TaxTMI 
TaxTMI 
2020 (9) TMI 643
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....llate authority giving the benefit cum-duty price while confirming the demand. 3. The facts of the case in brief are that the assessee herein are engaged in fabrication of steel tanks for Oil Companies, such as, M/s Bharat Petroleum Company Ltd., M/s Indian Oil Corporation Ltd. and M/s Indo-Burma Petroleum Company Ltd. as per their specifications. The Department received intelligence that the appellants did not obtain Central Excise Registration even after exceeding the SSI exemption limit of turnover Rs. 1.00 Crore. Accordingly, the Officers investigated the matter, inspected the premises of the assesses, issued summons and recorded statements and came to the conclusion that the assesses have not obtained Central Excise Registration nor have they paid duty on the steel tanks, which have been manufactured for the aforesaid Oil Companies. Show-cause notices were issued proposing to recover the aforesaid short paid duty and impose penalties. While proposing to recover the duty for extended period of limitation in the show-cause notices, no specific allegation of fraud, collusion, willful mis-statement, suppression of facts or violation of provisions of Act and Rules, with an intent ....
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....alify to be called as goods and therefore, no Central Excise duty was payable. For this reason, no penalty under Section 11AC is imposable upon them. Penalties imposed upon them need to be set aside even if on merit, the demand is upheld. 8. Further, Ld.Counsel argued if the demand are decided against them, the prices received by them may be taken as cum-tax prices and CENVAT Credit on inputs may be given to them. 9. The Ld.Departmental Representative, on the other hand, submits that the assessee have had at no point of time taken Registration or informed the Central Excise Department regarding their activities. They have not paid any Central Excise duty and they have dealt with large Oil Companies under large contracts and it was expected from them to have acted responsibly and paid Central Excise duty. If they had any doubt, they could have sought clarification from the Department. They did no such thing. They have clandestinely manufactured and cleared the goods without informing the Department. Therefore, the extended period of limitation is invokable and penalties under Section 11AC are rightly imposable. On merit, he argued that it is now well settled that merely because th....
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....ined either in the Sale of Goods Act or in the Central Excise Act. In the absence of any definition of "attached to earth", the question arises as to how to interpret this expression in the context of Central Excise Act. This has been answered in the judgment of the Hon'ble Apex Court in the case of Solid & Correct Engineering Works [2010(252)ELT 481 (S.C.)] and the definition in the Transfer of Property Act, 1882 has been adopted. Respectfully following the ratio, I also adopt the same definition. The relevant portion of the judgment of Apex Court is as follows: "10.Section 3 of the Central Excise Act, 1944, inter alia, sanctions what was during the relevant period called "central excise duty' on all "excisable goods" produced or manufactured in India at the rates set forth in First Schedule to the Central Excise Tariff Act, 1985. The term "excisable goods" appearing in Section 3 has been defined under Section 2(d) of the said Central Excise Act which reads as under : "2(d) : "excisable goods" means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt. Explanation : For t....
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....ability of the plant which causes heavy vibrations while in operation. The following passage from the Tribunal's order was in particular relied upon by Mr. Bagaria in support of his submission that the size and nature of the plant was such as made its fixing to the ground essential : "The individual element such as feeder bins, conveyor, rotary mixing drum, asphalt tank, fuel tanks, etc. have to be separately embedded into the earth. This is done on a civil foundation of 1.5 deep. This is because the weight of the material as well as the vibrations caused by the movement thereof is very substantial. The drier at one time holds 40MT of raw material." 14.Relying upon certain decisions of this Court, Mr. Bagaria argued that the plants in question did not satisfy the test of marketability and moveability. According to Mr. Bagaria, the setting up of the plant was no more than an accretion/annexation to immovable property which was far from manufacture of goods exigible to excise duty. We shall presently refer to the decisions relied upon by Mr. Bagaria, but before we do so we may briefly refer to the relevant statutory provisions to examine, what would constitute moveable or immov....
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....d shrubs (b) imbedded in the earth as in the case of walls or buildings or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1½ feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does n....
