Excisability of goods under mandatory testing fails where poles are destroyed before becoming fully manufactured and marketable.

Central excise duty was not payable on cement concrete poles destroyed during mandatory quality control testing because the testing was an integral part of the production process and the poles had not yet become fit for delivery or marketable. Goods do not become fully manufactured merely by being entered in stock records or stored in the factory; excisability arises only after completion of manufacture. As the poles were destroyed before reaching that stage, they were outside the charge to duty.

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Issues: Whether central excise duty was payable on Cement Concrete Poles destroyed during mandatory quality control testing conducted as part of the production process before the poles became fit for delivery and marketable.

Analysis: The poles were manufactured for supply against specific contracts and could be treated as fit for delivery only after they passed prescribed quality control tests. About one per cent of the poles were selected at random and subjected to testing till they broke. The testing was a mandatory contractual requirement and formed an integral part of the production process. Goods that had not yet reached the stage of being fit for delivery and fully manufactured could not be treated as fully manufactured goods merely because they had been entered in stock records or stored in the factory. The need for an exemption notification would arise only after full manufacture and subsequent utilisation.

Conclusion: No central excise duty was payable on the poles destroyed in the mandatory quality control tests, as the goods had not yet become fully manufactured in the sense required for excisability.

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