TaxTMI 
TaxTMI 
2012 (10) TMI 824
X X X X Extracts X X X X
X X X X Extracts X X X X
....usible expectation of a broader justice which enables tracing the links between the perennial channels of concepts and practices. This is more important in taxation issues. The disputable prints are on the consideration of assessability or otherwise on the following :- (a) Activities performed at site (embedded stretches or otherwise, immovable or otherwise) (b) Goods brought for making the structure (structure/goods distinguishable) and (c) Distributiability thereof. On conviction, we may discuss the interpretation of concepts first. The issue being debated on strong legal terms, we go into the crux with much legal caution drawn from the settled law of the land. On this background, we may sail through the facts, which are as follows:- (i) M/s. Richardson and Cruddas (1972) Limited, Byculla Iron Woks, Sir J J Road, Mumbai and M/s. Ahmedabad Electricity Company Limited of Ahmedabad (AEC) had entered into a works contract. As per the contract the said assessee had to carry out the fabrication work of Iron or Steel and its erection at the site of "F" project unit stationed at Sabarmati, Ahmedab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....life of the plant. (iv) The committee of Chief Commissioners reviewed the above OIO passed by the Commissioner, Central Excise, Ahmedabad-II and as per the grounds of appeal mentioned in Review Order No. R-18/2006 dated 17-2-2006 issued from F. No. V/15-42/CCO/RC/05, the appeal before CESTAT was filed by the Revenue. Subsequent to filing the said appeal, the said assessee being Govt. company the department has sought for the permission from COD (Committee on Disputes) vide letter dated 12-3-2010/6-4-2010 but the same is not received so far. As the permission from COD has not been produced before the CESTAT, the appeal filed by the Revenue has been closed for want of same vide Final Order No. A/236/WZB/AHD/2011 dated 2-2-2011. 3. The miscellaneous application for restoration or reopening of the appeal filed by the Revenue is restored subsequently on the following grounds:- "That recent judgment of the Hon'ble Supreme Court of India in the case of M/s. Electronics Corporation of India v. Union of India in Civil Appeal No. 1883/2011 and 1903/2008 and SLP (C) No. 2358 of 2009, reported in 2011-TIOL-18-SC-CX-CB = 2011 (265) E.L.T. 11 (S.C.) = 2011 (21) S.T.R. 593 (S.C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns as well as parts of structures such as trusses, purlins, columns, beams, rafters, glazing frames, crane girders, hoppers, bracings, gable runners, platforms, hand­rails, grating rails, walk-ways, stairs, gutters support, ladders, gantries, railings, portals, pushings, round surged, inserts, drop-boxes, windties, framework partitions, north light glazing, sliding frames and the like articles in their movable state will be subject to excise duty under Heading No. 73.08, notwithstanding their getting permanently fixed in the structures." The ratio of the said case law is squarely applicable to the present case. 4. The case laws of M/s. Union Carbide reported at 1986 (24) E.L.T. 169 (S.C.), M/s. Bhor Industries reported at 1989 (40) E.L.T. 280, M/s. Aruna Industries reported at 1986 (25) E.L.T. 580 as referred to by the said assessee in their communication dated 28-2-05 have been discussed and considered at length by the Tribunal while giving their decision in the case of Mahindra and Mahindra Ltd. reported at 2005 (190) E.L.T. 301 (T- LB)." 5.&e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Collr. v. Dodsal Pvt. Ltd. - 1987 (28) E.L.T. 352 5.3 In the Aruna Industries case it has been specifically mentioned that nobody in the market knows of beams, columns, rafters, purlins etc., and as such articles are not dealt with by those dealing in such goods in the market. The present show cause does not produce any evidence to rebut the findings on record by the Hon'ble Tribunal. It may be submitted that the work at site carried out by us is identical to that of M/s. Aruna Industries and therefore, the ratio thereof should hold good in our case as well. 5.4 In this case, this was a works contract that is they are creating a permanent structure fixed to the earth, that is to say not goods but immovable property which is outside the scope of the excise levy. As the principle of assessment has to be uniform throughout the Union of India, it was felt that the ratio thereof would be equally applicable to their case. It is submitted that this view has not been rebutted by the excise authority so far and not also in the show cause notice under reply. It is further submitted that the said show cause notice is bad in law and is legally untenable, biased a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the schedule to the tariff does not by itself make an article excisable. They also argued that the department has not adduced any evidence to show that the articles are marketable as such especially the observations in the case of Aruna Industries (supra). 7. Amongst with the above points, it was argued that M/s. Richardson & Cruddas Ltd. that the allegations are merely based on presumptions and there was no mens rea since the contractive parties where Government of India undertaking there is no scope for wilful intention to evade payment of duty as has been held by the Tribunal in the case of Garden Reach Shipbuilders (supra). It was contended by them that the duty was demanded for the duty paid materials procured by M/s. Ahmedabad Electricity Company Limited and given to them at cost price for job work. It was also requested by them that in the event of demanding duty they should be allowed the benefit of modvat and the duty demanded should be correspondingly reduced to that extent. 