TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 303
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....of duty and carry out the activities of installations at site as per the contract entered into with the customers. For completion of activities they procure/ purchase components liked electric motor, gears, gear boxes, pumps, valve etc. from other manufacturers or dealers. As the goods are cleared as per composite contract between assessee and buyer, the value of the goods include costs right from the drawing & designing of the goods to its installation and commissioning and also the costs of its essential spare parts i.e bought out parts. The Appellant have not determined the correct and proper value of the goods/ essential spare parts (bought out items) as required under section 4 of the Central Excise Act, 1944 and thus there has been an undervaluation of goods supplied to the customer for completion of projects at site. The Appellant have failed to pay central excise duty on the clearance of essential spare parts (bought out items) of the goods and have not included the value of bought out goods in the invoices for the purpose of payment of excise duty. They have contravened the provisions of Section 4 of the Central Excise Act, 1944 and Rule 4 of Central Excise Rules, 2002. Fu....
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....the sugar mill plant, which they got erected and commissioned at the customer's site through sub-contractors by assembling the bought out components as well as the components manufactured by them after including the selling price of the bought out items in the selling price of the sugar mill plant. They submitted that in case of clearance of goods from their factory, they paid central excise duty on the same which is not disputed and in case of bought out items used in the erection and commissioning of the sugar mill plant the manufacturer of the goods has already paid duty. Such goods were not brought to their factory but were directly cleared at site of the customer without availing credit. It was also submitted that the impugned items alleged to have been manufactured on site are not belonging to any transportable articles but are the commercial names of various sections of sugar mill plant. They are of huge dimension in width and height and these items are installed and erected at the site piece-by-piece. They are not movable and marketable and are sections of entire sugar plant. These are the sections of the entire sugar plant. Unless these unit s are permanently attached to t....
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....of supply as per the agreement states that the design, manufacture, procurement and supply of equipment for boiler of 80 TPH capacity shall be in conformity with the specifications which will enable the machinery & equipment ready for commissioning & commercial production. The agreement clearly states that the Appellant will design, manufacture and supply Boiler 80 TPH. The contract price is for design, procurement, manufacture, supply and do the checking of erection, commissioning of Boiler 80 TPH capacity at site. The scope of supply is entire Boiler of 80 TPH. The Appellant manufactures some of the parts of boilers in their own premises. A boiler is made up of many critical components each of which is required to make the boiler fully functional. The technical specification of the boiler is as per Annexure - I to the agreement. The other critical items required to make the boiler functional are as per Annexure - II to the agreement and these critical items which are part of the boiler are purchased by the Appellant from other manufacturers/ vendors. The Appellant places separate purchase orders on different vendors/ manufacturers for supply of these critical components. The crit....
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....e required to make the machinery manufactured by the Appellant functional. The demand has been made on the ground that the bought out goods are required for manufacture of Boiler without which the system will be incomplete and non-functional. The contract of 80 TPH Boiler relied upon by the Department nowhere shows that they are liable to pay duty on the contract price. They have only supplied the bought-out items which were already duty paid as well as their own manufactured goods on which duty was paid at the time of clearance. They were not engaged in erection or installation of the Boiler and the said activity was undertaken by separate persons. The contract did not include erection of Boiler but only for supply of goods to be used in such boilers which was part of a power plant in a sugar factory. The various bought out items were directly installed piece-by-piece on several foundations or structures at specific places in the huge power plant system. The price received by them is for scope of supply of goods, as laid-down in the technical specifications. The adjudicating authority has erred in holding that the bought out items are critical items for completing the manufacture ....
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....ods which become immovable property on erection as held in case of Triveni Engineering 2000 (120) ELT 273 (SC). That the adjudicating authority in Para 13.14 has held that the Appellant completed manufacturing of the boilers on site by putting together bought out and manufactured goods and thus new product came into existence known as boiler. That in absence of process of putting them together no new product with distinct commercial name, identity and usage prior to its assimilation and structure. There is no material to show that the Appellant carried out any process of manufacture on bought out and manufactured goods. The bought out good s and the goods cleared by the Appellant were not even enough to complete the boiler system as chimney and other civil works were not part of Appellant's work. He further submits that the who le demand was confirmed merely on the basis of one instance of Boiler agreement applying to all the projects by treating that all the agreements are having same base. He submits that the show cause notice and the adjudication order failed to appreciate that Appellant entered into contracts with the buyers for sugar machinery factory. He also relies upon the ....
