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The Central Board Of Excise & Customs vs M/S.Mettur Thermal Power Station on 21 December, 2016
cites
The Central Excise Act, 1944
Central Excise Tariff Act, 1985
Union Of India vs Delhi Cloth & General Mills on 12 October, 1962
The Act charges duty on manufacture of goods. The word manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth and General Mills Ltd. [AIR 1963 SC 791]
In A.P. SEB v. CCE [(1994) 2 SCC 428] , this Court reiterated the same principle and observed that marketability was must irrespective of whether it was marketed or not. Reference has already been made to Indian Cable [(1994) 6 SCC 610 : (1994) 74 ELT 22] . Thus any goods mentioned in the Tariff Schedule does not attract duty unless it is marketable or capable of being marketed.
Section 3 in The Central Excise Act, 1944 [Entire Act]
Section 78 in The Central Excise Act, 1944 [Entire Act]
Union Carbide India Limited vs Union Of India And Ors on 4 April, 1986
The test of marketability was relaxed in Union Carbide India Ltd. v. Union of India [(1986) 2 SCC 547 : 1986 SCC (Tax) 443 : (1986) 24 ELT 169] and it was held that in order to attract excise duty the article manufactured must be capable of sale to a consumer . The question that arose was whether aluminium cans produced by the appellants for the flashlights manufactured by it were goods. It was held: (SCC pp. 550-51, para 7)
The question here is whether the aluminium cans manufactured by the appellant are capable of sale to a consumer. It appears on the facts before us that there are only two manufacturers of flashlights in India, the appellant being one of them. It appears also that the aluminium cans prepared by the appellant are employed entirely by it in the manufacture of flashlights, and are not sold as aluminium cans in the market. The record discloses that the aluminium cans, at the point at which excise duty has been levied, exist in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans have sharp uneven edges and in order to use them as a component in making flashlight cases the cans have to undergo various processes such as trimming, threading and redrawing. After the cans are trimmed, threaded and redrawn they are reeded, beaded and anodised or painted. It is at that point only that they become a distinct and complete component, capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case.
South Bihar Sugar Mills Ltd., Etc vs Union Of India & Ors on 5 February, 1968
In South Bihar Sugar Mills Ltd. - v -Union of India [AIR 1968 SC 922 : (1968) 3 SCR 21] it was held by this Court:
Bhor Industries Ltd., Bombay vs Collector Of Central Excise, Bombay on 31 January, 1989
We find it difficult to believe that the elementary and unfinished form in which they exist immediately after extrusion suffices to attract a market.
It was explained in Bhor Industries Ltd. v. CCE [(1989) 1 SCC 602 : 1989 SCC (Tax) 98 : (1989) 40 ELT 280] : (SCC p. 607, para 6)
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.
Hindustan Polymers Etc. Etc vs Collector Of Central Excise, Etc. Etc on 23 August, 1989
24. From the above judgment of the Supreme Court, it is clear that the first test in the process of levy of excise duty is that the product has to be produced or manufactured and the second test being that the product so produced or manufactured should be a marketable commodity. Further, the Supreme Court has also categorically held that levy of excise duty is on the manufacture or production of the goods and that leviability of duty is linked to its manufacture or production. Therefore, as propounded by the Supreme Court in a catena of decisions referred to above, the twin tests of manufacture and marketability should be satisfied in order to bring the goods within the ambit of excise duty and failure of even one of the test would render the product not liable for excise duty. In the case on hand, it is clear from the averments of either party and is also not in dispute that 'fly ash' is a by-product during the production of electricity and is not the main manufactured item. Further, the 'fly ash' is not a commodity which can be used as such in the market, but it is usable only as one of the materials in the production of other products. Therefore, there being no manufacture of 'fly ash', but 'fly ash' gets formed as a by-product during the production of electricity, merely because the goods 'fly ash' finds a place in the specific or residuary entry in the schedule it cannot be termed as an excisable commodity, since it satisfies the test of marketability. The twin tests have to be satisfied in order to bring a product within the ambit of excise duty and satisfaction of solitary test alone would not be sufficient to levy excise duty on the commodity. Therefore, mere marketability of the product alone would not be suffice to levy duty on the 'fly ash', there being no manufacturing process involved.
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