TaxTMI 
TaxTMI 
1995 (12) TMI 410
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....gun and drilling machine. These components/parts were brought from Madras to Bhilai vide various consignment Notes of Express Road Carrier Pvt. Ltd., Madras. Thereafter the appellants carried out the manufacture and assembly of the Top Hole drilling machine and Mudgun allegedly at about 100 metres away from the place of erection and removed the same for commissioning at Blast Furnace Nos. 4 and 6 without payment of central excise duty. The appellants raised bills to M/s. SAIL, B.S.R, Bhilai towards the cost of equipment amounting to Rs. 8,38,19,640.00 towards the supply of spares Rs. 40,70,275.00 and for the supervision charges Rs. 8,38,320.00 totalling Rs. 8,87,28,235/-. After deduction of Rs. 33,80,380.00 towards sales tax from the invoice value as shown above the total assessable value of the goods came to Rs. 8,53,47,855.00 on which central excise duty liability @ 10% adv. worked out to BED Rs. 85,34,786.00 as per Notification No. 69/90-C.E. and 5% SED thereof Rs. 4,26,739 totalling Rs. 89,61,525.00 and was recoverable from the assessees. The assessees had suppressed the fact of such manufacture and removal of excisable goods from the department of Central Excise. They had fail....
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....rocess of piece by piece erection of the components in a fixed and pre-determined condition and therefore are immovable property and hence not excisable. They have also pleaded that no movable goods came into being before being fixed in an immovable manner and no duty can be levied based on case laws. The noticee have also argued that though the Supreme Court in the case of Name Tulaman Manufacturers (P) Ltd. - 1988 (38) E.L.T. 566 have held that assembly of various duty paid components into weigh bridge amounts to manufacture, the aspect whether such goods are movable or not was not decided by the Supreme Court, based on case law in 1990 (46) E.L.T. 562 (T). The aforesaid plea of the noticee is not tenable. The ratio of the decision of the Supreme Court in the said case 1988 (38) E.L.T. 566 (SC) as also the facts thereof are squarely applicable to the present case. Assembly of weigh bridge and the two equipments in the present case are akin to each other. Further, the Tribunal in a latest case of 1991 (53) E.L.T. 461, on X-ray equipment have held that "by nature if the property is movable and for its beneficial use or enjoyment it is necessary to fix it to earth though permanently....
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.... fed into this Blast Furnace and hot air at 1200°C is fed into the Blast Furnace at various levels to melt the raw materials. The blast furnace is lined with refractory brick of 1 metre thickness from inside to protect the shell against heat. When each cycle of manufacture of pig iron is completed a bore is made inside the wall of the blast furnace to allow the molten portion to flow out. This function is accomplished by the drilling machine erected by us which drills 1 metre on the wall of the furnace. As the temperature in the blast furnace is more than 1200°C, the drilling machine is mounted at a distance of about 6 metres away from the blast furnace. After the molten pig iron is taken out of the blast furnace, the pre-determined hole in the wall of the furnace has to be closed by spraying special clay. This function is being achieved by mudgun which is erected by us. Since the temperature in the blast furnace is more than 1200°C, as mentioned above, the whole structure coming into contact with the moiten steel in the blast furnace may melt and hence mudgun and drilling machine are mounted on a base frame, and only drill hammers have acc....
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....ng anything at ground level and lifting the same to a height of 25' and taking it to the cast floor house and then, to the platform over which it is mounted and erected. A practical visit to the steel plants and seeing the situation will make one clearly understand that there is nothing assembling of some components 100 metres away as alleged and bringing them to the platform for mounting.... We have stated that all these components are lifted by a crane on the cast floor house which itself is 25' above. From there each component is moved by a trolley and mounted to the base plate piece by piece and thus, mudgun and drilling machine emerge. We have taken pains to explain all these only to state that the version that some identifiable unit was manufactured cannot be sustained. We are enclosing a drawing to show placement of the mudgun and drilling machine in relation to the furnace, about 25' above ground level. Various components that go into the erection of d filing machine and mudgun are also indicated clearly. This drawing will unfailingly show that each component, by itself is huge and there is nothing like combine a few components and then lifting....
