Marketability test defeats excise duty on site-erected conveyor system fixed to earth as an immovable structure

A site-erected belt conveyor system fixed to the earth through civil foundations and permanent welding was held not to be excisable goods because excisability requires manufacture of movable, marketable goods. The system was found to be an immovable structure that could not be dismantled and sold in the market without substantial damage, so coverage by a tariff entry was insufficient. As the conveyor was non-excisable, the central excise duty demand could not survive and the penalties were also set aside.

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Issues: Whether the belt conveyor system erected at the customer's site was excisable goods liable to central excise duty, and whether the duty demand and penalties could survive.

Analysis: The conveyor system came into existence through site-specific civil foundations, permanent welding, and erection of components step by step over a large area. It was fixed to the earth with an element of permanency, could not be dismantled without substantial damage, and was not shown to be capable of being taken to the market and sold. The governing test for excisability required not only a tariff entry but also manufacture of movable, marketable goods. On the facts, the system was in the nature of an immovable structure and did not satisfy the marketability requirement. Once the goods were held non-excisable, the basis for duty, limitation controversy, and penalties fell away.

Conclusion: The belt conveyor system was not excisable goods. The duty demand was unsustainable and the penalties imposed on the assessee were set aside.

Ratio Decidendi: A site-erected structure fixed to the earth with permanency, which cannot be dismantled and marketed as such, is not excisable goods notwithstanding its coverage by a tariff entry.

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