Excise duty not leviable where curtain glass fabrication is works contract/erection, not manufacture; sales or service tax irrelevant

CESTAT (New Delhi) - AT dismissed the Revenue appeal, holding that excise duty cannot be imposed absent manufacture. The tribunal and Commissioner correctly found the curtain glass work constituted works contract/erection, not manufacture, so central excise was not chargeable. Payment of sales tax or service tax on fabrication/erection did not establish manufacture nor create concurrent excise liability. The appellate committee's observations did not reveal any infirmity in the impugned order, and the Revenue's contention was rejected.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the curtain glass/curtain wall system fabricated and permanently fixed on buildings in the course of a works contract amounts to manufacture of excisable goods liable to central excise duty.

2. Whether a prior decision of the Appellate Tribunal holding that such curtain walls do not result in excisable goods is binding and precludes levy in the present period when not appealed by the Department.

3. Whether payment of sales tax on the value of sales in respect of curtain walls or recognition of sale/deemed sale affects the question of manufacture for central excise purposes.

4. Whether payment or registration for service tax for activities of fabrication and erection of curtain walls precludes or impacts the applicability of central excise duty on the curtain walls (i.e., whether both service tax and excise can be levied on the same activity).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether curtain walls fabricated and permanently fixed on buildings amount to manufacture of excisable goods.

Legal framework: Central excise duty attaches where there is manufacture of goods so as to bring a new product into existence that is capable of being removed from the factory. The concept of manufacture requires transformation into a new commercial product and the ability to be removed/transported as goods.

Precedent Treatment: The Appellate Tribunal, in an earlier decision concerning the same activities, held that curtain walls constructed on existing buildings do not result in the creation of new excisable goods because the work is performed in situ, the product is too large to be manufactured and removed, and components are assembled on site such that no new commercial product separate from the building comes into existence.

Interpretation and reasoning: The Court accepts the factual matrix of the process steps (mapping, drilling, fixing clamps, fixing aluminium sections, applying double-sided tapes, fixing toughened glass, sealing with structural silicon) and emphasizes that the curtain wall comes into existence only upon on-site erection and permanent joining to the building. The Tribunal's findings that the curtain glass cannot be removed or refitted, and that no new commercial product is created at the factory, are affirmed as establishing absence of manufacture for excise purposes.

Ratio vs. Obiter: Ratio - where goods are fabricated and permanently affixed so as to form part of immovable structure and cannot be removed and traded as goods, no manufacture liable to excise is held to have occurred. Obiter - detailed factual description of the fabrication steps is explanatory but the core legal ratio is the permanence and non-removability combined with absence of a new commercial product.

Conclusions: The curtain wall fabricated and fixed on buildings under works contracts does not amount to manufacture of excisable goods; central excise duty is not chargeable on curtain glass in these circumstances. (Cross-reference: Issues 2-4 on corroborating matters.)

Issue 2: Binding effect of prior Tribunal decision not appealed by the Department.

Legal framework: Principles of judicial discipline and finality attach where an adjudicatory body's decision has become final by non-appeal; subsequent administrative orders should follow binding appellate findings between the same parties on identical issues.

Precedent Treatment: The Commissioner relied on the Tribunal's earlier decision in favour of the taxability position of identical activities and recorded that the Department did not appeal that Tribunal order.

Interpretation and reasoning: The Court reasons that where the Tribunal has determined that no excisable goods came into existence and that finding was not appealed by the Department, the Commissioner was correct in following that binding precedent in denying the excise demand. The element of identity of parties and of the factual/legal issue is present.

Ratio vs. Obiter: Ratio - an unappealed appellate decision on the same issue is binding and justifies administrative adherence; failure to appeal implies finality. Obiter - comments on conduct of Department and review committees are ancillary.

Conclusions: The Commissioner correctly followed the earlier Tribunal decision in dropping the demand; the prior unchallenged decision is binding and supports the outcome.

Issue 3: Relevance of payment of sales tax on curtain walls to existence of manufacture for central excise.

Legal framework: Sales tax is levied on sale or deemed sale of goods; central excise is levied on manufacture. The legal incidence and bases of the two taxes are distinct.

Precedent Treatment: The Tribunal's earlier decision did not address the sales tax point, but the Commissioner noted the Department's contemporaneous confirmation that the Tribunal order had not been appealed.

Interpretation and reasoning: The Court rejects the Department's contention that payment of sales tax implies that sale of goods preceded erection and therefore indicates manufacture. The Court emphasizes that sales tax liability does not equate to manufacture; goods may be subject to sales tax when used in a works contract or deemed sale situations without establishing manufacture for excise. Hence, the Department's mere proof of sales tax payment does not displace the Tribunal's finding of absence of manufacture.

Ratio vs. Obiter: Ratio - payment of sales tax on value of sales does not, by itself, establish manufacture for central excise purposes. Obiter - observations about the Committee of Chief Commissioners' awareness of tax distinctions.

Conclusions: Sales tax payment by the contractor is irrelevant to establishing manufacture; it does not justify levying central excise where no manufacture is found.

Issue 4: Effect of registration/payment of service tax for fabrication/erection on excise liability (double levy argument).

Legal framework: Service tax is imposed on taxable services, including certain works contracts; central excise is imposed on manufacture of goods. The two levies operate on different tax bases and applicability depends on existence of taxable service or manufacture respectively.

Precedent Treatment: The respondent had been registered/paid service tax for fabrication and erection activities; the Commissioner considered earlier Tribunal reasoning that the activity did not produce excisable goods.

Interpretation and reasoning: The Court finds the Department's argument-that payment of service tax proves excise liability or that both levies cannot apply-unsustainable. The Court explains that payment of service tax for fabrication and erection does not transform an in situ construction activity into manufacture. Conversely, excise would only be chargeable if manufacture of goods occurred. Thus, coexistence of service tax registration does not establish excise liability nor does it preclude an independent determination of manufacture.

Ratio vs. Obiter: Ratio - service tax liability does not negate or create excise liability; the two are distinct and one cannot be used to infer the other. Obiter - general remarks on overlap possibilities are explanatory.

Conclusions: The Commissioner was not obliged to find excise liability merely because service tax was being paid; the absence of manufacture remains dispositive.

Overall Conclusion and Decision

The Commissioner's order finding no central excise liability on curtain walls is upheld: the Court dismisses the Revenue's appeal, confirming that the curtain glass affixed as part of works contracts does not amount to manufacture of excisable goods; prior unappealed Tribunal findings are binding; sales tax payment and payment/registration for service tax do not, without more, establish manufacture for excise purposes.

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