Excisability of fabricated steel tanks turned on marketability and immovable property tests, while extended limitation failed for want of proper notice.

Fabricated steel tanks cleared from the factory remained excisable goods because they were marketable and did not become immovable property merely due to later installation at the buyer's premises. Excise duty was therefore sustainable for the normal period. The extended period of limitation and penalties were not invokable because the show cause notices did not properly set out the required basis for such invocation. The amount collected was to be treated as cum-duty price, Cenvat credit on inputs was allowed, and remand was directed only for limited recomputation.

---

---

Issues: (i) Whether the fabricated steel tanks cleared from the factory and installed at the buyers' premises were excisable goods liable to central excise duty, and if so whether the normal-period demand was sustainable. (ii) Whether the extended period of limitation and penalties were invokable, and whether the valuation had to be done on cum-duty basis with Cenvat credit allowed.

Issue (i): Whether the fabricated steel tanks cleared from the factory and installed at the buyers' premises were excisable goods liable to central excise duty, and if so whether the normal-period demand was sustainable.

Analysis: The goods cleared from the factory were incomplete or unfinished tanks, but they retained the character of tanks and were marketable. The expression "attached to the earth" had to be understood in the light of the statutory meaning of immovable property and the settled test under property law. On the facts, the tanks were not shown to be rooted in the earth or permanently embedded in the manner of immovable property; they were fabricated goods which arose in the factory and were cleared as tanks, even though further fitting and installation took place at site. The majority also relied on the settled position that excise duty is attracted by manufacture in the factory and not by the ultimate use of the product after clearance.

Conclusion: The tanks were excisable goods and the demand for the normal period was sustainable in favour of Revenue.

Issue (ii): Whether the extended period of limitation and penalties were invokable, and whether the valuation had to be done on cum-duty basis with Cenvat credit allowed.

Analysis: The show cause notices did not specifically allege the ingredients necessary to invoke the extended period, and the assessees were not properly put to notice on that basis. The demand beyond the normal period therefore could not survive. For the same reason, penalties under Section 11AC were not sustainable. The amount collected from customers had to be treated as cum-duty price, and Cenvat credit on inputs could not be denied. The matters were remanded only for computation consistent with these directions.

Conclusion: The extended-period demand and penalties were set aside, cum-duty benefit and Cenvat credit were allowed, and remand was ordered for limited computation.

Final Conclusion: The decision sustained excise duty only for the normal period while setting aside the extended-period demand and penalties, and the appeals were disposed of with consequential recomputation.

Ratio Decidendi: Goods fabricated in a factory remain excisable if they are marketable and do not become immovable property merely because they are later installed or affixed at site; however, extended limitation and penalty cannot be invoked without a specific and proper foundation in the show cause notice.

---