Site fabrication of an immovable composite structure is not manufacture for excise; extended limitation and penalty also fail.

Site fabrication and erection of a composite primary reformer package that results in an immovable property, rather than marketable goods with independent existence, does not amount to manufacture for Central Excise purposes; no duty is payable on such fabricated items. The extended period of limitation was also not available because the assessee acted under a bona fide belief and the record did not establish suppression or the other elements needed for extended limitation. Penalty therefore could not survive, and the demand failed on both merits and limitation.

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Issues: (i) Whether the fabricated items formed at site in the course of erection of a primary reformer package were excisable goods liable to Central Excise duty. (ii) Whether the extended period of limitation and penalty were sustainable.

Issue (i): Whether the fabricated items formed at site in the course of erection of a primary reformer package were excisable goods liable to Central Excise duty.

Analysis: The contract and subcontract showed that the appellant was engaged in the execution of an entire primary reformer package, including supply, fabrication, erection and testing, and not merely in the manufacture and sale of separate parts. The items were fabricated piece by piece at site and became part of the completed primary reformer, which on the evidence, including photographs, was an immovable property. Since the components had no independent existence as marketable goods, the process did not amount to manufacture of excisable goods.

Conclusion: The items were not excisable goods and no Central Excise duty was payable on them.

Issue (ii): Whether the extended period of limitation and penalty were sustainable.

Analysis: The appellant had proceeded under a bona fide belief regarding taxability, and the record did not justify invocation of the extended period. In the absence of a sustainable demand on merits and without the requisite elements for extended limitation, penalty also could not survive.

Conclusion: The extended period of limitation was not applicable and penalty was not leviable.

Final Conclusion: The demand failed both on the character of the activity as non-excisable site fabrication of an immovable property and on limitation, with the result that the impugned order was set aside and the appellant obtained consequential relief.

Ratio Decidendi: Site fabrication and erection of a composite structure that results in an immovable property, and not marketable goods with independent existence, does not amount to manufacture for Central Excise purposes; where the assessee acts under bona fide belief and no suppression is established, the extended limitation period and penalty cannot be sustained.

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