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TMI Blog2022 (11) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... , Intake Gates of Trash Racks, Sedimentation Chamber Gates, Flushing Conduit Gates. The same has also been extracted in the impugned order. They would clearly indicate that these are articles that have been fabricated or manufactured for the particular requirements of the particular Hydroelectric Project. That the Gates, RCC construction etc. have been made by the petitioner - it cannot be said, nor to be found from any material on record to indicate that all the goods that are being manufactured by the petitioners are goods which are said to be marketable. The order dated 15.12.2005 passed by respondent no.1 is quashed. The amount in deposit made by the petitioner with the respondents is directed to be adjusted towards any dues of the petitioner and if there are no dues, then to be refunded to him within a period of six months from today - petition allowed. - WRIT PETITION NO.1200 OF 2006 & 10832 OF 2008 - - - Dated:- 19-9-2022 - HON'BLE SHRI JUSTICE RAVI MALIMATH, CHIEF JUSTICE AND HON'BLE SHRI JUSTICE VISHAL MISHRA PETITIONERS: SHRI NAMAN NAGRATH - SENIOR ADVOCATE WITH SHRI AVINASH ZARGAR - ADVOCATE RESPONDENTS: SHRI SIDDHARTH SETH ADVOCATE ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjected to during the course of their use. That, all the articles so prepared at the workshop are used only for the purposes of the said project. None of the articles are sold in the open market or diverted for any other purpose. However, some of the items are also diverted so far as the second project in Omkareshwar is concerned. Therefore, each and every item that is so prepared in the workshop is sent either to the project at Vishnuprayag Hydroelectric Power Project or the Omkareshwar Hydroelectric Power Project. That, the said items that are fabricated in the workshop are not useful for any other purpose or any other project. The same are prepared for the exclusive use and for the exclusive design of the project concerned. 2.(d) All the items bought by the petitioner from the market have suffered Central Excise duty. About 300 metric tons of the said iron and steel items were prepared for being dispatched at the petitioner s workshop. Therefore, a letter dated 1st December, 2004 was addressed to the respondent No.1/Commissioner, Customs and Central Excise requesting for confirmation that no Central Excise duty was payable by the petitioner on the said items. Yet another lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.2 prays for a short time to file reply. He also opposed the prayer and contended that the Excise duty is payable on the aforesaid items and if the Excise duty is paid and in future it is held that the petitioner is not liable for the payment of the Excise duty, the said amount shall be refunded to the petitioner. Contention of the petitioner is that he is not liable for the payment of Excise duty and has to supply the aforesaid material to a national project. The payment of Excise duty is to be considered by this Court after hearing the other side. Till the next date of hearing, by way of interim measures, following directions are issued: 1. Petitioner shall pay 50% of the Excise duty in accordance with the rules to the respondents. 2. For remaining 50% of the Excise duty, petitioner shall furnish surety to the respondent no.2 that in case of any order passed by this court or dismissal of the petition, petitioner shall pay Excise duty payable by them within a period of 15 days from the date of passing of the order. 3. Petitioner shall also furnish an undertaking that respondents shall be entitled to recover the aforesaid Excise duty from the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactured by the party are excisable, marketable and liable to Central Excise Duty. Accordingly, I pass the following order :- O R D E R I pass an order that :- (i) the activities such as cutting, bending, joining, drilling and welding for the fabrication/manufacture of Radial Gates, Gate Hoists, Hydraulic Hoists, Spillway units, Stop Logs, Intake Gates, Bulk Head Gates, Intake Trash Racks, Draft Tube Gates, Grany Crane etc. from various iron and steel items such as plates, angles, channels beams, nuts and bolts etc. amount to manufacture as per section 2 (f) of the Central Excise Act, 1994; the goods are liable to Central Excise duty and appropriately classifiable under Chapter Sub Heading 7308. 9090 to the schedule of Central Excise Tarrif Act, 1985 (Act No.5 of 1986) as structures/parts of Hydroelectric Power Project; (ii) the goods fabricated/manufactured by the party viz. Radial Gates, Gate Hoists, Hydraulic Hoists, Spillway units, Stop Logs, Intake Gates, Bulk Head Gates, Intake Trash Racks, Draft Tube Gates, Grany Crane etc. are excisable, marketable and liable to Central Excise duty under section 3 of the Central Excise Act, 1994. (iii) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 1998 SC 839, A.P. State Electricity Board v. Collector of Central Excise, Hyderabad reported in 1994 (2) SCC 428 and Sanjay Industrial Corporation V. Commissioner of Central Excise, Mumbai reported in Appeal No. E/1806/97. 