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....en furnace is ready for tapping, the drilling machine is brought to the working position and drilling operation commenced. The drill makes a thorough hole for more than about a metre and power required for this purpose is 10 KN to go through resistance of anhydrous clay. To counter the reaction force the drill is located in its position by is own weight and through the locking arrangements. Once the tapping is completed, the drilling machine is taken out and time is allowed for the entire hot metal to flow out and fill up the laddies. After that mudgun is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up mud into the furnace. The mud which is under question is otherwise known as clay which hardens in 25-60 seconds. (Though it becomes dry in a few minutes the gun will be held against Mass for 15 minutes against furnace pressure on clay). Hence, the force required to push out steel like clay would be 240 tons. To resist the retrograde action, the mudgun is designed to be sturdy and heavy. It is also locked in its position by a locking mechanism. ... Base frame which is a rigid welded steel construction with ....
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.... the machines in assembled condition due to their volume and weight, merits acceptance and is fortified by the finding of the Collector that the same can be dismantled after it is assembled. 10. In the light of our finding that erection of mudguns and tap hole drilling machines results in erection of immovable property and not goods, let us examine the relevant case law on the subject. (i) In the case of Gujarat Machinery Manufacturers Ltd. v. CCE reported in 1983 (12) E.L.T. 825 (T), the Tribunal held that the chemical plant affixed to the ground is in the nature of immovable property and cannot go to the market for being bought and sold as such. [This decision was confirmed by the Supreme Court as reported in 1989 (44) E.L.T. A58]. (ii) In the case of Tata Robins Fraser Ltd. v. CCE reported in 1990 (46) E.L.T. 562 (T), it was held by the Tribunal that erection of structural work, supply of machinery and equipment, their erection and installation (partly manufactured at the appellant's works at Jamshedpur and partly procured from outside) does not result in the emergence of a movable property chargeable to excise duty. In paragraph 5 of the order the Tribu....
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....d before the Supreme Court therein. 11. Learned DR sought to rely upon the decision of the Tribunal in the case of I.G.E. India Ltd. v. Collector of Central Excise - 1991 (53) E.L.T. 461, holding that the X-ray equipment would be leviable to duty by observing that "by nature, if the property is movable and for its beneficial use or enjoyment it is necessary to fix it on earth though permanently i.e. when it is in use, it is not immovable property. In the instant case, the components/parts both essential and non-essential are fixed to the earth for beneficial enjoyment and by fixing it to the earth it has not become part of the earth and, therefore, it is not immovable property. It is also not disputed that the X-ray equipment can be dismantled and shifted....Therefore, we are of the view that the X-ray equipment is not immovable property." The learned DR, therefore, pleaded that by the same analogy, the items in dispute in the present appeal should also be considered as movable property and hence liable to duty. We find that the decision of the Tribunal in the IGE case is based upon the judgments of Madras High Court in the case of K.N. Subramaniam Chettiar v. M. Chidambaram (AI....
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....as used to imbed the tank to the earth by itself is not conclusive. Though the witness stated that the tank is capable of being shifted as a fact the tanks were never shifted from the places of erection. By scientific process, the tanks stand on their own weight on the earth at the place of erection as a permanent structure". The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and drill tap hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above. Accordingly applying the test laid down by the Supreme Court, we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, therefore,....
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....uty under heading/subheadings appropriate to such goods in their complete form, otherwise such parts and components should be charged to duty under headings/subheadings appropriate to such parts and components. (ii) at site, duty would be chargeable only if the assembly of parts/components results in a different recognisable marketable product before installation in an immovable manner. Mere bringing together of parts and components would not be excisable. (iii) however, at site, if the piece by piece erection or installation of parts orcomponents results into an immovable property, then no duty would be required to be levied on such property." Therefore, the appellants cannot be held guilty of any suppression and the contention of the learned DR that the suppression is attributable in the face of the nonintimation of erection to the Indore Collectorate, being the Collectorate having jurisdiction over the Bhilai Steel Plant, has no force. Accordingly, the entire demand is barred by limitation, as the show cause notice for recovery of duty for the period from 25-6-1990 to 22-1-1991 (Annexure A to the show cause notice) was issued on 3-4-1992/8-4-1992. For the sa....
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....ial clay with the help of a mudgun. It has been stated that these machines have to be erected or assembled by constructing a trolley way for transporting a 80mm mild steel sheet of about 5 ft. diameter, called the base plate and other components to an area called, Cast house floor which is in the nature of a platform 25' high encircling the blast furnace. It has also been pointed out that various components of mudgun and drilling machine have to be mounted piece by piece on a metal frame which is welded to be base plate and thus mudgun and drilling machine come into existence as identifiable units after assembly on the metal frame and once assembled and identified as mudgun and drilling machine they no longer remain "goods" within the meaning of Central Excise Law since they are grouted to the concrete platform 25' above the ground level. It has, therefore, been contended that assembly of mudgun and tap hole drilling machine elsewhere for being transporting and mounting them at a height of 25' on the cast house floor of a blast furnace being a physical and engineering impossibility, the assembly of these machines has to be deemed as resulting in the creation of immovabl....
