Manufacture and marketability test defeats excise duty on site-fabricated steel structures embedded in immovable property.

Fabrication and erection of trusses, columns and purlines at site using duty-paid steel, where the resulting structures became permanently embedded in the earth and formed part of immovable property, did not amount to manufacture of excisable goods. The activity of cutting, drilling, welding and assembling materials at the construction site produced no marketable goods with an independent commercial identity, and excise duty was therefore not attracted. Applying the settled tests of manufacture, marketability and immovable property, the demand and show cause notice were liable to be quashed; the alternate remedy objection was not accepted in view of the long pendency of the petitions.

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Issues: Whether fabrication and erection of trusses, columns and purlines at site, using duty-paid steel materials, and resulting in structures permanently embedded in the earth, amounted to manufacture of excisable goods and attracted central excise duty.

Analysis: The activity consisted of cutting, drilling, welding and assembling purchased duty-paid steel at the construction site for incorporation into the building works. The resulting structures were not intended for sale, had no independent commercial identity at the stage of emergence, and became integral parts of immovable property. Excise duty is attracted only when there is manufacture of goods; the goods must also satisfy the test of marketability. Applying the settled principles on manufacture, marketability and immovable property, the fabrication undertaken at site did not produce marketable goods distinct from the materials used. The objection as to alternate remedy was also not accepted in view of the long pendency of the petitions.

Conclusion: The fabrication and erection activity did not amount to manufacture and was not exigible to excise duty; the impugned demand and show cause notice were liable to be quashed, and the writ petitions succeeded in favour of the petitioners.

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