1996 (11) TMI 66 - SC - Central Excise

Mono vertical crystallisers aren't 'goods' for excise duty as they require on-site installation and fixation

SC held that mono vertical crystallisers are not 'goods' liable to excise duty. The Court found they must be assembled, erected and fixed to foundations ... Meaning of 'goods' for excise dutiability - marketability test for excisability - attachment to earth and immovability - erection and installation not exigible to excise - distinction between supply of component parts and manufacture of an end-product by on-site assemblyMeaning of 'goods' for excise dutiability - marketability test for excisability - attachment to earth and immovability - erection and installation not exigible to excise - Whether mono vertical crystallisers cleared in knocked down condition are 'goods' liable to excise duty under the Act - HELD THAT: - The Court applied the settled two-fold test that an article must be 'goods' and must be marketable or capable of being brought to the market to attract excise duty. It accepted the appellants' uncontroverted material showing that mono vertical crystallisers are delivered in knocked down condition and require assembly, erection and attachment to foundations at the customer's site. The crystalliser, as assembled on site, becomes attached to the earth and is not capable of being sold 'as it is, without anything more'; hence it fails the marketability test. Relying on precedent that erection and installation of plants do not constitute excisable manufacture and that goods attached to the earth and rendered immovable are not 'goods' within the Act, the Court held that treating such structures as excisable would improperly extend the ambit of excise to all manner of installations. The Tribunal's reliance on debit notes and absence of a debit note in one case did not justify a finding that a complete, marketable crystalliser left the factory; the Tribunal's conclusion was therefore unreasonable. Applying these determinations to the material on record, the Court concluded that mono vertical crystallisers are not 'goods' exigible to excise duty under the Act. [Paras 9, 10, 11]Mono vertical crystallisers are not 'goods' within the meaning of the Act and are not exigible to excise duty.Final Conclusion: The appeal is allowed; the Tribunal's order and the Collector's demand are set aside; no order as to costs. 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.