2016 (9) TMI 939 - AT - Central Excise

Manufacture - marketability - Duty liability - goods got fabricated by the appellant from the job workers - appellants engaged in fabrication of gates and gate parts for irrigation project using M.S. Sheets, Plates, Angles etc. - items were made as per specifications of the project and are not regularly traded items - Held that - the original authority presumed marketability on the basis that even a single buyer will constitute the market. We find in the present case the specified parts of irrigation gates which are ultimately installed into immovable structure are not bought and sold. These specific parts were fabricated as intermediate parts to create a final structure.It is found that the facts of the case are similar to the one decided by the Karnataka High Court which was affirmed by the Hon ble Supreme Court. It is also noted that the Hon ble Supreme Court in Board of Trustees vs. Collector of Central Excise, A.P. 2007 (8) TMI 350 - SUPREME COURT OF INDIA held that in order to constitute goods twin tests have to be satisfied, namely, process constituting manufacture and secondly marketability. It is well-settled that goods are manufactured with the object of being sold in the market. If the goods are not capable of being sold then the test of marketability is not fulfilled. Further, the burden is on the Department to prove whether there is the process which constitutes manufacture and secondly whether the product is marketable. The Hon ble Supreme Court concluded that the impugned goods in that case is made of particular specification and cannot be used anywhere else. There is no evidence coming from the department to show that said specified products are bought and sold in the market as a commodity. Accordingly, the impugned order is set-aside. - Decided in favour of appellant

Summary

Issues:
1. Whether goods fabricated by the appellant from job workers are liable to Central Excise duty as parts of gates for irrigation projects.
2. Whether the fabricated goods are excisable goods satisfying the conditions of excisable goods.
3. Whether the fabricated goods are marketable and thus liable to excise duty.

Analysis:
1. The appeals were against the order of the Commissioner of Central Excise, Jaipur-I, regarding the liability of goods fabricated by the appellant as parts of gates for Central Excise duty. The Tribunal remanded the matter for fresh decision, examining if the activities amounted to manufacture and the applicability of the decision of the Karnataka High Court. The original authority concluded that the goods were liable to Central Excise duty as they were manufactured, movable, and marketable.

2. The appellant argued that the gate parts were made as per buyer specifications and satisfied the conditions of excisable goods before installation. The Tribunal noted that the goods were made as per project specifications and not regularly traded items, similar to the facts in the Karnataka High Court case. The High Court had held that goods must be marketable to be excisable, and in this case, the goods were not offered for sale in the market.

3. The original authority found the goods liable to excise duty based on their distinct name, character, and use after several manufacturing processes. However, the Tribunal disagreed, stating that marketability is a crucial factor for goods to be excisable. The Tribunal referenced the Supreme Court's decision that goods must be capable of being sold to be considered excisable. As the specific gate parts were not bought or sold but fabricated for a particular project, they were not marketable. Citing previous case law and the lack of evidence of marketability, the Tribunal set aside the impugned order and allowed the appeals.