2026 (1) TMI 778 - AT - Central Excise

RVI elements and site-installed aluminium structures not excisable goods; duty demand, 9405 classification and penalties set aside

Dominant issue 1 - liability of RVI elements and site-installed aluminium structures to central excise duty: the Tribunal applied precedent and found the ... Levy of Central Excise Duty - RVI Elements and aluminium doors/frames/shutter/lockers etc installed by the Appellant at the sites of its various vendors - Classification of the RVI Elements by the department under sub-heading 9405 60 90 - Demand of excise duty on aluminium doors, windows, frames and other structures fabricated by the Appellant - Levy of personal penalty under Rule 26 of the Central Excise Rules - invocation of extended period of limitation. Whether the RVI Elements and aluminium doors/frames/shutter/lockers etc installed by the Appellant at the sites of its various vendors are liable to central excise duty or not? - HELD THAT:- The issue is no longer res integra as the same has been decided by various benches of the Tribunal in favour of the assessees in respect of similar contracts - It is also found that the RVI Elements are not cleared from the factory in fully manufactured condition rather the same came into existence as a part of permanent structure on site only and the once the same installed, the same cannot dismantled nor re-installed at alternate locations/petrol-pumps. It is further found that these RVI Elements are not resold/marketable by IOCL, therefore, it cannot be said that the Appellant manufactured the RVI Elements completely. The Adjudicating Authority in the impugned order, has wrongly confirmed the demand of differential amount of excise duty on the ground that the RVI Elements were manufactured by the Appellant in its factory and the same were cleared from the factory in CKD condition which were assembled at site and fixed to civil foundation with nuts and bolts to make them stand still. It is also found that in the case of RVI Elements, the Test of Marketability has also not been satisfied because these parts, in the form that they are cleared, are not capable of being used for any other purpose than the fabrication and installation of RVI Elements at the retail outlets of IOCL only. Classification of the RVI Elements by the department under sub-heading 9405 60 90 - HELD THAT:- This heading is a residuary clause and therefore, any item can only be classified under this heading if its classification elsewhere in the Tariff is ruled out. There is no such finding in the impugned order that the RVI Elements were not classified under any other tariff heading and hence covered under 9405. It has been held by the Tribunal in the case of Studio Printfall New Delhi Pvt Ltd [2004 (7) TMI 138 - CESTAT, NEW DELHI] that 9405 covers those items which have permanent light source. Demand of excise duty on aluminium doors, windows, frames and other structures fabricated by the Appellant - HELD THAT:- This issue is already settled in favour of the Appellant vide Order-in-Original No. 111/2003 dated 31.10.2003 wherein it was held that the conditions of marketability and of being goods were not satisfied as the final product is immovable and hence not chargeable to excise duty. Levy of personal penalty under Rule 26 of the Central Excise Rules - HELD THAT:- For imposing the penalty under Rule 26, the department has to produce evidence showing mala fide intention and involvement of the person in respect of the allegations raised in the show cause notice; whereas, in the instant case, the department has failed to prove any mala fide intention of the Appellant No.2. Further, it is found that the penalty under Rule 26 can be imposed only when a person has dealt with the excisable goods with the knowledge of the liability of the said goods to confiscation; whereas, in the present case, there has been no such proposal in the show cause notice stage to confiscate the goods. Therefore, imposition of penalty under Rule 26 is not sustainable in law. Whether invocation of extended period of limitation is justified in this case or not? - HELD THAT:- The entire demand has been confirmed by invoking the extended period of limitation. The period under dispute is 2006 to 2009 whereas the show cause notice was issued on 04.07.2011 by alleging suppression of facts, fraud or misstatement on the part of the Appellant. We find that the Appellant has been regularly filing the returns and has disclosed the goods manufactured in its factory and has been paying excise duty for the same under respective tariff heading - it cannot be said by any stage of imagination that the Appellant has suppressed the material facts from the department with intent to evade payment of duty. Therefore, invocation of extended period is not justified and the entire demand is also barred by limitation. The impugned order is not sustainable in law and is liable to be set aside on merit as well as on limitation - Appeal allowed. Issues: (i) Whether RVI Elements and aluminium doors/frames/shutters/lockers installed by the appellant at customer sites are liable to central excise duty; (ii) Whether invocation of the extended period of limitation for demand is justified.Issue (i): Whether the goods cleared from the appellant's factoryparts of Retail Visual Identity (RVI) Elements and fabricated aluminium doors/windows/framesamount to excisable manufactured goods liable to central excise duty.Analysis: The Tribunal examined whether the items cleared from factory were marketable goods or parts which only attained identity and permanence upon assembly and fixation at site. It was found that the parts were made to customer specifications, cleared in CKD condition, not resold or marketed by the purchaser, and not capable of use for other purposes in the cleared form. The Tribunal also examined permanence of fixation and the consequent character of the installed unit as immovable property, and noted absence of proof that classification under tariff headings other than 9405 had been ruled out before invoking sub-heading 9405 60 90.Conclusion: In favour of Assessee.Issue (ii): Whether the extended period of limitation could be invoked to confirm the demand for the period 20062009.Analysis: The Tribunal examined the existence of wilful suppression, fraud or misstatement necessary to invoke extended limitation. It noted that the appellant regularly filed returns, disclosed manufactured goods and paid duty under relevant headings, that similar prior demands were previously dropped by the department, and that the appellant held a bona fide view based on legal interpretation that installed items became immovable and not exigible to excise duty.Conclusion: In favour of Assessee.Final Conclusion: The impugned order confirming differential duty, interest and penalties and imposing a personal penalty under Rule 26 is set aside on merits and on limitation; both appeals are allowed.Ratio Decidendi: Goods cleared in parts that are not marketable in the cleared form and which attain permanence and become immovable upon installation are not excisable manufactured goods; extended limitation cannot be invoked absent evidence of wilful suppression, fraud or misstatement.