2008 (2) TMI 216 - AT - Central Excise

Appellate Tribunal rules on HVAC ducts: Not goods subject to excise duty

The Appellate Tribunal determined that ducts fabricated on-site for HVAC systems were not considered goods but part of immovable property, thus not ... Dutibility of those Ducts which were fabricated at site by the appellants & which are not marketable – ducts brought into existence by sheet metal fabrication work - sheet metal fabrication is done along with the immoveable property - Ducts cannot be considered as goods and the fabrication work undertaken does not constitute a process of manufacture – held that such ducts fabricated at site with immovable property are not excisable/dutiable Issues: Classification of ducts for installation of HVAC systems as goods or immovable property; dutiability of fabricated ducts; marketability of ducts.The main issue in this case was the classification of ducts used for HVAC systems as goods or immovable property and their dutiability. The Appellate Tribunal had to determine whether the ducts fabricated at the site by the appellants could be considered as goods or if they became part of the immovable property. The Lower Authority proposed to classify the ducts under a specific heading, but the appellants argued that the fabrication work did not constitute a process of manufacture and the ducts were not marketable. They contended that the ducts were not 'hollow profiles' falling under a particular subheading, as they were made by sheet metal fabrication work and not by processes like drawing or extrusion. The appellants emphasized that the ducts were designed specifically for each customer's location and were not articles known to the market for buying and selling.The Appellate Tribunal analyzed various aspects, including the process of manufacture, marketability, and relevant legal precedents. They referred to a Board Circular and a Supreme Court judgment to determine the excisability of the products based on the process of manufacture and marketability. The Tribunal concluded that since the ducts were fabricated at the site and were not marketable goods, they did not pass the twin test required for excisability. Therefore, they set aside the earlier order and allowed the appeal filed by the appellants.Another issue raised by the Revenue was that the ducts should be considered as structures and were marketable despite being fabricated at the site. The Tribunal considered a judgment regarding iron and steel structures and found that the goods in question, i.e., the ducts, were different. They agreed with the Commissioner (A)'s analysis that the ducts did not fall under a specific heading as they were not made by certain processes but through sheet metal fabrication work. The Tribunal upheld the Commissioner (A)'s decision, noting that the ducts came into existence at the site and were not marketable goods. They rejected the Revenue's appeal, finding no merit in it and affirming the legality of the earlier order.