1988 (12) TMI 182 - AT - Central Excise

Tribunal allows delay in filing appeals, exempts duty on destroyed goods.

The Tribunal condoned the delay in filing Supplementary Appeals by the Department as the main appeal was filed within the prescribed time limit and the ... Manufacture-completion - mandatory quality control tests as part of production - captively utilised finished goods - excise duty liability on consumption within factory - necessity of exemption notification for post-manufacture utilisationManufacture-completion - mandatory quality control tests as part of production - excise duty liability on consumption within factory - necessity of exemption notification for post-manufacture utilisation - Whether Central Excise duty was payable on cement concrete poles destroyed during mandatory quality control tests carried out before the goods were fit for delivery - HELD THAT: - The Tribunal found that the poles were intended for supply under contracts which required prescribed quality control tests to be carried out before goods could be deemed fit for delivery. About one per cent of production was randomly tested until breakage occurred; dispatch to the purchaser took place only after samples passed these tests. Consequently, the goods became marketable and fully manufactured only after successful completion of the mandatory tests. The testing, being an integral and compulsory part of the production process and occurring prior to attainment of the stage of manufacture at which goods are fit for delivery, did not amount to post-manufacture utilisation within the factory attracting duty. The requirement for an exemption notification would arise only where fully manufactured goods were subsequently utilised; it was therefore not applicable to goods destroyed during pre-delivery mandatory testing. Applying these principles, the Tribunal agreed with the Collector (Appeals) that no excise duty was payable on poles destroyed in the course of mandatory quality control tests. [Paras 3, 4]No Central Excise duty payable on cement concrete poles destroyed during mandatory pre-delivery quality control tests; appeals dismissed.Final Conclusion: The appeals are dismissed: destruction of sample poles in mandatory quality-control testing conducted prior to the stage when goods become fit for delivery does not attract Central Excise duty, and no exemption notification was required in the circumstances. The appeals concerned whether Central Excise duty was payable on about one percent of cement concrete poles destroyed during mandatory quality-control testing. The Department argued the poles were 'fully manufactured', accounted in RG-1 and placed in bonded storage, so removal for testing amounted to in-factory 'utilisation' liable to duty absent an exemption notification. The Tribunal rejected this view, noting the poles were produced under contract and could be delivered only after passing prescribed tests; approximately one percent were selected and destroyed during testing. The court held the goods became 'marketable and fit for delivery only after they had passed the prescribed quality control tests' and that 'unless the goods reach a stage where they are fit for delivery, they cannot be considered as fully manufactured goods.' The necessity for an exemption notification arises only after goods are fully manufactured and thereafter utilised; here testing occurred prior to that stage. All seven appeals were dismissed.