ORDER
G. Sankaran, Senior Vice-President
1. This appeal is against Order-in-Appeal No. 290 CE/IND/83, dated 7.11.1983 passed by the Collector of Central Excise (Appeals) New Delhi, whereby he held that breaking and scrapping of defective cement poles (for the Madhya Pradesh State Electricity Board) into broken poles could not be termed a process of manufacture resulting in excisable goods and set aside the Assistant Collector’s order dated 24.9.80 charging duty on a quantity of such goods and imposing a penalty of Rs. 2000 on the respondents under the provisions of Central Excise law.
2. This appeal had been heard on 23.5.88 when orders were reserved. However, both sides had requested that in the event of there being a previous decision having a bearing on the issue, they might be heard again so as to enable them to make submissions with reference to the decision. When the file was taken up for dictation of orders, it was noticed that there was a previous decision of the Tribunal having a bearing on the issue involved in the present appeal. In the circumstances, the appeal was heard again with reference to the decision having a bearing on the issue on 23.2.89. On conclusion of the hearing, we pronounced our order dismissing the appeal filed by the Collector of Central Excise, Indore. We now record our reasons for doing so.
3. In the present instance, during the process of manufacture of poles, while dipping them in the tanks or otherwise, certain cracks or bends developed. As a result the poles had to be broken and scrapped. The broken poles are used either for levelling and filling of the ground by breaking them into small pieces or are used incidentally as pillars for hedges/fencing.
4. The North Regional Bench of this Tribunal in the case of Orient Presstressed Products Private Limited v. Collector of Central Excise, Allahabad -1987 (30) ELT 762 held that poles manufactured for the U.P. Electricity Board and drawn for test were not, in the absence of any exemption notification, eligible for remission of duty. It was noted that it had not been pleaded that the goods had been lost or destroyed by natural causes or due to unavoidable accident as provided for under Central Excise Rule 49 for the goods to be eligible for remission of duty nor was there any plea that the goods were unfit for consumption or marketing. The poles became unfit only after being subjected to test. Though Smt. Zutshi, SDR, for the Collector, submitted that the said decision supported the Revenue’s case, we are in agreement with the submission of Shri P.N. Kaul, Counsel for the respondents, that the facts of the present case are distinguishable. In the instant case, it was not as if goods completely manufactured in all respects and fit for marketing were scrapped. The defects in the nature of cracks and bends developed in the poles in the course of manufacture. In other words, they had not reached the stage of completion of manufacture and the stage of marketability unlike in the Orient Presstressed Products case where a certain quantity of fully manufactured poles had been drawn for test purposes. The said previous decision of the Tribunal is, therefore, of no help to the Revenue.
5. On the other hand, Special Bench ‘B’ of this Tribunal had occasion to consider a somewhat similar issue in Collector of Central Excise v. General Cement Products Private Ltd. -1989 (39) ELT 689. The dispute in that case was whether duty was payable on a percentage of cement concrete poles destroyed during the quality control test within the factory or not. The contention for the Department was that the goods were fully manufactured prior to their being tested and that in the absence of any exemption notification duty payable on the said poles could not be remitted. The Tribunal, in its order, observed that the goods became marketable and fit for delivery to the Electricity Board only after they had passed the prescribed quality control test and not before (which was the condition in the contracts between the manufacturer and the Board). It was further noted that unless the goods reached a stage where they were fit for delivery they could not be considered as fully manufactured goods. Since quality control test was done at a stage prior to the stage when the goods could be considered as fit for delivery and fully manufactured in that sense, the necessity for an exemption notification did not arise. It is true that in the present case we are not concerned with a percentage of the cement concrete poles being subjected to quality control test. Nevertheless, the principle which emerges from the previous decision is that unless the goods are ready for being marketed they could not be said to have been fully manufactured. In the present instance, the goods in question were scrapped because of the defects they developed in the course of manufacture. If anything, the case for not levying duty on the subject goods is much stronger than in the case of General Cement Products Pvt. Ltd. (supra).
6. Smt. Zutshi drew our attention to the Order-in-Original passed by the Assistant Collector according to which the respondents had admitted that the broken poles had been used by them within the factory premises in foundation, fencing etc. The fact that the broken poles were put to some use and might conceivably also have had some commercial value would not, in our opinion, detract from the finding we have already recorded that the subject goods had not reached the stage of fully manufactured goods ready for marketing.
7. Smt. Zutshi submitted that the goods were liable to be charged to duty and relied, for this purpose, on the Tribunal decision in Collector of Central Excise, Kanpur v. Hindustan Scientific Glass & Fancy Glassware Works and Anr. -1985 (21) ELT 195. In that case, the goods were ‘Bhagar’ on scrap or broken glass. The Tribunal found that ‘Bhagar’ was an item regularly bought and sold fetching considerable value. It was on the basis, inter alia, of this consideration that the Tribunal found that ‘Bhagar’ was an ex cisable Article. In the present instance, there is no such evidence before us.
8. In the light of the foregoing discussion, we hold that the subject broken poles were not liable to be charged to excise duty. We uphold the impugned order and dismiss this appeal.