8. We would like to dwell upon the basic fact i.e. what is the activity, does it amount to manufacture or not? 9. In the statement of Shri Ivon G. Jacob, site in-charge, reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir letter dated 19-10-89. 12. We have gone through the contract dated 31-3-86 on installing of 110 MW installation of 'F' project. The para relevant to payment is as follows : "(a) Fabrication work : 90% value of the fabricated materials after delivery to site. 10% after final erection, aligning and painting of fabricated materials. (a) Fraction Work : 95% after fabricated materials erected, aligned, plumbed, levelled and grouted. 5% on acceptance by us after the structures are found to be withstood the necessary tests." In the same contract under the schedule of items and rates which is stated as follows : Item No. Description App 1. Taking delivery of raw steel material from Owner's Stores and transport to Fabricator's workshop, fabricate, pack and store at the fabricator's workshop after rendering one coat of approved Redoxide-zinc chromate primer to structures of following categories including all necessary connection as per Drawings and Specifications. i. Steel work using rolled sections only with or without and cleats/plates for connections. 700 ii. Steel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... crane girders and others mentioned in the contract and were transporting it to a site for which they were charging transportation/delivery charges. Though in the statement of Ivon Jacob, he states that no new items come into existence after the fabrication and prior to erection as the process involved does not change the basic character of the raw materials though some process is carried out by way of cutting, drilling etc. The items like purlins, bracings, girders become known as purlins, trusses, girders etc. only when they are erected at site in the building. However, he admits that the basic raw materials supplied does undergo a change after the process of labour is supplied and what comes out is basically the same item in a different shape having distinct names for which they have to perform the function i.e. purlins, bracings, girders etc. The statement of Shri Ivon Jacob therefore gives a clear idea of the process being undertaken of converting the basic raw materials to identifiable manufactured goods with distinct names and these items are marketable also. 14. If the facts are being so this is a clear case whereas the supply of raw materials and manufacture of cer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ufacturing process connected with the production of these goods is being carried on or is ordinarily carried on". 11.5 The decision in Aruna Industries (supra) was in respect of structurals manufactured in open site i. e. otherwise than in a factory as defined in section 2(m) of the Factories Act, which were exempted from excise duty under the said notification issued in the context of the Tariff Item 68. The First Schedule which contained Tariff Item 68 was omitted by Section 4 of the Central Excise Tariff Act, 1985. The ratio of the decision in Aruna Industries and all other decisions which have followed it has to be viewed in the background of the exemption notification issued in respect of goods manufactured otherwise than in a "factory" as defined in Section 2(m) of the Factories Act and the Tariff Item 68 of the First Schedule which was omitted. 11.6 We may now refer to the contention that Aruna Industries has been affirmed by the Supreme Court in Commissioner of Central Excise, Nagpur v. Wainganga Sahakari S. Karkhana Ltd. (supra). The order made by the Supreme Court in Wainganga is reproduced hereunder : "Order : - The Tribunal was concerned with wheth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... having been remanded by Hon'ble Supreme Court after setting aside the decisions earlier given in these appeals in which the ratio of Aruna Industries was followed. 12. As noticed hereinabove, the first part of Tariff Heading 73.08 deals with structures and parts of the structures of the nature, which are enumerated in the parenthesis and which are made of iron and steel, while the latter part refers to the articles named therein which are prepared for use in structures of iron and steel. Bridges and bridge-sections, Towers and lattice masts. Doors, windows and their frames and thresholds for doors, Props and similar equipment for scaffolding, shuttering or pit-propping, are items from those enumerated in the parenthesis, falling under sub-headings 7308.10, 73.20, 7308.30 and 7308.40. The article mentioned in the parenthesis are only illustrative and indicated by ways of examples. Roofs, roofing frame-work, shutters, balustrades, pillars, columns which are also in the parenthesis are not mentioned in the aforesaid sub-headings and they would, therefore, fall in the residuary sub-headings 7308.90 - "Other", and, these too would be considered to be illustrative and not exhaus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich clearly indicate that the parts of the structure were first fabricated on the ground and thereafter they were used for erecting the designed structures. In our opinion, all these parts of structures which were fabricated were distinct marketable commodities the existence of which was brought about by the process of manufacture as defined in Section 2(f) of the Act. These were not simply members such as angles, etc., with holes or cut to a different size, but the process was undertaken to bring them into a particular commercially known shapes and assemble them for that purpose as per the designs and having fabricated them, to use them for permanently fixing them in the structures which were to be erected as per the design under the works contracts. 