Holding

Mono vertical crystallisers are not "goods" within the meaning of the Central Excise and Salt Act, 1944 and are not liable to excise duty.

Summary

Mittal Engineering Works (P) Ltd. manufactured mono vertical crystallisers used in sugar factories, which were shipped in knocked‑down condition and assembled on site. The Central Excise Collector held that the crystallisers were "goods" and liable to excise duty, a view affirmed by the Customs, Excise and Gold (Control) Appellate Tribunal. The company appealed, arguing that the crystallisers only became a complete product after erection and therefore were not marketable goods within the meaning of the Central Excise and Salt Act, 1944. The Supreme Court examined the definition of "goods" and the test of marketability, relying on earlier decisions such as Quality Steel Tubes and Union of India v. Delhi Cloth. It concluded that the crystallisers required assembly, erection and foundation attachment, making them immovable installations not capable of being sold as‑is, and thus not "goods" for excise liability. Consequently, the appeal was allowed and the demand for excise duty was set aside.

Issues considered

Whether mono vertical crystallisers constitute "goods" within the meaning of the Central Excise and Salt Act, 1944 and are therefore liable to excise duty.
Whether the test of marketability applies to plant and equipment that require on‑site assembly and erection.

Legislation cited

Central Excise and Salt Act, 1944

Subjects

excise dutydefinition of goodsmarketabilityplant erectionCentral Excise Acttax liabilitystare decisis

Judgment

A MIS. MITTAL ENGINEERING WORKS (P) LTD.
v.
COLLECTOR OF CENTRAL EXCISE, MEERUT

NOVEMBER 19, 1996

B [S.P. BHARUCHA AND K. YENKATASWAMI, JJ.]

Central Excise and Salt Act, 19./4:

Mono Vertical Ciystallisers-He/d, are not 'goods' within the meaning
of the Act and, therefore, not eligible to excise duty.
c
Stare decisis-A decision can;10t be relied upon in support of a
proposition that it did not decide.

The appellant--assessee was required to pay excise duty on mono
D vertical crystallisers patented by it The said crystalliser, which was
used in sugar factories to exhaust molasses of sugar was a tall structure,
like a tower, with a platform at its summit. The assessee resisted the
demand stating that the parts of the crystalliser came into existence
only after assembling and erection done at the site; that the process
involved welding and gas cutting; and that the assembly and erection
E was done by the assessee but the fabrication materials were procured
from the stores of the customer for which customer sent to the
appellant the debit notes.

The Collector of Central Excise confirmed the deman<t·holding
that the mono vertical crystalliser should be termed as 'goods' and
F its manufacture was complete in all respects at the time of its clearance
from the assessce's premises, and its delivery1 in knocked down
1

condition was only to facilitate transport. The'appeal filed by the
asseess was dismissed by the Customs Excis~ and Gold (Control
Appellate Tribunal. Aggrieved, the assessee filed the present appeal.
G
Allowing the appeal, this Court

HELD : I.I. Mono vertical crystallisers are not 'goods' within
the meaning of Central Excises and Salt Act, 1944, and, therefore,
not exigible to excise duty. The cyrstalliser has to be assembled, erected
H and attached to the earth by a foundation at the site of the sugar
796
MIITALENGG WORKS(P)LTD.1· COLLECTOROFCENTRAL 797

factory. It is not capable of being sold as it is, without anything more. A
The erection and installation of a plant is not excisable. To so hold'
would, impermissibly, bring into the net of excise duty all manner of
plants and installations. [801-A,q

Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P.,
(1995[ 2 sec 372, relied on. B

Narne Tuleman Manufactures Pvt. Ltd., Hyderabad v.
Collector of Central Excise, Hyderabad, [1988) Supp. 3 SCR 1,
distinguished.

Union of India and anr. v. Delhi Cloth and General Mills Co. Ltd. C
AIR (1963),SC 791; Bhor Industries Ltd., Bombay v. Collector of Central
Excise, Bombay, )1989) 1 SCC 602; South Bihar Sugar Mills Ltd. Etc. v.
Union of India and Ors., )1968) 3 SCR 21; Union Carbide India Ltd. v.
Union of India, )1986) 2 SCC 547 and Indian Cable Company Ltd.,
Calcutta v. Collector of Central Excise Calcutta & Ors., [1994) 6 SCC
610, referred to. D

1.2 The Tribunal took an unreasonable view of the evidence.
The fact that there was no debit note in respect of one customer could
not reasonably have led the Tribunal to conclude that in the case of
that customer a complete mono vertical crystalliser had left the E
appellant's factory and that, therefore, mono vertical crystallisers
were marketable. [801-E-F]

2. A decision cannot be relied upon in support of a proposition
that it did not decide. [801-B]
F
Narne Tulaman Manufactures Pvt. Ltd., Hyderabad v. Collector of
Central Excise, Hyderabad, [1988] Supp. 3 SCR 1, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2919 of
1986. G
From the Judgment and Order dated 14.5.86 of the Customs Excise
and Gold (Control) Appellate Tribunal, New Delhi in A. No. E. 1631 of
1984-B-I in (Order No. 239/86-B-1)

V. Lakshmikumaran, V. Sridharan and V. Balachandran for the H
798 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A Appellant.

