Full Judgment Text
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CASE NO.:
Appeal (civil) 6790-6791 of 2005
PETITIONER:
M/s. Ibex Gallagher Pvt. Ltd. & Anr
RESPONDENT:
Commissioner of Central Excise, Bangalore
DATE OF JUDGMENT: 17/08/2007
BENCH:
Dr. ARIJIT PASAYAT & D.K. JAIN
JUDGMENT:
J U D G M E N T
Dr. ARIJIT PASAYAT, J.
1. These appeals have been directed against the judgment
of the Customs, Excise and Service Tax Appellate Tribunal,
South Zonal Bench, Bangalore (in short \021CESTAT\022). Challenge
before the CESTAT was to the order in original 7/04 dated
14.7.2004 passed by a Commissioner of Central Excise,
Bangalore No.3. By the said order the Commissioner
confirmed demands on bringing into existence \023electric power
fencing system by use of solar power\024. The same was classified
in sub-heading 8543.90 as \023other electrical machinery and
apparatus having individual functions\024. The Commissioner
had invoked larger period in terms of Section 11A of the
Central Excise Act, 1944 (in short the \021Act\022). He confirmed the
duty demand and also imposed like sum as penalty under
Section 11AC of the Act. Penalty of rupees five lakhs was also
levied on the Managing Director. According to the Revenue for
the purpose of manufacture and clearance of the said item,
namely, solar power electric power fencing system, the
appellant brings various items which are also duty paid such
as insulator, insulation test tool kit, battery charger and also
procure various items from outside stores. They get GI wire,
springs, battery, solar panel and Voltage Stabilizer etc. as
bought out items and procured items such as Kiwitha Post,
posts and pipes etc. on job work basis and imported certain
items as such six channel controller and key pad etc. These
are all erected as a fence at various sites. The Commissioner
after examining Section 2(b) of the Act held that process of
erection of the fence at the site will bring into existence this
item as a new product distinct from all the products used.
According to the assessee, the item is fixed on the walls and
separately also on poles and they are not classifiable as
electrical machines and apparatus having individual function
under heading 8543.90. The Tribunal repealed the contention
of the assessee and held as follows:
\023On a careful consideration and
examining the impugned order, and the
record, we are satisfied that the item which
has come into existence is an electrical
appliances having individual functions. All the
items are put together to bring into existence
this item, Electric Power Fencing system and
the same is also powered by using solar power.
The catalogue as well as the statement of the
MD is relied by Revenue to say that the item
can be relocated and item can be saved and it
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does not get destroyed and dismantled merely
because the evidence has to be reused if at all
for use in other places does not mean that the
item has got destroyed while refixing the same.
The item has not become immovable property
on erection piece by piece. The poles are fixed
and the wires are fenced with all the other
parts. The fence gives electric shock to
animals when they want to cross the same it
acts not only as an electrical barrier but also
as a psychological barrier as no human or
domestic animal having felt the shock once will
attempt to go anywhere near the fence again.
The power fence systems of various
components which are brought out and some
are manufactured and some are imported.
They are all assembled to bring into existence
solar power fence as a system. There is no
civil work for erection and the item does not
become part and parcel of immoveable
property as contended. Therefore, the item
satisfies the tariff description. We are of the
considered opinion that it is goods and liable
for duty in the Chapter heading already noted
supra. However, the prayer of the appellant
for modvat credit and cum duty benefit is
required to be extended in terms of the ratio of
the judgment cited (supra). The submission
that the demands are partly time barred as the
department was aware of all the details
collected by them for 1998 and the show cause
notice issued in 2003 makes the demands time
barred is a well considered plea and require to
be accepted in the light of the following
judgments cited by them.
1) Cosmic Dye Chemical v. CCE Bombay (1995
(75) ELT 721 (SC)
2) CCE v. Chemphar Drugs & Linements (1989
(40) ELT 276 (SC)
3) Padmini Products v. CCE (1989 (43) 195
(SC)
4) Pushpam Pharmaceuticals Company v. CCE
Bombay (1995 (78) ELT 401 (SC)
The penalty of Rs.5 lakhs on the Managing
Director is excess. Hence it is reduced to
Rs.50,000/-. The matter is remanded to
Commissioner for re-working out after granting
benefit of modvat and treating clearance as
cum duty as pleaded by the appellants in the
light of large bench judgment rendered in the
case of Shre Chakra Tyres. Appeals are
allowed by remand only for recomputation of
duty. Order accordingly.\024 \023
2. However, the penalty was reduced to Rs.50,000/- in the
case of the Managing Director.
3. In support of the appeal leaned counsel for the appellant
submitted that the excisability on plant and machinery
assembled at site has been considered by this Court and
placed strong reliance on decision of this Court in
Commissioner of Central Excise, Indore v. Virdi Brothers
[2007 (207) ELT 321 (SC)].
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4. Learned counsel for the Revenue, on the other hand,
submitted that though in some cases this Court remanded the
matter to the CESTAT to decide on the factual aspects, in this
case categorical findings have been recorded on the aspects for
which remand has been made and, therefore, the assessee\022s
appeal is without merit.
5. Apart from Virdi Brothers case (supra) this Court in
Commissioner of Central Excise, Indore, v. Cethar Vessels Ltd.
[2007 (212) ELT 454 (SC)] also dealt with the similar question.
6. According to learned counsel for the appellant, the view
taken by the CEGAT is untenable. The adjudicating authority
was not justified in holding that fabrication of the plants in
question out of duty paid bought out items amounts to
manufacture of a new marketable commodity and therefore
dutiable.