13. There can be no dispute over the proposition that it is always open to the assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule, they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being marketed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sold. The owner of a commodity does not have the power to sell it to any person of his choice. The owner has no choice of selling his commodity to persons who have no requirement of it, who are prevented by legal or physical circumstances from purchasing it, or who have no knowledge of the availability of the offer. The marketability of commodities is also limited with respect to the area within which they can be sold. For a commodity to be sold in anyone place, it is also necessary that there must be a number of persons to whom it can be sold, that there be no physical or legal barrier to its transportation to that place or to its being offered there for sale, and that the cost and expenses of transportation shall not exhaust the gain that can be derived from the expected opportunity to sell. There are commodities, which as a result of spatially limited requirements for them, can be sold only in a single town or village, others that can be sold only in a few provinces, some only in a certain country, others in all civilized countries, and still others that can be sold in all the inhabited parts of the world. Again, the marketability of a commodity is restricted quantitatively to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our opinion all the above items fall under Heading 73.08 are marketable commodities. 14. When a part of structure is prepared and disassembled, the members thereof will be angles, rods etc., prepared for use in such structure. These are not angles, or plates merely cut or drilled without reference to a particular structure. The later part of Heading 73.08 would apply to the members such as plates, rods, angles, etc., that are prepared for use in structures or their parts in their pre-assembled or disassembled state of an identifiable article of the types of the parts of structures covered under Heading 73.08. Answer to the question referred : 15. For the foregoing reasons, we are unable to accept any of the contentions raised on behalf of the appellants and we answer the question referred to us as under :- (i) The immovable iron and steel structures not being goods will not fall under Heading 73.08 of the Excise Tariff. (ii) The structures or parts thereof mentioned in the parenthesis of Heading 73.08 illustrating parts of structures namely, bridges and bridges-sections, lock-gates, towers, lattice masts, roofs, roofing frameworks, doors and windo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of construction or erection of a structure which is an immovable property, then there would be no manufacture of "goods" involved and no levy of excise duty. (iv) Integrated plants/machines, as a whole, may or may not be 'goods'. For example, plants for transportation of material (such as handling plants) are actually a system or a network of machines. The system comes into being upon assembly of its component. In such a situation there is no manufacture of "goods" as it is only a case of assembly of manufactured goods into a system. This cannot be compared to a fabrication where a group of machines themselves may be combined to constitute a new machine which has its own identity/marketability and is dutiable (e.g. a paper making machine assembled at site and fixed to the earth only for the purpose of ensuring vibration free movement). (v) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as movable and will, therefore, not be excisable goods. (vi) If any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Keeping the above factors in mind the position is clarified further in respect of specific instances which have been brought to the notice of the Board. (i) Turnkey projects like steel plants, cement plants, power plants etc. involving supply of large number of components, machinery, equipments, pipes and tubes etc. for their assembly/installation/erection/integration/inter-connectivity on foundation/civil structure etc. at site, will not be considered as excisable goods for imposition of central excise duty - the components, however, would be dutiable in the normal course (emphasis supplied) 17. Therefore it is very clear that the goods manufactured by the assessee it is excisable and duty is leviable. Since this circular is issued in exercise of powers under Section 37B of the Act is binding and the legality and clarity is visible. 18. In view of the above, we do not have an iota of doubt to hold that there was a manufacture of excisable goods by M/s. Richardson & Cruddas Ltd. out of the raw materials supplied by the M/s. Ahmedabad Electricity Company Limited. The Board's circular clearly clarifies the ....