Site fabrication and stone crushing in excise: embedded steel ribs were not dutiable, while limitation defeated the crushed-stone demand.

Fabrication of steel ribs at a tunnel site, where the members were cut, bent and fixed in the earth as part of the civil structure, was treated as non-dutiable because the process did not produce a separately marketable movable commodity. Crushing oversize stones into smaller sizes was held to amount to manufacture because a new commercial commodity emerged, but the demand on that count failed on limitation since the duty issue was debatable and the extended period was unavailable. In the majority view, the duty and penalties were set aside; one member dissented and would have remanded both issues for de novo consideration.

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Issues: (i) Whether fabricated steel ribs formed at the tunnel site and embedded in the earth were dutiable goods under Tariff Heading 7308.90; (ii) Whether crushing of stones into smaller stones attracted duty under Tariff Heading 2505.00 and whether the demand was barred by limitation.

Issue (i): Whether fabricated steel ribs formed at the tunnel site and embedded in the earth were dutiable goods under Tariff Heading 7308.90.

Analysis: The steel joists were cut, bent and fastened at site to form ribs inside the tunnel as part of the civil structure. On the facts accepted by the majority, the ribs came into existence only within the tunnel and became embedded in the earth, unlike cases where fabricated structural members were manufactured in a factory and taken to site for further work. The process did not result in a separately marketable movable commodity.

Conclusion: The demand on steel ribs was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether crushing of stones into smaller stones attracted duty under Tariff Heading 2505.00 and whether the demand was barred by limitation.

Analysis: Stones collected for the work were sorted and the oversize pieces were crushed to the required size. The majority held that stones are covered by the tariff heading and that crushing them into smaller sizes amounts to manufacture because a new commercial commodity emerges. At the same time, the issue of duty on this count was not free from doubt, so the extended period of limitation was held inapplicable and the assessee was given the benefit of doubt on limitation.

Conclusion: The demand on crushed stones failed on limitation and the issue was decided in favour of the assessee.

Final Conclusion: The impugned orders did not survive in the majority view, the duty and penalties were set aside, and the appeals succeeded.

Ratio Decidendi: Fabrication carried out at site does not amount to excisable manufacture where the resultant structure comes into existence only as part of an immovable property, and the extended period of limitation is unavailable where the duty issue is debatable and not free from doubt.

Dissenting Opinion: One member disagreed on the steel ribs and limitation issue for crushed stones, holding that the affidavit relied upon by the appellants should not have been accepted as additional evidence and that both issues required remand for de novo consideration.

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