TaxTMI 
TaxTMI 
2013 (3) TMI 27
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....nd Statements of the employees were recorded and necessary investigation was conducted on the installation of the Digital Switching System at the said premises. On completion of investigation, a show cause-cum-demand notice was issued to the Appellant on 15.01.2007 alleging that the Appellant had assembled various parts of the Digital Switching System at Panihati Telephone Exchange, chargeable to Central Excise duty under the Chapter Heading 85.17 of Central Excise Tariff Act, 1985, but failed to discharge duty of Rs.1,03,64,469/- on installation of the said Digital Switching System at Panihati Telephone Exchange, which was put to use in July, 2002. The ld. Commissioner of central Excise confirmed the demand and imposed equivalent penalty on the Appellant under Section 11AC of the CEA, 1944. Aggrieved, the Appellant is in appeal. 3. Shri A.D.Ray, Advocate for the Appellant has submitted that the Appellant is a Government of India Undertaking and provider of telephone services. For providing such services, it require various upgraded systems and one such system is known as Digital Local Telephone Exchange Equipment (DLTEE) System. The ld. Advocate further submitted that the Appel....
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....urposes. He has submitted that the Certificate issued by M/s. ITI on whom M/s. Alcatel Network Systems India Ltd. placed the sub-contract for supply of such a System in dismantled condition, shows that the entire system was so huge that it could not be moved as a whole and accordingly, on its assembly at the site of the Appellant, becomes immovable. 6. Further, he has submitted that assuming though not admitting that a new equipment had emerged, but since the same was never brought outside from the place where it was assembled nor used in the manufacture of any excisable commodity, hence, no duty was payable on the same. It is submitted that for calculating duty of excise, goods are to be valued and for determination of value, Section 4 of the Central Excise Act needs to be adopted. It is contended that if value cannot be determined under Section 4(1)(a) simply on the sale price, then it would be determined in such a manner as prescribed, that is, under Rules, which is, Central Excise (Determination of Price of Excisable Goods) Rules, 2000. His contention is that under such Rules, valuation is arrived at, if the goods are sold some way or the other except under Rule 8 of the sai....
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.... of the Department that M/s. Alcatel Network Systems India Ltd. were neither involved in the manufacture of any item nor concerned with the supply of any item directly to the site, as the whole of the purchase order was sub-contracted to M/s. ITI Ltd. Consequently, when statements of various officers of the Appellant were recorded and from the statement of Shri Sekhar Chandra Saha, AGM (E/S), it revealed that all the above equipments were installed by the engineers of the Appellant at Panihati. 8. He has further submitted that from the statement of Divisional Engineer of the Appellant Shri Nikhil Kr. Das, it revealed that Digital Switching System means combination of software and hardware cable to provide communication and the main/principal equipments which were required to be assembled to make the digital switching system, consist of (i) SMM rack; (ii) Subs Connection Rack; (iii) SFC Rack; (iv)STS Rack; (v) SMT Rack; (vi) SMX Rack; (vii) DMB Rack etc. It is further revealed from his statement that to avoid vibration/displacement, the Digital Switching System had been screwed by nuts and bolts on the floor and it would be movable after unscrewing; that t....
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.... the meaning of marketability , that when the goods purchased by a consumer from a trader for consumption, itself indicates that the goods become marketable as the same become fit for consumption which it was not so in the hands of trader. 12. He has submitted that since the Digital Switching system has been fixed to the floor with nuts and bolts only to avoid vibration and displacement, which could easily be unbolted and shifted, as admitted by the Divisional Engineer of the Appellant; also the said goods being marketable as Digital Switching System and tendered by the Appellant, hence, it satisfies the twin tests of movability and marketability and accordingly the same is chargeable to excise duty. 13. The ld. AR further submitted that the judgement of Hon'ble Supreme Court in Board of Trustees vs. Collector of Central Excise [2007(216) ELT 513(SC)] is not applicable to the facts of the present case, as in the said case, the point of marketability was not established by the department. He has submitted that in the present case, the Digital Switching System is itself a marketable commodity and could be bought and sold in the market. He has submitted that way back in the year....
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....tment stood admitted. 16. Heard both sides at length, considered their written submissions and perused the record. The question, in short, in the present case relates to determination of excisability of the Digital Local Telephone Exchange Equipment (DLTEE) System installed in their premises at Panihati Telephone Exchange, B.T.Road, Panihati by the Appellant. It is not in dispute that the Appellant had floated tenders and consequently, placed an Advance Purchase Order on 01.11.2001 and a Purchase Order dated 14.01.2002 on M/s. Alcatel Network Systems India Ltd. for supply of the said DLTEE System. Initially, it has been the claim and stand of the Appellant that the said System was manufactured and supplied by M/s. Alcatel Network Systems India Ltd. on payment of duty and due to its huge size and for easy transportation, various parts of the said system were dispatched to their Panihati site and mere assembly of various duty paid parts of the said System, would not result into manufacture of the said Digital Local Telephone Exchange Equipment (DLTEE) System. In support of the aforesaid submission, the Appellant had referred to the conditions in the said Purchase Order date....