5. On notice, the respondents have filed their reply on 25.04.2006. They have disputed the claim of the petitioner. They have stated that the orders passed by the Authorities are just and proper and do not call for any interference. That the goods being prepared by the petitioner attract excise duty and hence, the petitioners are liable to pay their relevant excise duty. The question of marketability and the question of fact has to be decided in the facts of each case, therefore, in the given facts of this case the goods are liable for excise duty. It is also further stated in their reply that as a consequence whereof, the petitioner may be directed to pay the Central Excise duty at appropriate rate with applicable interest etc. They do not accept the judgment in the case of Thungabhadra Steel Products Ltd (supra). It is their plea that it is not at all applicable in the petitioners case and is distinguishable. That in the case of Thungabhadra Steel Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty. It appears to us that under the Central Excise Act, as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufacture goods must come into existence. For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. That was necessary. This has been clearly spelt out by this Court in Union of India v. Delhi Cloth and General Mills - (1963) (Supp.) 1 SCR 586 : AIR 1963 SC 791. There this Court held that excise duty being leviable on the manufacture of goods and not on their sale, the manufacturer could not be taxed unless manufacturing process resulted in production of goods as known in the market. (emphasis supplied) After considering the definition of the word 'manufacture' and several authorities and Words and Phrases, Permanent Edition, Volume 18 from a judgment of the New York Court and also other relevant authorities, this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there should be manufacture of goods. The goods being articles which are known to those who are dealing in the market having their identity as such. Section 3 of the Act enjoins that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. Excisable goods under Section 2(d) of the Act means goods specified in the Schedule to the Central Excise Tariff Act, 1985, as being subject to a duty of excise and includes salt. Therefore, it is necessary, in a case like this, to find out whether there are goods, that is to say, article as known in the market as separate distinct identifiable commodities and whether the tariff duty levied would be as specified in the Schedule. Simply because a certain article falls within the Schedule it would not be dutiable under excise law if the said article is not goods known to the market. Marketability, therefore, is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff Act, 1985. It is significant to note that this decision takes into consideration the new amended Act of 1985. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s open to an assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being marketed. 7. The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be usable, movable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling . . . . . . . . 9. Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc. is linked with marketability. An articles does not become goods in the common parlance unless by productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity was a decisive test for dutiability, the Supreme Court further held that it meant that the goods were saleable or suitable for sale. They need not in fact be marketed. They should be capable of being sold to consumers in the market, as it is without anything more . The Supreme Court finally held that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were. 8.(b) Therefore, it was clearly held that in the absence of showing marketability of the goods in question, the same do not get attracted. The said judgment was confirmed by the Hon ble Supreme Court as reported in 1998 (101) ELT A139 (SC) (Union of India v. Thungabhadra Steel Products Ltd.). Moreover, the CESTAT, South Zone Bangalore have also relied on the very judgment in the case of Thungabhadra Steel Products Ltd. (supra) and applied the same thereon in the case of KCP Limited vs Commissioner Of Central Excise, Guntur reported in 2004 (168) ELT 325 (Tri. Bang.). 9.(a) The learned counsel for the respondents places reliance on the judgment of the Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The question herein is one of marketability. In the instant case, what was being marketed therein are cement concrete poles, which have been manufactured, therefore, it was held thereon that the marketability of the article does not depend on the number of purchasers nor is a market confined to the territorial limits of the country. As said hereinabove, we have no quarrel with the aforesaid proposition of law, which have already been reiterated by the Hon ble Supreme Court in the aforesaid judgments as referred to in Thungabhadra Steel Products (supra). 11. What the department would have to show is that the goods that are being manufactured by the petitioner are goods that are capable of being sold in the open market or to any purchaser. Only going by the theoretical reference that goods are marketable is not sufficient. The nature and extent of the goods requires to be defined in order to show that any one in the open market can purchase the same. In the instant case, there is no dispute that what the petitioner is fabricating or manufacturing are articles such as Spillway Raidal Gates, Spillway Stoplog Units, Intake Gates of Trash Racks, Sedimentation Chamber Gates, Flushin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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