The Hindu Business Line : Even one buyer makes a market

GOODS, for purpose of levy of Excise duty, must be movable and marketable, as established through a number of cases. One more case that has been reported recently, though decided years back, is of FGP Ltd where the apex court held that marketability of goods is an essential ingredient of excisability.

The company manufactures `glass wool' and `glass staple fibre' using raw materials such as silica sand, soda ash, and borax. "They are mixed in required proportion and heated in a furnace to a temperature of around 1400 degrees Celsius. During the process the surplus molten glass when drained and sprinkled with water forms into lumps."

These formations, called `glass lumps' lay at the core of the case, because on one side the Department said that these lumps were excisable manufactured goods, while the company refuted the claim.

FGP's counsel stated that glass lumps were not known in the market by the same name and were not marketable. The Revenue's side contended that the company was the sole manufacturer of glass lumps that are captively consumed in the manufacture of end products.

The court observed: "It cannot be disputed that the glass lumps though a by-product, satisfy the test of manufacture. The only controversy is whether they are goods as understood in Excise law. To fulfil the requirements of excisable goods, they must be capable of being bought and sold in the market."

The argument of the Department - that for levying Excise duty, the test of marketability of glass lumps need not be established as the manufacture and utilisation of the goods cannot be disputed - did not find favour with the Supreme Court.

On its side, to show that the lumps in litigation had no market, the company had filed affidavits of certain concerns showing that they were not interested in purchasing glass lumps. The court noted that these affidavits did not disprove marketability of the goods.

However, to prove marketability, it was necessary for the Excise authorities to bring on record evidence; but that was lacking. "The burden of showing that the goods are marketable is on the Revenue," ruled the court. In the absence of any such proof, "it is not possible to hold that the test of marketability is satisfied," stated the judgment.

An interesting precedent that the judges cited was a decade-old ruling of the apex court in the AP State Electricity Board case where it was stated that even if there were only one purchaser, it must still be said that there was a market.

"Marketability of articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of the country."

Since glass lumps are not available in the market, it would be fair to surmise that they could be quite attractive as decorative pieces in showcases or gardens, depending upon how small or big they are.

It appears, therefore, that the Revenue lost the case for want of a single affidavit - of some interested buyer, so the marketability test could have been met.

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