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....lant had clearly agreed/accepted that all these parts were assembled by the engineers of the Appellant at their site resulting into emergence of the said DLTEE. Therefore, the claim of the Appellant that in view of the stipulation in the APO and PO, the DLTEE could not be assembled without necessary training and expertise, being contrary to the evidence, hence, in our considered view cannot be accepted. 20. The central issue to the present dispute needs to be addressed is: whether the process of assembly of various parts of Digital Local Telephone Exchange Equipment (DLTEE) procured from different sources has resulted into manufacture within the meaning of Section 2(f) of CEA,1944, of an excisable goods at Panihati, and leviable to excise duty at the said premises. 21. The principal argument of the Appellant that the Digital Local Telephone Exchange Equipment (DLTEE) System cannot be considered as goods , as on assembly of various parts of the said system and by attaching the system to floor/earth by nut and bolts the System could function, and on reaching that stage only, the DLTEE comes into existence. Thus, by affixing the System to the ground through nuts and bolts....
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.... were not immovable property so as to be immune from the levy of excise duty. 23. A plain reading of the aforesaid observation of the Hon'ble Apex Court, it is clear that if the attachment to earth is with an intention of affixing the property permanently, then it becomes immovable. On the contrary, if the goods are attached or affixed to earth by way of nuts and bolts to provide a wobble free operation to the machine, such attachment cannot be considered as a permanent attachment, and be called as an immovable property. Applying the said ratio to the facts of the present case, we find that the Divisional Engineer, Shri Nikhil Kumar Das in his statement dated 01.02.2006 had categorically stated that the DLTEE was screwed by nuts and bolts on the floor to avoid vibration and displacement and the same could be movable after unscrewing. It is commonsense that the DLTEE can easily be shifted to any place from the premises where it is installed, and many a time, these Exchanges are installed in different floors of a multistoried building. Therefore, we are of the opinion that by affixing the said DLTEE to the floor by nuts and blots would not make it an immovable property and ....
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.... the market, would be irrelevant. [See Indian Cable Co. Ltd. v. CCE, 1994 (74) E.L.T. 22 (S.C.). We will now refer to some of the decisions of this Court, which have explained the concept of Marketability for the purpose of the Act. 25. The aforesaid ratio lays down the guidelines for ascertaining whether the test of marketability is satisfied in a given case or otherwise. The litmus test is, whether the article is capable of being bought and sold, and the true meaning of being bought and sold to a consumer, means the commercial identity of the article as is known in the market for being bought and sold in the market, and the fact whether the product in question is generally not being bought or sold or has no demand in the market, would be irrelevant for determination of marketability. In the present case, the Digital Telephone Exchange (DLTEE), as a commodity, is known in the market as the supply of the said product has been tendered and necessary Purchase Orders were also placed on M/s. Alcatel Network Systems India Ltd. for supply of the said System. This indicates that the said Digital Switching System is being bought and sold and therefore, the test of marketability ....
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....bserved as: 23. Section 3 of the Act is the charging provision. The taxable event for attracting excise duty is the manufacture of excisable goods. The charge of incidence of duty stands attracted as soon as taxable event takes place and the facility of postponement of collection of duty under the Act or Rules framed thereunder can in no way effect the incidence of duty. Further, the sale or ownership of the end products is also not relevant for the purposes of taxable event under the central excise. Since excise is a duty on manufacture, duty is payable whether or not goods are sold. Duty is payable even when goods are used within the factory or goods are captively consumed within factory for further manufacture. Excise duty is payable even in case of free supply or given as replacement. Therefore, sale is not a necessary condition for charging excise duty. 29. In the aforesaid ratio, it is clearly laid down that even if manufactured goods are put to use at the place of its manufacture, in theory as well as in practice the same is leviable to excise duty. This situation of use of goods without its removal from the place of manufacture, is covered through a specific provision....
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....ved was, whether on transfer of ownership of the factory, without removal of capital goods and inputs on which MODVAT Credit availed, would be required to be reversed, to which the answer was also in negative. In Ashida Electricals Pvt. Ltd. case (supra), the issue involved was includibility of value of bought-out items in the assessable value of the SCADA System classifiable under Chapter Heading 8537.00 of CETA. In Indica Laboratories case (supra), the issue involved was that whether on the facts of the case, the goods would be subjected to assessment under Section 4 or Section 4A of the CEA, 1944. Thus, the present issue of using the manufactured goods at the place of manufacture, was not before any of the forums in the aforesaid cases. 32. We find that the value of the said DLTEE has been determined under Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The contention of the ld. Advocate is that Rule 8 is provided for determination of value of the goods used for captive consumption. In the present case, there is no doubt that the Exchange had been put to use by the Appellant for r....