Marketability and extended limitation govern excise treatment of an in-house screening plant, with input exemption allowed on proof of duty-paid inputs.

A revolving screening plant fabricated for the assessee's own use was treated as excisable goods because marketability, not actual sale, is the controlling test, and the plant was found to be functional machinery capable of being sold. The extended limitation period under the proviso to Section 11A(1) was available where the assessee had not disclosed the manufacture to the department and the notice alleged intent to evade duty. Exemption under Notification No. 201/79 was available for duty-paid inputs used in manufacture, and could not be denied merely for procedural non-compliance if entitlement was otherwise established, subject to proof of the duty-paid character of the inputs.

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Issues: (i) whether the revolving screening plant manufactured and used by the assessee was excisable goods; (ii) whether the extended period for issuing notice under the proviso to Section 11A(1) of the Central Excise Act was invokable; and (iii) whether the assessee was entitled to exemption under Notification No. 201/79 in respect of duty-paid inputs used in the manufacture of the plant.

Issue (i): whether the revolving screening plant manufactured and used by the assessee was excisable goods.

Analysis: The plant was fabricated for the assessee's own use, but that by itself did not take it outside the concept of goods. The decisive test was marketability, and actual sale or marketing was not required. Since the plant was a functional machinery capable of being sold and was not shown to be inherently non-marketable, it retained the character of goods for excise purposes. The claim that it was not manufactured in a factory so as to attract exemption was also rejected on the facts found.

Conclusion: The plant was held to be excisable goods and the assessee did not succeed on this issue.

Issue (ii): whether the extended period for issuing notice under the proviso to Section 11A(1) of the Central Excise Act was invokable.

Analysis: The assessee had not filed a classification list or otherwise brought the manufacture and clearance of the plant to the notice of the department before clearance. The show cause notice contained specific allegations of intent to evade duty, which was sufficient to attract the proviso. In these circumstances, the department was entitled to rely on the extended limitation period, and the demand was not barred by time.

Conclusion: The extended period was held to be available to the department and the limitation defence failed.

Issue (iii): whether the assessee was entitled to exemption under Notification No. 201/79 in respect of duty-paid inputs used in the manufacture of the plant.

Analysis: The assessee was found entitled to the benefit of the notification, because denial of the exemption merely for non-compliance with procedural requirements was not justified where the assessee acted under a bona fide belief that no duty was payable. The benefit was, however, conditional upon proof to the department regarding the duty-paid character of the inputs used in the manufacture of the goods.

Conclusion: The assessee succeeded on this issue and was held entitled to the notification benefit, subject to verification of duty-paid inputs.

Final Conclusion: The demand and penalty were substantially upheld, but the assessee obtained relief to the limited extent of exemption on eligible duty-paid inputs under Notification No. 201/79.

Ratio Decidendi: For excise purposes, actual sale is not necessary for marketability, the extended limitation proviso is attracted by suppression or intent to evade duty, and an exemption on duty-paid inputs cannot be denied solely for procedural non-compliance when entitlement is otherwise established.

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