7. The issue relating to excisability of plants and machinery
assembled at site has been determined by this Court in several
cases, e.g. Quality Steel Tubes Pvt. Ltd. v. CCE (1995 (75)
E.L.T. 17 (SC); Mittal Engineering Works Pvt. Ltd. v CCE,
Meerut (1996 (88) E.L.T. 622 (SC); Sirpur Paper Mills Ltd. v.
CCE, Hyderabad (1998 (97) E.L.T. 3 (SC); Silica Metallurgical
Ltd. v. CCE, Cochin (1999 (106) E.L.T. 439 (Tribunal); Duncan
Industries Ltd. v. CCE, Mumbai (2000 (88) ECR 19 (SC);
Triveni Engineering & Industries Ltd. v. CCE (2000 (120)
E.L.T. 273 (SC) and CCE, Jaipur v. Man Structurals Ltd. (2001
(130) E.L.T. 401 (S.C.).
8. As a matter of fact taking into account these decisions
Circular No.58/1/2002-CX dated 15th January, 2002 has been
issued by the Government of India, Ministry of Finance
(Department of Revenue), Central Board of Excise & Customs,
New Delhi. The Circular indicates that it was intended to
clarify the question of excisability of plant and machinery
assembled at site. The relevant portion of the Circular reads as
follows:
\023Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Sub: Excisability of plant and machinery
assembled at site-Regarding
In exercise of the power conferred under
Section 37B of the Central Excise Act, 1944, the
Central Board of Excise and Custom considers it
necessary, for the purpose of uniformity in
connection with classification of goods erected and
installed at site, to issue the following instructions.
2. Attention is invited to Section 37B Order
No.53/2/98-CX, dated 2.4.98 (F.No.154/4/98-
CD.4) (1998 (100 E.L.T.T9) regarding the
excisability of plant and machinery assembled at
site.
3. A number of Apex Court judgments have been
delivered on this issue in the recent past. Some of
the important ones are mentioned below:
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(i) Quality Steel Tubes Pvt. Ltd. v. CCE
(1995 (75) E.L.T. 17 (S.C.);
(ii) Mittal Engineering Works Pvt. Ltd. v CCE,
Meerut (1996 (88) E.L.T. 622 (S.C.);
(iii) Sirpur Paper Mills Ltd. v. CCE,
Hyderabad (1998 (97) E.L.T. 3 (S.C.);
(iv) Silica Metallurgical Ltd. v. CCE,
Cochin (1999 (106) E.L.T. 439 (Tribunal) as
confirmed by the Supreme Court vide their
order dated 22.2.99 (1999 (108) E.L.I. A58
(S.C.);
(v) Duncan Industries Ltd. v. CCE, Mumbai
(2000 (88) ECR 19 (S.C.));
(vi) Triveni Engineering & Industries
Ltd. v. CCE (2000 (120) E.L.T. 273 (S.C.)
(vii) CCE, Jaipur v. Man Structurals
Ltd. (2001 (130) E.L.T. 401 (S.C.)
4. The plethora of such judgments appears to
have created some confusion with the assessing
officers. The matter has been examined by the
Board in consultation with the Solicitor General of
India and the matter is clarified as under:-
a. For goods manufactured at site to be
dutiable they should have a new
identity, character and use, distinct
from the inputs/components that have
gone into its production. Further, such
resultant goods should be specified in
the Central Excise Tariff as excisable
goods besides being marketable i.e.
they can be taken to the market and
sold (even if they are not actually sold).
The goods should not be immovable.
b. Where processing of inputs results in a
new products with a distinct
commercial name, identity and use
(prior to such product being
assimilated in a structure which would
render them as a part of immovable
property), excise duty would be
chargeable on such goods immediately
upon their change of identity and prior
to their assimilation in the structure or
other immovable property.
c. Where change of identity takes place in
the course of construction or erection
of a structure which is an immovable
property, then there would be no
manufacture of \023goods\024 involved and
no levy of excise duty.
d. Integrated plants/machines, as a
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whole, may or may not be \021goods\022. For
example, plants for transportation of
material (such as handling plants) are
actually a system or a net work of
machines. The system comes into
being upon assembly of its component.
In such a situation there is no
manufacture of \021goods\022 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)
e. 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
moveable and will, therefore, not be
excisable goods.
xx xx xx xx
5. 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.
xx xx xx xx
(iii) Refrigeration/air conditioning plants.
These are basically systems comprising of
compressors, ducting, pipings, insulators
and sometimes cooling towers etc. They
are in the nature of systems and are not
machines as a whole. They come into
existence only by assembly and
connection of various components and
parts. Though each component is
dutiable, the refrigeration/air
conditioning system as a whole cannot be
considered to be excisable goods. Air
conditioning units, however, would
continue to remain dutiable as per the
Central Excise Tariff.
6. Based on the above clarifications pending
cases may be disposed of. Past instructions,
Circulars and Orders of the Board on this issue may
be considered as suitably modified.
7. Suitable Trade Notice may be issued for the
information and guidance of the trade.
8. Receipt of this order may please be
acknowledged.
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9. Hindi version will follow.\024
9. As the basic factual aspects were not considered by the
CEGAT we deem it proper to remit the matter to it for a fresh
consideration in the light of the judgment in Virdi Brothers\022
case (supra) and Cethar Vessels\022 case (supra) and Circular
referred to above.
10. The appeals are accordingly disposed of without any
order as to costs.