R. Mohan, S.D. Sharma and Ms. Sushma Suri for the Respondent.

The Judgment of the Court was delivered by :

B BHARUCHA, J. The order of the Customs, Excise and Gold
(Control) Appellate Tribunal under appeal confirms the levy of excise
duty on mono vertical crystallisers.·

Mono vertical crystallisers are used in sugar factories. Their function
is to exhaust molasses of sugar. A general note placed on the record of the
C Tribunal by the appellants, who have patented the mono vertical crystalliser,
describes its function and manufacturing process. The mono vertical
crystalliser is fixed on a solid RCC slab having a load bearing capacity of
about 30 tones per sq. mt. It is assembled at site in different sections
shown by the packing list given to customers with the invoices. This consists
D of bottom plates, tanks, coils, drive frames, supports, plates, distance places,
cutters, cutter supports, tank ribs, distance plate angles, water tanks, coil
extension pipes, loose bend angles, coil supports, railing stands, intermediate
platforms, drive frame railings and flats, oil trough, wormwheels, shafts,
housing stirrer arms and support channels pipes, floats, heaters, ladders,
platforms, etc. The parts aforestated are cleared from the premises of the
E appellants and the mono vertical cyrstalliser is assembled and erected at
site. The process involves welding and gas cutting.Where the assembly
and erection is done by the appellants welding rods, gases and the like are
procured from the stores of the customer and the customer sends to the
appellants debit notes for their value. A sketch and photograph produced
by the appellants before the authorities shows that the mono vertical
F crystalliser is a tall structure, rather like a tower with a platform at its
summit.

The appellants were required to show cause why they should not pay
excise duty on mono vertical crystallisers cleared from their premises during
G 1982-83. The Collector, Central Excise, Meerut, confirmed the demand.
He held, relying on orders placed by sugar factories with the appellants
and the correspondence in that behalf, that the manufacture of a mono
vertical crystalliser was complete in all respects at the time of its clearance
from the appellant's premises; its delivery in knocked down condition was
only to facilitate transport. It was clear that the mono vertical crystalliser
H was known to the trade and capable of being sold and purchased in the
MITT AL ENGG. WORKS (I') LTD. 1·. COLLECTOROFCENTRAL\BHARUCHA,J.J 799

market, at the time and place of removal and before erection and A
commissioning, and should be termed 'goods'. The mono vertical
crystalliser had a distinct name and was meant for a definite use. As the
finished product was the result of the processes of welding, bending, cutting,
drilling, etc. and had a name, character and use different from the raw
materials used, the process amounted to manufacture within the meaning
of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the B
Act'). The test of marketability and of being goods was satisfied.

The Tribunal, in the appeal filed by the appellants, noted the debit
notes aforementioned and found that in the case of one customer there was
no debit note. The Tribunal concluded, "Thus in the case of this party
complete Sugar Mill Machinery which the appellants describe as mono C
vertical crystallisers in the invoice left the factory. Besides it is also observed
that while in the case of Madurantakam Cooperative Sugar Mills case the
appellants collected erection charges of Rs. 40,000 in some cases erection
was left to the customers themselves. This destroys the appellants argument
that the crystalliser comes into existence only after erection at site."
D
The principal question to which we 1nust address ourselves is whether
mono vertical crystallisers are 'goods' upon which excise duty under the
provisions of the Act can be levied.

In Union of India and Anr. v. Delhi Cloth and General Mills Co. E
Ltd, AIR (1963) SC 791, a Constitution Bench considered the application
of the provisions of the Act to the hydrogenated oils that are known as
'vanaspati'. 'Goods' were not defined in the Act. The meaning, as found
by the Court from dictionaries, showed "that to become 'goods' an article
must be something which can ordinarily come to the market to be bought
and sold". In Bhor Industries Ltd., Bombay v. Collector of Central Excise, F
Bombay, [1989] l SCC 602, the view taken in the case of Delhi Cloth and
General Mills Co. Ltd, and reiterated in South Bihar Sugar Mills Ltd etc.
v. Union of India and Ors., [1968] 3 SCR 21, and Union Carbide India
Ltd v. Union of India, [1986] 2 SCC 547, was applied to crude PVC
films. It was held that they "were not known in the market and could not G
be sold in the market and was not capable of being marketable". In Indian
Cable Company Ltd., Calcutta v. Collector of Central Excise, Calcutta
and Ors., [1994] 6 SCC 610, this Court considered the question of PVC
compounds, and observed that marketability was a decisive test for
dutiability. 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 H
800 SUPREME COURT REPORTS [1996] SUPP. 8 $.C.R.

