2004 (11) TMI 231 - AT - Central Excise

Tribunal Rules On-Site Construction of Aluminium Doors and Windows Not Subject to Excise Duty; Appeals Allowed.

The Tribunal concluded that the appellant's activities, involving the construction of aluminium doors, windows, and curtain walls on-site, do not ... Duty demand - imposition of penalties on the manufacture of doors, windows, frames of curtain walls, alucobond panels, and structural glazing - HELD THAT:- It appears from the materials on record that the appellant is not a manufacturer as such of doors, windows or any such identified items. It is a civil contractor manufacturing curtain walls. The curtain wall is constructed on existing buildings. It is erected piecemeal on site. It is too big to be first manufactured in a factory and to be lifted and installed. And once constructed, it cannot be removed and re-fitted as such. The appellant first prepares aluminium sections by cutting aluminium angles, plates etc. to size, drilling holes etc. in their own premises or at construction site. That activity does not bring into existence any commercial products. Windows, doors etc. come into existence only upon installation along with other members. These are constructed piecemeal. Items do not come into existence as identifiable commercial products in a factory or other manufacturing premises. The appellant's contention that construction at site does not involve manufacture of excisable goods is covered by judgment of the Apex Court in the case of CCE, Nagpur v. Wainganga Sahkari S. Karkhana Ltd. [2002 (4) TMI 55 - SUPREME COURT] and the decision of the Tribunal in the case of Suvidha Engineers (India) Ltd. v. CCE, Delhi [2004 (3) TMI 307 - CESTAT, NEW DELHI]. The duty demand in the present case is not sustainable. In the absence of duty demand, penalties are also not justified. Thus, the appeals are allowed with consequential relief if any, to the appellant, after setting aside the impugned order. ISSUES PRESENTED AND CONSIDERED 1. Whether on the facts and materials the on-site construction and erection of aluminium curtain walls, doors, windows, frames, alucobond panels and structural glazing amounts to 'manufacture' of goods attracting central excise duty. 2. Whether items fabricated piecemeal at site and permanently attached to immovable property attain marketability as goods separate from the building so as to be excisable. 3. Whether, if the activity does not constitute manufacture attracting duty, any consequential penalties imposed are sustainable. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether on-site construction/erection of aluminium curtain walls etc. is 'manufacture' attracting central excise duty Legal framework: Central excise applies to 'manufacture' of goods; established authority requires a transformation producing a new marketable commodity ordinarily produced in a factory or manufacturing premises, and previous decisions hold that mere construction at site may not amount to manufacture attracting excise. Precedent treatment: The Tribunal applied and followed the principles laid down by higher authority and prior Tribunal decisions which held that construction at site does not involve manufacture of goods attracting central excise duty. Interpretation and reasoning: The Tribunal examined the nature of the activity - procurement of aluminium sections, anodizing outside, cutting/routing/drilling, and sequential on-site erection through clamps, cleats, tapes and structural silicon leading to a curtain wall integrated with the building. The process was found to produce no identifiable finished product in factory premises; the frames and glazing become completed only upon piecemeal assembly and permanent attachment to the building. The Tribunal emphasized practical impossibility of first manufacturing complete curtain-wall units in a factory and subsequently installing them; the on-site activity results in an inseparable structural addition to immovable property rather than a separate commercial commodity. Ratio vs. Obiter: Ratio - On the facts, the Court held that the on-site piecemeal construction and permanent attachment of curtain walls and allied works did not amount to manufacture of excisable goods. Observations about the impracticability of factory manufacture and the specific processes (use of tapes, silicon, clamps, interlocking erection) are integral to the ratio. Remarks contrasting factory production with on-site erection are explanatory but support the operative conclusion. Conclusions: The activity of constructing and erecting curtain walls, doors, windows, alucobond panels and structural glazing on-site as described does not constitute 'manufacture' of goods attracting central excise duty; the duty demand based on a finding of manufacture is unsustainable. Issue 2: Marketability and separability - whether piecemeal, permanently attached items become marketable goods excisable separately from the building Legal framework: Central excise targets marketable goods; an item must be identifiable and capable of separate sale to be treated as excisable. Permanently affixed items to immovable property may lose independent character as goods. Precedent treatment: Prior decisions cited by the parties and relied upon by the Tribunal hold that constructions at site which become part of immovable property lack the requisite marketability and are not excisable goods. Interpretation and reasoning: The Tribunal accepted the appellant's consistent assertion that the erected curtain walls and related fittings are too large and permanently attached to be removed and re-fitted as complete, marketable products. The processes carried out in the appellant's premises (cutting, drilling) did not produce commercially distinct products; identifiable products (windows/doors) 'come into existence only upon installation along with other members.' The Tribunal treated permanence of attachment, the piecemeal method of construction, and the impracticability of prior manufacture as determinative of non-marketability and inseparability from immovable property. Ratio vs. Obiter: Ratio - The conclusion that items made and affixed in the described manner lack marketability and thus are not excisable goods is central to the decision. Observations about specific shop-floor operations not producing commercial products are factual findings underpinning the ratio. Conclusions: The erected curtain walls and associated items, being permanently attached and not existing as separable marketable commodities prior to installation, do not qualify as excisable goods for central excise purposes. Issue 3: Consequences for duty demand and penalties Legal framework: If the primary finding of manufacture/excisability fails, consequential duty demands and penalties premised on such classification cannot be sustained. Precedent treatment: The Tribunal applied settled principles that penalties contingent on an unsustainable duty demand fall with the demand. Interpretation and reasoning: Given the Tribunal's determination that the activities do not constitute manufacture of excisable goods, the confirmed duty demand of Rs. 48 lakhs and attendant penalties lacked legal basis. The Tribunal observed that absent a sustainable duty demand, penalties are not justified. Ratio vs. Obiter: Ratio - The setting aside of duty demand and penalties flows directly from the primary legal conclusion and is an operative part of the judgment. Conclusions: The duty demand and penalties founded on the classification of the on-site work as manufacture are set aside; appeals allowed with consequential relief as appropriate. Cross-references and final operative determination Reference to Issues 1-2: The determinations under Issues 1 and 2 are interdependent - the conclusion that on-site, piecemeal erection produces no marketable, separable goods (Issue 2) informs and supports the conclusion that no 'manufacture' attracting central excise duty occurred (Issue 1). Operative outcome: The Tribunal allowed the appeals, set aside the impugned order confirming duty and penalties, and granted consequential relief to the appellant.