1996 (11) TMI 66 - SC - Central Excise

Crystallisers not 'goods' for excise duty under Central Excises and Salt Act, 1944

MITTAL ENGINEERING WORKS (P) LTD. Versus COLLR. OF C. EX., MEERUT

The Court ruled in favor of the appellants, holding that mono vertical crystallisers do not qualify as 'goods' for excise duty purposes under the Central ... Whether mono vertical crystallisers are `goods' upon which excise duty under the provisions of the Act can be levied? Held that:- Where the assembly and erection was done by the customer, there was no occasion for it to send to the appellants a debit note. The fact that there was no debit note in respect of one customer could not reasonably have led the Tribunal to conclude that in the case of that customer a complete mono vertical crystalliser had left the appellants' factory and that, therefore, mono vertical crystallisers were marketable. The Tribunal ought to have remembered that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event marketable as they were. Having regard to the material on record, we come to the conclusion that mono vertical crystallisers are not `goods' within the meaning of the Act and therefore, not exigible to excise duty. In favour of assessee. Issues:Levy of excise duty on mono vertical crystallisers.Analysis:The judgment concerns the confirmation of the levy of excise duty on mono vertical crystallisers by the Customs, Excise & Gold (Control) Appellate Tribunal. The mono vertical crystallisers, patented by the appellants, are used in sugar factories to exhaust molasses of sugar. The appellants were required to show cause for not paying excise duty on these crystallisers cleared during 1982-83. The Collector held that the crystallisers were complete products at the time of clearance from the premises and were known to the trade, capable of being sold and purchased before erection. The Tribunal noted the assembly process, including welding and gas cutting, and considered the marketability and distinct name of the crystallisers. It observed instances where erection was done by customers, leading to the conclusion that crystallisers were marketable goods.The principal issue addressed in the judgment was whether mono vertical crystallisers qualify as 'goods' for excise duty purposes under the Central Excises and Salt Act, 1944. The Court referred to precedents such as Union of India v. Delhi Cloth and General Mills Co. Ltd. and other cases to determine the definition of 'goods.' It emphasized that for an article to be considered goods, it must be something marketable or capable of being brought to the market for sale. The Court also cited Quality Steel Tubes (P) Ltd. v. Collector of Central Excise to establish the test for levying excise duty, emphasizing marketability and separateness from immovable structures.The judgment discussed the applicability of a previous case, Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise, regarding the manufacturing of a weighbridge. The Court analyzed whether assembling components to create a weighbridge constituted manufacturing of the end product. The judgment highlighted the distinction between manufacturing a component and the final product, emphasizing the distinct name, character, and use of the end product. This case was cited to draw parallels between the weighbridge scenario and the mono vertical crystallisers in question.The Court rejected the Revenue's argument that mono vertical crystallisers should be treated as goods based on the weighbridge case, emphasizing the specific characteristics and assembly process of the crystallisers. It concluded that mono vertical crystallisers, requiring assembly, erection, and attachment to the earth, were not capable of being sold as they were, and thus did not qualify as goods for excise duty. The Tribunal's view of marketability and completion of crystallisers was deemed unreasonable, considering the necessity of assembly and erection before being marketable. Ultimately, the Court allowed the appeal, setting aside the judgment and order under appeal, with no order as to costs.