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....gh and skimmer accessibility and a correct implantation of reliable tap-hole machinery, i.e. clay guns and drills. All these conditions can only be fulfilled by an economical use of the available space. The Paul WURTH Cy, a subsidiary of the ARBGD group - one of the biggest steel producers in Europe - is acting since many years in the blast furnace field and set up a dynamic engineering division for basic concepts, lay-outs of plants and the development of unit equipment. Its reputation has again been confirmed by the design of high performance tap-hole machinery. Due to our long experience in hydraulics, we moved away from conventional electro-mechanical to fully hydraulic operation with simple cylinder-operated movements. The growing number of world-wide sold machines and the satisfaction of our customers reflect the reliability of the equipment. We would like to familiarize you hereafter with our tap-hole guns and drills as well as with our concepts of the tap-hole zone arrangement. On simple request, we will be pleased to make a preliminary free of charge-out of our machines, adapted to your specific needs. Our concept - the answer to your pr....
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....bridge, a new product known to the market and known under the excise item. The mere fact that the appellant bought out the two parts and manufactured only the "indicating system" and paid duty thereon will not change the position because parts and end products are separately dutiable. Para 3 of the said judgment being relevant is reproduced below : "3. The appellant's contention before the Tribunal was that it was only preparing a part and that part is dutiable as a separate part. The appellant, however, did the work of assembling. As a result of the work of the appellant a new product known in the market and known under the excise item "weighbridge" comes into being. The appellants will become a manufacturer of that product and as such liable to duty. That is precisely what the Tribunal found on the facts of the case. The appellant seems to have been obsessed by the idea that as a part of machine is liable to duty then the whole endproduct should not be dutiable as separate excise goods. That is mistake, a part may be goods as known in the excise laws and may be dutiable. The appellants in this case claims to have manufactured only the indicator system. If the indicat....
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....o are suppliers of international repute have been offering the machines in question for sale to buyers in different parts of the world. The machines in question are therefore movable and have individual well defined functions. Hence they are classifiable under Chapter 84 of the Central Excise Tariff. Under these circumstances, in respect of the individual machines in question the tests for determining whether a property is immovable or movable as laid down by the Hon'ble Supreme Court in the case of the Municipal Corporation of Greater Bombay and Ors. v. The Indian Oil Corporation Ltd. reported in JT 1990 (4) SC 533, on which heavy reliance has been placed by the Learned Counsel for the appellants, cannot be of any assistance to the appellants. I, therefore, hold that the Collector's finding that the appellants had manufactured the machines and evaded Central Excise duty thereon, as alleged in the show cause notice, is sustainable. 17. As regards the finding of the Learned Member Judicial that the demand is barred by limitation, I find that the appellants had filed Classification List before the Central Excise authority having jurisdiction over their factory in Tamilnadu....
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....uilty of suppression, thereby warranting the invoking of the extended period of limitation, as held by the Member (T). 20. The matter was heard by me on 25-10-1995 when Shri V. Lakshmikumaran, ld. Advocate appeared for the appellant. Shri R.R. Jha, ld. SDR represented the respondent. 21. Shri V. Lakshmikumaran, ld. Advocate stated that the machines in question had been erected in the factory premises of M/s. Bhilai Steel Plant (BSP) and were immovable property. Their manufacturing activities were at Madras and these machines have been erected in Bhilai. These machines were erected on a platform at a height above the ground level. The place where they were erected was known as cast house floor. It was admitted that in the central excise documents filed at Madras, it had been described that completed machines were manufactured but it was submitted that it was done as desired by the local central excise officers. In the Madras factory, they were producing only components for these machines. The ld. Advocate contended that the tender documents will not show whether the goods were immovable property. It was accepted that there was a process of manufacture at Bhilai and the goods i....