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.... produced the excisable goods during installation of plants and the same were installed in sugar plants and therefore liable for duty on goods viz. Mill House, Cane Unloader, Cane leveller, Cane feeding device, Cane-rake-Bagassee Carrier including Secondary rake Carriers, Juice Sulphiter, Juice Heaters, Evaporators, Vacum pans, Vacum filters, Sugar Elevators, condensers , Grass Hoppers, Feeder Table etc. However in such show cause notices also the duty was demanded on the Total Sales value reduce d by the value shown in ER - 1 Returns filed by the Appellant. We are unable to comprehend as to what is the basis of such demands. The show cause does not specify as to what are the bought out goods and how they have been considered as critical goods and what is the basis of arriving at assessable value. Even in case of show cause notices wherein it was alleged that the goods manufactured on location were excisable, it is not forthcoming from the show cause notice as to how the duty computation was made on whole contract price. Notably many of the contracts entered into by the Appellant in this appeal are only for supply of goods and supervision of erection and commissioning and thus stan....
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.... and set up of sections of the Sugar factory or the Sugar factory itself. All these Section are part of Power plant system of Sugar factory i.e Boiler or turbine system or the factory itself which are in huge set up of machinery and equipment embeded permanently to earth. None of these sections can be removed as such or in Knocked down condition or semi knocked down condition. It has to be dismantled and to be broken up into pieces if it is to be shifted which will lead to losing its identity of any goods. The impugned order has relied upon some instances where some goods were brought from other sugar factory and were used in installation at Appellant's factory. We find that these goods were brought to Appellant unit by d ismantling the system of old sugar plants. However the adjudicating authority failed to appreciate that after dismantling into price s the identity of the goods did not remain as of goods which was recognizable in old sugar factory. It turned into individua l components or goods since they were not in the form of knocked down condition. We are thus of the view that by means of any imagination the agreements under which the goods were supplied by the Appellant or i....
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.... goods which answer the definition of excisable goods and satisfy the requirement of Section 3. A machinery provision contained in Section 4 and that too the explanation contained therein by way of definition of transaction value can neither override the charging provision nor by reason thereof a goods which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires. 4.1. Tribunal in the case of Emerson Network Power India P. Ltd. (supra) in a similar circumstance observed as follows: "4. The entire duty demand on bought-out items pertains to installation of air-conditioning machines at site. From the perusal of the list of bought-out items such as floor grills, piping, cabling etc., it would be seen that they are not parts of air-conditioning machines manufactured and cleared, but items required purely at site. Therefore, the appellants are right in contending that the cost of bought-out items cannot be included in the assessable value." Relying on the aforesaid decisions the appeal is allowed. 8. Drawing parallels from the above order we find that there is no reason to demand duty on the bought out goods as t....
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....Top Half of Top Bearing, Bottom Half of Top Bearing. Mill Roller with crown pinion, Trash Beam with bolts, Trash Plates, Scrapper Plate Holder, Scrapper Plate Massecheart Knife Holder with knives, Tail Bar. Service Gangway with staircase and railing. Hydro-pneumatic System Control Panel. Tank with pumps, Pipes & filings. Roller Movement Indicator, Hydrolic Accumulator Set of Forced Feed Lubricator with pipe & fittings, Set of Juice Troughs under the mills, Square Coupling for Tail Bar, Set of Base Frames for DC Motor of mill, set of Foundation Bolts & Anchor Plates. Under Feeder Roller complete with Brackets, Pinions, Donnelly type Chute, Level Sensing Device, DC Drive for Mills, Mill Reversing Arrangement complete in all respect, Slow Speed Gear Box, Gear Box complete with Oil Pump, Spur Gear for 1st motion, Spur Pinions for Mill Gearing, Shaft for 1st motion Gear-2nd motion Pinions, Set of Gear Guards, Pedestal Bearing for Mill Gearing. Base Frames for Mill Gearing complete with foundation Bolts, Turbine complete with Base Frame. Enclosed Reduction Gear Box, Main & Auxiliary Panel and Safety Devices, Pressure Gauge, Steam Flow Meters. Tacho meter Panel complete with oil pipes & f....
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....ipe, Multi-jet condensor for 1100 MM diameter vapour pipe including tail pipe. It is also the case of the department, as seen from the show cause notices and the impugned orders, that the items are huge items encompassing wide area and cannot be transported and installed as such in any other premises but require to be dismantled before transport and installation at any other site. In view of this admitted position, the ratio of the Apex Court in Triveni Engineering & Indus. Ltd. v. CCE, 2000 (120) E.L.T. 273 (S.C.) is directly attracted to the facts of this case. In paragraph 20 of that decision, the Apex Court held that the marketability test requires that the goods as such should be in a position to be taken to the market and sold. In that case, for taking turbo alternator to the market, it has to be separated into components, viz. turbine and alternator and then would not remain turbo alternator and therefore the turbo alternator cannot be excisable goods falling within the meaning of Heading 85.02. The Supreme Court set aside the finding of the Tribunal that the turbo alternator was excisable goods. The above decision has been followed by the Tribunal in the case of CCE, Chand....
