether an item is considered 'goods' under the Act:The appellant's counsel, Shri Shanti Bhushan, argued that the poles are not marketable because they are not sold in the market and are unknown to the market. The excise authorities did not provide any instance where these poles were sold, supporting the claim that they are not marketable and hence not 'goods' under the Central Excise Act.On the other hand, the counsel for the Revenue, Sri Joseph Vellapalli, argued that the poles are indeed marketable. He pointed out that the appellant's earlier plea that these poles were manufactured by independent contractors from whom the appellant-Board purchased them indicates marketability. He cited the case of the Kerala State Electricity Board, where similar poles were purchased from independent contractors, establishing that such poles have a market. The fact that the appellant does not sell these poles does not affect their marketability.The court reviewed several precedents to understand the concept of 'marketability':- Union of India v. Delhi Cloth & General Mills: The court held that 'refined oil' at an intermediate stage of production of vanaspati was not marketable because it was not deodorised and hence not known to the market.- South Bihar Sugar Mills Ltd. v. Union of India: The court held that a mixture of gases generated during the manufacturing process was not marketable as 'compressed carbon dioxide' because it did not meet market specifications.- Union Carbide India Ltd. v. Union of India: The court held that aluminium cans in their crude form were not marketable as they were not sold in that state and were not capable of being sold to a consumer.- Bhor Industries Ltd., Bombay v. Collector of Central Excise, Bombay: The court held that crude PVC films were not marketable products and hence not 'goods' for the purposes of Section 3.- Collector of Central Excise v. Ambalal Sarabhai Enterprises: The court held that starch hydrolysate was not marketable because it was highly unstable and could not be stored or marketed.The court concluded that 'marketability' is a question of fact to be decided based on the specific circumstances of each case. The fact that goods are not actually marketed is irrelevant as long as they are marketable. Even if goods are available from only one source or a specified market, they are still considered marketable.In this case, the court found that the poles manufactured by the appellant are marketable. The fact that similar poles are purchased by the Kerala State Electricity Board from independent contractors indicates that such poles have a market. The appellant's own plea before the excise authorities that these poles were manufactured by independent contractors from whom it purchased them further supports their marketability.Conclusion:The court dismissed the appeals, holding that the prestressed cement concrete poles manufactured by the appellant are 'goods' within the meaning of Section 3 of the Central Excises and Salt Act, 1944. The marketability of the poles was established based on the fact that similar poles are purchased by other electricity boards from independent contractors. The court affirmed the conclusion of the Tribunal and dismissed the appeals with no costs.