Customs, Excise and Gold Tribunal - Mumbai
Gordhandas Desai Ltd., Shri M.N. Patel ... vs Commissioner Of Central Excise on 29 October, 2004
Equivalent citations: 2005(100)ECC207, 2005(179)ELT557(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. The appellants are an assessee under the Central Excise Act and a Director and authorized signatory.
2. The assessee is engaged in production and clearance of excisable goods, namely, Laboratory Furniture falling under Chapter 94 and Fume Hood Chambers, etc., falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act, 1985.
3. Prior to 1.4.2000, they opted for MODVAT Credit Scheme and availed the same. With effect from 1.4.2000, they opted for the CENVAT Credit Scheme.
4. For convenience of transportation and to prevent damage to finished excisable goods, produced in the assessee's factory, the same are cleared in unassembled form and on reaching the site of the buyers premises, the consignments are opened and the components are installed/erected at site. Duty at the time of removal from the assessee's factory is paid on the appropriate value of the excisable goods as applicable, but erection/installation charges are not included in such assessable value.
5. The major finished excisable goods produced by the appellants and which are involved in this appeal are as follows:-
(i) LABORATORY WALL BENCHES, AS PER CUSTOMER'S REQUIREMENT/SPECIFICATION :
The Appellants, manufacture above items in various sizes and specifications, as per the requirement of the individual customer, depending upon Laboratory Room dimensions. They are mainly consisting of the following:
STRUCTURAL COMPONENTS : Such as Pedestals, Cross Brace, Horizontal Channels, Cover Panel, Flexible Frame Assembly, etc. These are manufactured in various lengths and widths so as to fit into the Laboratory Room of the customer and are supplied in component form to customer's site.
UNDER BENCH STORAGE MODULES : Such as Storage Modules, Sink Unit Modules of various dimensions in a combination of Shutters, Drawers and Colours. These Modules are rested on Pedestals/Flexible Frame Assemblies. These Modules have tops, which are covered and can also act as Table Tops, if required.
BENCH TOPS/TABLE TOPS : There are variety of Optional Table Tops such as Melamine Laminate Tops, Asbestos Cement Sheet Tops, Ceramic Tile Tops, Stainless Steel Tops, Granite Tops. They are of various dimensions as per individual customer's needs. Further, they are with or without Ceramic or Stainless Steel Sinks.
Most of the appellant's customers opt for Bench/Table Tops, made from GRANITE Stones. The appellants procure such Tops from various places such as Mumbai, Bangalore, Delhi, Hyderabad and also from Baroda. In Baroda, the appellants provide drawings to the Granite Suppliers and they manufacture Tops as per the appellant's requirements. Subsequently, the Granite Tops are dispatched from above places (supplier's premises) to the customer's site. Granite Bench Tops, do not enter the appellants' factory premises. For delivering these Tops, the appellants' Branch Office use printed delivery challans, which are provided by the appellants to them (Challans are having the appellant's Baroda Office address). In certain cases, where the appellants do not have Branch Office (say Hyderabad), Granite Tops are supplied by procuring the same from a Baroda supplier.
Except Granite Tops and other Vendor bought-out items, the goods manufactured at the appellants' factory are cleared on payment of Excise Duty, whereas for the Vendor items, like Granite Tops, the appellants prepare Vendor Goods Invoices (Prefix "V" in the appellants' Invoices).
All above goods are supplied in CKD condition and erected by the appellants' technicians or by customer's persons at customer's site. Further, there are cases where customers do not order Bench/Table Tops from the appellants, but produce these directly by themselves. In case of recent exports also, the appellants have supplied above goods, without Bench/Table Tops.
FUME HOODS:
The appellants manufacture Fume Hood Upper Units, specifications of which vary from customer to customer. On front fascia of Fume Hood Panels as per customer's requirements are fitted Valves, Sash Position Monitors, Air Flow Meters, Electrical Switches, Starters, etc., at the site of buyer by using bought-outs and if a specific type of Remote Control Valve, which the appellants also manufacture, if desired by the buyer, the same is cleared from the appellants' factory, on payment of duty.
In the premises, items such as Sash Position Monitors, