2002 (12) TMI 96 - HC - Central Excise

Court rules civil contractor's activities not manufacturing excisable goods under Central Excise Act

GANNON DUNKERLEY & CO. LTD. Versus UNION OF INDIA

The court ruled in favor of the petitioner, a civil contractor, stating that their activities did not amount to the manufacture of excisable goods. The ... Excisability - Works contract - Writ Issues Involved:1. Whether the activities carried out by the petitioner constituted the manufacture of excisable goods.2. Whether the notice issued u/s 11A of the Central Excise Act was beyond the stipulated period.3. Whether the payment of sales tax implies the manufacture of excisable goods.4. Whether the statements of the officers of the petitioner company were admissible and conclusive.Summary:1. Manufacture of Excisable Goods:The petitioner, a civil contractor, was engaged in setting up factory sheds for various companies. The Excise Department issued a show cause notice alleging that the petitioner had manufactured excisable goods such as structural steel items and cleared them without payment of duty. The petitioner contended that their activities were limited to executing works contracts and did not amount to the manufacture of excisable goods. The court referred to several judgments, including *Quality Steel Tubes (P) Ltd. v. Collector of Central Excise* and *Union of India v. J.G. Glass Industries Ltd.*, which established that goods embedded in the soil and not freely marketable do not qualify as excisable goods. The court concluded that the items manufactured by the petitioner were not marketable and were embedded into the soil, thus not qualifying as excisable goods u/s 3 of the Central Excise Act.2. Notice Beyond Stipulated Period:The petitioner argued that the notice issued u/s 11A of the Central Excise Act was beyond the period of six months. However, the court decided the matter on merits and did not delve into this issue.3. Payment of Sales Tax:The respondent argued that the payment of sales tax on the goods implied that they were excisable. The court noted that the sales tax was paid under the Maharashtra Sales Tax on the transfer of property in goods involved in the Execution of Works Contracts Act, 1985. The court held that the payment of sales tax does not necessarily imply that the goods are excisable under the Central Excise Act.4. Admissibility of Officers' Statements:The respondent relied on the statements of the officers of the petitioner company to argue that the items manufactured were excisable goods. The court acknowledged that these statements were admissible u/s 14 of the Central Excise Act but concluded that the statements alone were insufficient to determine the excisability of the goods. The court emphasized the need to consider the totality of the factors and found the respondent's reliance on these statements to be erroneous.Conclusion:The court allowed the petition, quashing the order dated 26th October 1989, and ruled that the petitioner was not liable to pay excise duty on the items in question. The petitioner was permitted to withdraw the deposit made in court, and the bank guarantees furnished were to be released. The judgment was stayed for eight weeks to allow the respondents to obtain any further orders.