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....nd it is why the goods were described as completed machines in the documents filed at Madras. The information was supplied to the central excise officers at Bhilai as they thought that they were not engaged in the manufacturing of excisable goods at Bhilai. 24. I have very carefully considered the matter. M/s. BSP floated enquiries for purchase of hydraulic mudguns and drilling machines. In the tender documents, it was stipulated that the prices quoted must be per unit and must include all packing and delivery charges. The price was to be stated for each item separately. BSP required the goods as manufacturers. The scope of supply was described as under : "design, supply, supervision of erection and commissioning of 4 sets of Hydraulic Mudguns and drilling machines required for BF4 and BF6 complete with mechanical, electrical, hydraulic and pheumatic systems including interconnecting pipe lines and cables alongwith commission spares and operating spares as per list enclosed." In the schedule to the enquiry, the goods were referred as 'equipments'. In the terms of delivery the 'installation' was covered. It was referred that 'supervision of install....
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.... a part and partial of a larger construction. They did not come into existence as one attached to the earth or as one permanently fastened to anything attached to the earth. The immovables are constructed and not manufactured or produced, refer Hon' Supreme Court's decision in the case of Commissioner of Income Tax v. N.C. Budha Raja and Co. -1993 AIR SCW 3317. In that case, the Hon' Supreme Court had distinguished the piles which the assessee laid by his particular method and which became a fixture in the earth to ultimately become a integral part of the dam, bridge or building, as the case may be, from the pre-fabricated piles which are bored into the earth by the Contractor or owners the case may be (refer para 19 of the judgment). The machines under consideration were fixed for the beneficial enjoyment of these machines themselves, and with a view to use these machines they had to be installed and the installation lasted only so long as these machines were usable. They could be dismantled as and when the need arose. From page 29 of the paper book it is seen that a contract for dis-mantling had been given to M/s. MECHAST Engineers, Durg. 27. In the US Steel Public....
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....anufacturing this item themselves, the petitioners market. In fact, instead of manufacturing this item themselves, the petitioners could have purchased duty paid cooling coils and condensers already manufactured by some other manufacturer from the open market and utilised the same." The Hon' Supreme Court in the case of Andhra Pradesh State Electricity Board v. Collector of Central Excise, Hyderabad - 1994 (70) E.L.T. 3 (SC) had held that the pre-stressed cement concrete poles were "goods". Such poles are usable only when affixed to the ground. The Hon' Supreme Court observed that the marketability is a question of fact to be decided in the facts of each case. The fact that the goods are not actually marketed is of no relevance. It is also not necessary that the goods in question should be generally available in the market. It was added that the marketability does not depend upon the number of purchasers. In the case of IAEC Bokers Pvt. Ltd. v. Collector of Central Excise - 1990 (48) E.L.T. 388 (Tribunal), it had been held that the duty on the boilers was payable on the price of boilers as removed from the factory. For proper use boiler is also fixed to the ground. In th....
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....l plates which acted as bottom of the tanks which rested freely on the asphall layer. The facts in that case were different and distinguishable. Reference may however, be made to paras - 25, 31 and 32 of that judgment. These paras are extracted below :- 25. It is seen that the structure must be an entity in itself, although not necessarily a building in itself, adopted to the particular purpose it serves. In its ordinary sense a structure is something which is constructed by way of being built as is a building. But method of construction by itself is not conclusive. Structure by itself may not be a building but it may be analogous to a building, outhouse, shed, hut or a stable. Ship is like a floating building but it is not a structure. A crane gantry or a turnable is a structure but is not a building. Weighing bridge is a structure. Tilting furnaces mains are in the nature of structure. The British Act levies property tax on the tenant and each item by itself is exigible to separate rate ability. But under the Act the incidence of taxation is on the building or land. So the building or its accompaniments like house, out-house, garage, stable, shed, hut and such other stru....
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....perty to which it is attached. In view of the fact that the engine was fixed for the beneficial enjoyment of the engine itself and in order to use the engine, it has to be attached to the earth and the attachment lasts only so long as the engine is used and it would be detached and shifted to some other place. In that view of the matter it was held, it is not an immovable property. In Chaturbhuj Morarji v. Thomas Bannett (1905) ILR 29 Bom. 323, the new shed, the fixture whether part of the lease was in question. It was held that the new shed as provided was not attached to the land and, therefore, it was not a part of the fixture. In J.H. Sinha v. Govindrao Bhiwaji - AIR 1953 Nagpur 224, the machinery belonged to (A) was erected on the land of (B). The Division Bench laid down two tests to determine whether it was attached to the land and thereby became immovable property, namely, the degree or mode of annexation and the object of annexation. Of the two test the latter is the more important, and it is a question of fact to be determined upon the particular facts and circumstances of each case. In that case it was held that the (A) did not intend to annex the machinery to the land a....