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....08 viewed that the value of the bought out items cannot be included in the assessable value of the manufactured goods in view of the fact that the bought put items did not enter into the factory of the Applicant and no credit is being taken of the duty paid on such items. After this noting the Appellant were not issued show cause notice and thus the department itself appreciate d the fact that the duty demand is not sustainable. Even otherwise also we find that if the revenue demands duty on bought out goods in that case it has not been disputed that the goods were itself duty paid and the Appellant did not avail any credit of the same. Further even the bought out goods have been used in erection of the Sugar plant or its sections at site which are non excisable. Thus we are of the view that bought out goods which were taken directly to the site for erection/ installation does not invite any excise duty. The revenue has relied upon the judgments in case of Commissioner Vs. Thermax Bobcock & Wilcox Ltd. 2005 (182) ELT 336, Walchandnagar Ind. Ltd. Vs. CCE. Pune-III 20 14 (311) ELT 274, CCE, Delhi Vs. Frick India Ltd 2007 (216) ELT 497 (SC), CCE, Aurangabad Vs. Lipi Boiler Ind. Ltd. 2....
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....traffic controller. All these items go to form traffic signal system, which according to the appellant is an immovable property. The authorities below have held that the value of the bought out items is to be added to the assessable value of traffic controller. On a perusal of the judgments cited by the Counsel we find that the value of the bought out items is not required to be added to the duty paid goods cleared by the assessee from their factory. These judgments clearly apply to the facts of the case while the citations relied by the SDR pertains to a situation where bought out items are essential parts of the items supplied by the assessee and hence its value was required to be added. The situation is not the same in the present case as all the bought out items are sent to the site for erection of traffic signal system. Hence, they become part of the immovable property and cannot be considered as part of the traffic controller unit cleared by the appellant. Therefore, respectfully following the ratio of the judgments cited by the Counsel, the impugned order is set aside and appeals allowed. The above order was upheld by the Hon'ble Apex Court as reported in Commissioner v. Ke....
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....the site for erection and installation of the said LPG bullets. We find that all these elements such as bought out items are undisputedly supplied from the supplier to the site. It is not taking part in the manufacture of LPG Bullets. These bought out parts are used only for erection and installation of LPG Bullets at site and other activity at site are also related to erection and installation. The said activity of erection and installation in our considered view is not amount to manufacture. Moreover, after erection and installation of the LPG Bullets, it become immovable goods. For this reason also, if at all any activity by any imagination is amount to manufacture, by virtue of immovability of LPG Bullets, the activities at site cannot be charged to excise duty. With these undisputed facts, we are of the view that the value of Rs. 42 lakhs adopted by the appellant in respect of LPG Bullets, which is not in dispute, no further addition can be made. 5. As per our above discussion, the demand does not sustain. Accordingly, the impugned order is set aside and the appeal is allowed. On the identical issue this Tribunal passed various other judgments in favour of assesses which are....
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....essential and inseparable part of the control panel, they were installed at the site by them." 7. Thus we find that it is an admitted fact that the bought out items have never entered the factory premises of the appellant so as to become part of the manufactured control panel nor the same have been cleared along with the control panels. Accordingly, we allow these appeals and set aside the impugned order. The appellant will be entitled to consequential benefits in accordance with law including refund of amount deposited during investigation. Accordingly, the personal penalty on the Director Mr. Dinesh Kumar Bhardwaj is also deleted." From the consistent views of this Tribunal's in above judgments, ratio of which squarely applicable to the present case, impugned order is not sustainable. 10. The appellant also raised the issue of Cenvat Credit on bought out goods. We agree with the submission of appellant that when revenue seeks to demand duty on the value of bought out goods the appellant shall be entitled for cenvat credit of duty paid on such bought out goods. 11. Regarding the issue of availability of Notification No. 67/95-CE dt. 16.3.1995 on the alleged excisable goods ....
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....nder any heading of Chapter 24 of the Schedule to the said Act; (i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act; (iii) goods classifiable under sub-heading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act; (iii) woven fabrics classifiable under Chapter 52 or Chapter 54 or Chapter 55 of the Schedule to the said Act. (iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act. On reading of above notification it is clear that capital goods manufactured and used within the factory of production shall be exempted. As per the facts of the case the machines which undoubtedly capital goods falling under Chapter 84/85 erected and installed within the Sugar Mills product of which i.e. Sugar/Molasses etc. is liable to duty. Thus all the conditions of Notification No. 67/95-CE stands fulfilled. Even though it is accepted that the Appellant have manufactured the goo....