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.... 2002 (141) ELT 3 (S.C.), wherein it has been held that in case where duty has not been paid, the price which has been recovered by the assessee, should be taken as cum-duty price. The Department sought to rely on the judgement of the Hon'ble Apex Court in the case of Amrit Agro Industries Ltd. Vs. Commissioner of Central Excise, Ghaziabad reported in 2007 (210) ELT 183 (SC). In that particular case, based on the facts and circumstances, the Hon'ble Apex Court held that the lower authorities had to examine whether the price charged by the assessee to his customers contains profit element or duty element or otherwise. In view of the specific facts of the case, the Hon'ble Apex Court has remanded the matter to the lower authorities. I find no such justification in the present case. I also find that if the assesses have to pay duty, CENVAT Credit cannot be denied to them. 18. The appeal filed by the Revenue is liable to be rejected and I do so and the appeals filed by the assessees are rejected on merit, but demand for extended period of limitation, cannot be sustained. 19. In view of the foregoing, the appeals are disposed of as follows : (i) Demands for normal period, is confirm....
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....ract value. 22. The proceedings have mainly focused on the aspects whether the activities undertaken constitute 'manufacture' for levy of excise duty. I also find that the fabricated tank after being removed from the factory to the site is fastened by undertaking civil construction on all four sides of the tank and then necessary nozzles, tubes, dip pipes, etc. are attached and a complete foundation is made on the top of the tank which is said to be the complete tank in a usable condition. The said facts have nowhere been disputed in the entire proceedings. Moreover, the photographs produced by the assessee also clearly depicts the chain of activities involved post fabrication of steel sheets into cylindrical incomplete tank, including the underground fixation of fabricated tanks involving civil works. 23. In my view, the duty is payable only on the activities for fabrication of steel tank, by applying the provisions of Rule 8 read with Rule 11 (i.e. residuary rule providing application of reasonable means) of the Central Excise Valuation Rules, 2000, which have not been invoked in the present case. The Tribunal in Indian Hume Pipe Co. Ltd vs. CCE, Trichy [2015 (321) ELT 460 (Tri....
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....er unit. The appellants have quoted relevant section note, wherein it is stated that the processes by which an incomplete item becomes a fully manufactured item amounts to process of manufacture. Hence, here is a case where excisable goods are not sold by the assessee but are used on his behalf in the production of other articles. A complete product is different from an incomplete product. We do not agree with the Commissioner that the identity of the product does not change. The identity definitely undergoes a change. If the identity does not change, there is no point in sending the incomplete product to the sister unit. Hence, the Commissioner's reasoning is not sound. Assuming but not admitting that his contention is correct, we can also take it that the incomplete product is used for consumption by him. In either of the cases, the transfer of the goods is squarely covered by Rule 8. The appellants have correctly discharged the duty liability under Rule 8. The Commissioner has given a finding that Rule 7 is applicable to the present case. We shall show how Rule 7 is not applicable. We reproduce Rule 7 herein below......" 25. Further, in the decision of this Tribunal in Otis El....
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....that the cost construction method can be applied only if the goods are used for consumption for manufacture of other excisable goods. The word "article" is not limited to excisable goods. In the present case, the components were cleared to the sites and in the sites, they were actually used in the manufacture of the lifts or elevators which should be considered as article. Even in respect of the components cleared for modernization and also for Annual Maintenance Contract, the nearest rule which is consistent with Section 4(1)(a) will be Rule 8 and not the deductive method adopted by the Commissioner..................." 26. In view of the aforementioned decisions, I am of the view that the duty could be recovered from the appellant assessees upto the stage of fabrication of incomplete steel tanks and not on the whole value paid by the clients which included the price for installation of fabricated tanks below the ground. Having not invoked the relevant provisions contained in Rule 8 read with Rule 11 of the Valuation Rules, the entire proceedings initiated by the Revenue is liable to be set aside. At this stage, it is important to mention that the Hon'ble Supreme Court in the cas....
