2001 (5) TMI 918 - AT - Central Excise

Tribunal overturns duty order on refrigeration plants, penalties under Section 11AC and Rule 173Q

The Tribunal quashed the Commissioner's order demanding duty, penalties, and confiscation of refrigeration plants. It held that the duty on items like ... Excisability of immovable structures - construction of refrigeration plant not amounting to manufacture of a marketable commodity - double taxation of boughtout components - movable versus immovable property test for attachment to earth - penalty under Section 11AC and Rule 173Q and confiscation under Rule 209AExcisability of immovable structures - movable versus immovable property test for attachment to earth - Refrigeration plants/cold storages constructed and affixed at customer premises are not goods excisable under the Central Excise Act. - HELD THAT: - The Tribunal applied the established test whether a structure is movable or attached to the earth and concluded that refrigeration plants/cold storages, as installed, cannot be moved to another place for use in the same condition and are therefore immovable. Relying on precedent and the material produced (including photographs), the Tribunal found that boughtout machinery and components were permanently fixed to concrete foundations and formed an integral part of the mammoth civil construction. The masonry and fixed installations cannot be severed and treated as separate excisable goods. Consequently, the construction of such refrigeration plants does not result in the manufacture of a new marketable commodity liable to excise duty under the Act. [Paras 6, 7, 8, 9]The refrigeration plants/cold storages are immovable constructions and not excisable commodities; the demand of duty on them is unsustainable.Construction of refrigeration plant not amounting to manufacture of a marketable commodity - double taxation of boughtout components - penalty under Section 11AC and Rule 173Q and confiscation under Rule 209A - Duty demand, penalties and confiscation based on the view that erection/assembly of boughtout parts at site amounted to manufacture were set aside. - HELD THAT: - The Tribunal noted that the various components (compressors, cooling coils, motors, pipes, etc.) were bought out from manufacturers and had already borne excise duty at the time of clearance. The erection and affixation of these boughtout parts into civil structures did not amount to manufacture of a separate marketable commodity within the meaning of the Act. On this factual and legal basis the Tribunal held the adjudicating authority's imposition of duty, penalties under Section 11AC and Rule 173Q and confiscation with penalties under Rule 209A to be misguided and devoid of substance. Having concluded there was no excisable manufacture, the consequential penalties and confiscation could not stand. [Paras 4, 5, 9, 10]The demand of duty, the penalties and the confiscation imposed in the impugned order are unsustainable and are set aside.Final Conclusion: The impugned adjudication order is quashed in its entirety; appeals are allowed and the demands, penalties and confiscation imposed in respect of the refrigeration plants are set aside. Issues Involved:Challenge to adjudication order demanding duty, penalty, and confiscation of refrigeration plants.Analysis:1. Demand of Duty: The Commissioner confirmed duty of Rs. 58,25,580.00 on noticee No. 1, who constructed refrigeration plants. The duty was imposed on items like storage tank, cooling coil, compressor, and condenser. The appellant contended that these items were bought out from manufacturers who had already paid duty on them, thus should not be subjected to further duty liability.2. Penalties Imposed: Apart from duty, penalties were imposed under Section 11AC of the Act and Rule 173Q of the Rules on the appellant. The appellant challenged the imposition of these penalties in the appeal.3. Confiscation of Refrigeration Plants: The order of adjudication confiscated the refrigeration plants belonging to noticee Nos. 2 to 12. The appellant, noticee No. 1, challenged this confiscation in the appeal, arguing that the construction of refrigeration plants utilizing bought out items did not amount to manufacturing a new marketable commodity.4. Nature of Refrigeration Plants: The appellant, M/s. Virdi Brothers, contended that the refrigeration plants were not goods excisable to duty under the Act. They argued that the refrigeration system consisted of various components like storage tank, cooling coil, compressor, and condenser, which were bought out items already subjected to duty by their manufacturers.5. Legal Precedents: The judgment referred to legal precedents where structures attached to concrete bases were considered immovable property and not liable to excise duty. The Tribunal cited cases where machinery affixed to buildings or structures were deemed immovable property, supporting the argument that the refrigeration plants in question were not excisable goods.6. Final Decision: The Tribunal held that the Commissioner had erred in demanding duty, imposing penalties, and confiscating the refrigeration plants. The entire order of adjudication was deemed devoid of substance and was quashed in its entirety. The appeals were allowed, and the impugned order was set aside.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the appellant, relevant legal precedents, and the final decision of the Tribunal quashing the impugned order of adjudication.