A consumers in the market, as it is-without anything more". The case that
comes closest to that which we have before us is the case of Quality Steel
Tubes (P) Ltd. v. Collector of Central Excise, UP., [1995] 2 SCC 372.
The issue was whether "the tube mill and welding head erected and installed
by the appellant. for manufacture of tubes and pipes out of duty-paid raw
material" was assessable to excise duty. The Court observed, having regard
B to the earlier decisions aforementioned, "The basic test, therefore, oflevying
duty under the Act is twofold. One, that any article must be goods and
second, that it should be marketable or capable of being brought to the
market. Goods which are attached to the earth and thus become immovable
and do not satisfy the test of being goods within the meaning of the Act
nor it can be said to be capable of being brought to the market for being
C bought and sold". It was also said that the "erection and installation of a
plant cannot be held to be excisable goods. If such wide meaning is assigned
it would result in bringing in its ambit structure, erections and installations.
That surely would not be in consonance with accepted meaning of excisable
goods and its exigibility to duty."

D Learned counsel for Revenue relied upon the judgment in Narne
Tulaman Manufactures Pvt. Ltd., Hyderabadv. Collector ofCentral Excise,
Hyderabad, [1988] Supp. 3 SCR I. An indicating system was one of the
three parts ofa weighbridge, namely, (1) a platform, (2) load cells and (3)
-
the Indicating system. The Tribunal found that the appellant brought the
E three components together at site, fitted and assembled them so that they
could work as one machine and, as such, the appellant manufactured a
weighbridge. The question, therefore, was whether the activity carried
out by the appellant, of assembling the three components of the weighbridge,
brought into being a complete weighbridge, which had a distinct name,
character or use. The argument of the appellant was that it was making
F only a part of the weighbridge, that is, the indicating system, and that
alone was dutiable. It was held that the end product, namely, the
weighbridge, was a separate product which came into being as a result of
the endeavor and activity of the appellant, and the appellant must be held
to have manufactured it. The appellant's case that it was liable only for a
G component part and not the end product was, therefore, rejected.

Learned counsel for the Revenue submitted that if even a weighbridge
was excisable, as held in the case of Narne Tulaman Manufactures Pvt.
Ltd., so was a mono vertical crystalliser. The only argument on behalf of
Name Tulaman Manufacturers Pvt. Ltd. was that it was liable to excise
H duty in respect of the indicating system that it manufactured and not the
MITIAL ENGG. WORKS (P) LTD. r. COLLECTOR OF CENTRAL !BHARUCHA, J.} 801

whole weighbridge. The contention that weighbridges were not 'goods' A
within the meaning of the Act was not raised and no evidence in that
• behalf was brought on record. We cannot assume that weighbridges stand
on the same footing as mono vertical crystallisers in that regard and hold
that because weighbridges were held to be exigible to excise duty so must
mono vertical crystallisers. A decision cannot be relied upon in support of
a proposition that it did not decide. B

Upon the material placed upon record and referred to above, we are
in no doubt that the mono vertical crystalliser has to be assembled, erected
and attached to the earth by a foundation at the site of the sugar factory. It
is not capable of being sold as it is, without anything more. As was stated
by this Court in the case of Quality Steel Tubes (P) Ltd., the erection and c
installation of a plant is not excisable. To so hold would, impermissibly,
bring into the net of excise duty all manner of plants and installations.

The Tribunal took an unreasonable view of the evidence. It was the
case of the appellants, not disputed by the Revenue, that mono vertical
crystallisers were delivered to the customers in a knocked down condition D
and had to be assembled and erected at the customer's factory. Such
assembly and erection was done either by the appellants or by the customer.
Where it was done by the appellants, fabrication materials of the customer
were used and the customer sent to the appellants debit notes in regard to
their value. Where the assembly and erection was done by the customer,
E
there was no occasion for it to send to the appellants a debit note. The fact
that there was no debit note in respect of one customer could not reasonably
have led the Tribunal to conclude that in the case of that customer a complete
mono vertical crystalliser had left the appellants factory and that, therefore,
mono vertical crystallisers were marketable. The Tribunal ought to have
remembered that the record showed that mono vertical crystallisers had, F
apart from assembly, to be erected and attached by foundations to the
earth and, therefore, were not, in any event, n1arketab1e as they were.

Having regard to the material on record, we come to the conclusion
that mono vertical crystallisers are not 'goods' within the meaning of the
G
Act and, therefore, not exigible to excise duty .
...
' The appeal is allowed. The judgment and order under appeal is set
aside. There shall be no order as to costs.

R.P. Appeal allowed. H