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.... the Oil storage tank in question could be said to be 'goods', it is the stand of the assessee that the tanks become 'immovable' as they are affixed underground. In an identical situation, in the case of Prodip Engineering Works vs. CCE Kolkata [2007 (216) ELT 534 (Tri-Kol)], the various activities undertaken by the contractor for fabrication of oil storage tanks for underground installation have been examined. In this case, the Tribunal observed that the said underground tanks were not removable. The Tribunal came to the conclusion that those tanks which were not removable without being dismantled or causing significant destruction could not be said to be 'goods' and hence, were not dutiable. I find that in the instant case, the Revenue has not made out the case that the subject tanks could be removed without causing significant destruction, so as to render them movable. In this context, the relevant portion of the decision of this Tribunal in Servesham Construction Ltd vs. CCE Jaipur [2004 (171) ELT 204 (Tri- Del)] is reproduced: "6. The Adjudicating Authority has left out two tanks in question which were of the diameter 3.8 Mtr. x height 4.4 Mtr. with capacity of 49.9 Cub. Mtr....
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....r that anything attached to the earth, which has been so attached for permanent beneficial enjoyment qualifies as 'immovable property'. In the instant case, the tanks are permanently fastened and placed underground for storing oil. Therefore, I find that such tanks are 'immovable' and cannot be made exigible to levy of central excise duty. 30. Further, on the question of invocation of extended period of limitation, it has been submitted that the said ground was not raised in the Show Cause Notice. Therefore, I am of the view that the Revenue has travelled beyond the scope of the Show Cause Notice in invoking the extended period of limitation. 31. It is pertinent to mention that on the date of hearing i.e. 26.06.2019, we had held that the assessees were liable to pay Central Excise duty for the normal period of limitation on cum-duty basis, for which the assessees' appeals were partly allowed by way of remand for computation purpose and the Department's appeal bearing Ex. Appeal no. 206 of 2010 filed against allowing the benefit of cum-duty was rejected. In view of the legal position discussed in the foregoing paragraphs, I am of the view that the Tribunal is duty bound to follow ....
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.... central excise demand is legally sustainable on merits for the normal period of limitation as held by the learned Member (Technical) or the entire demand is unsustainable on merits as held by the learned Member (Judicial). Registry is directed to place the matter before Hon'ble President to consider referring the same to a third Member to settle the difference of opinion. SD/ (P.V.SUBBA RAO) Member (Technical) SD/ (P. K. Choudhary) Member (Judicial) 34. The Division Bench of the Tribunal heard the present appeals on 24/06/2019 but there was a difference of opinion between learned Member(Judicial) and learned Member(Technical) while disposing of these three appeals involving a common issue together vide the Interim Order dt. 24/06/2019. I was nominated by the President to settle the difference of opinion. Before I proceed to discuss the relevant findings rendered by each learned Member, it is pertinent to reproduce the difference of opinion between the two learned Members, which is reproduced herein below: Whether central excise demand is legally sustainable on merits for the normal period of limitation as held by the learned Member(Technical) or the entire demand is ....
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....tc., are being attached at site. The cylindrical tank is being fixed on the foundation and is placed below the ground. 35.4. It is the case of the assesses that no steel tanks have come into existence at their premises. It is not complete when it leaves the factory gate. The steel tank comes into existence only at the premises of the buyers of Oil Companies when all parts are welded together. At this place, the steel tanks are fixed to the foundation and are placed under-ground. Therefore, they cease to be the goods because they are attached to the earth. No Excise duty is, therefore, leviable on the goods because the steel tanks, when they came into existence, are attached to the earth and cannot be called as goods at all. Before the steel tanks reached the buyers' premises, they are incomplete and cannot be called as steel tank at all. Therefore, they are not liable to pay Excise duty at all and have not taken Central Excise Registration nor have they paid Central Excise duty. 35.5. The Ld.Counsel for the assessees also argued that the show-cause notices specifically lack either an allegation or any evidence of fraud, collusion, wilful misstatement or suppression of facts o....
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....should be Classified as complete article for the purpose of levies of Central Excise duty. Even if, the manufacture is undertaken outside the factory premises of the assessee, the Central Excise duty is still payable. Merely because the tank is placed on a foundation and is eventually placed below under-ground, it does not cease to be good. Further after considering the above submissions of the parties, learned Member(Technical) disposed of the appeals as follows:- i. Demands for normal period are confirmed in both the impugned orders. ii. Demands for extended period are set aside. iii. Cenvat Credit is available to the assessees. iv. The prices received by them may be taken as cumduty prices and duty calculated accordingly. v. All penalties are set aside. vi. Appeals are remanded to the original authority for the limited purpose of computation. 36. On the other hand, learned Member(Judicial) agreed with learned Member(Technical) as regards the nonapplicability of extended period of limitation, appellants' entitlement of cum-duty benefits and cenvat credit on inputs and waiver from imposition of penalty but on merits, learned Member(Judicial) has held that no central ....
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....e removed / detached from the civil foundation, then it will be recovered only as a scrap and not in the form of tank. He also submitted that since tanks are attached permanently, the liability of excise duty on such tanks does not arise and learned Member(Judicial) is correct to hold that the tanks are not excisable goods being permanently attached to the earth. He also argued that learned Member(Judicial) has rightly relied upon the decision in the case of Prodip Engineering Works Vs. CCE, Kolkata [2007(216) ELT 534 (Tri. Kol)] and Servesham Construction Ltd. Vs. CCE, Jaipur [2004(171) ELT 204 (Tri. Del.)]. He also submitted that the decision in the case of V.D. Engineering Vs. CCE, Jabalpur [2019(366) ELT 123 (Tri. Del.)] relied upon by the learned AR is not applicable in the present case as the said decision has been passed without considering the statutory provisions of Central Excise Act, Transfer of Property Act, General Clauses Act or Sale of Goods Act as has been elaborately raised by the appellant in the present case. 38. On the other hand, the learned AR submitted that the findings returned by the learned Member(Technical) is perfectly in accordance with law and should ....
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....econd Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt. Explanation: For the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable." 11. Entry 8474 in the First Schedule to the Central Excise and Tariff Act, 1985 stipulates the rate at which excise was payable on machinery of the kind enumerated in that Entry which reads: "Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances, in solid (including powder or paste) form; machinery for agglomerating, shaping or moulding solid mineral fuels, ceramic paste, unhardened cements, plastering materials or other mineral products in powder or paste form; machines for forming foundry moulds of sand." 12. It is evident from the above that any machinery which is used for mixing is dutiable. That Asphalt Drum/Hot Mix Plant is a machinery meant for mixing etc. was not disputed before us. It was fairly conceded by Mr. Bagaria that assembling, installation and commissionin....
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....before we do so we may briefly refer to the relevant statutory provisions to examine, what would constitute moveable or immoveable property. 15. The expression "moveable property" has been defined in Section 3(36) of the General Clauses Act, 1897 as under: "Section 3(36) : "movable property" shall mean property of every description, except immovable property." 16. From the above it is manifest that the answer to the question whether the plants in question are movable property, would depend upon whether the same are immovable property. That is because anything that is not immovable property is by this very definition extracted above "moveable" in nature. 17. Section 3 of the Transfer of Property Act, 1882 does not spell out an exhaustive definition of the expression "immovable property". It simply provides that unless there is something repugnant in the subject or context `immovable property' under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass. Section 3(26) of the General Clauses Act, 1897, similarly does not provide an exhaustive definition of the said expression. It reads: "Section 3(26) : "immovable property" shall in....
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....be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. 40. Further I find that the issue involved in the present case is squarely covered by the Division Bench decision of the Delhi Tribunal in the case of V.D. Engineering cited supra relied upon by the learned AR wherein identical goods were involved. Though the decision was rendered prior to the decision of this case, the same was not brought to the notice of the Bench at the time of hearing the matter. It is pertinent to reproduce the relevant findings of the Tribunal recorded in para 6 to 9 and reproduced herein below:- 6. Heard both sides and carefully and perused the record. We have also perused some of the work orders placed by IOCL/ HPCL on the appellant. In terms of such work orders, IOCL/ HPCL would supply steel sheet to the appellant and using them the latter, is required to fabricate the storage tanks of the required capacity and return the manufactured tanks to IOCL/ HPCL. From the nature of the ....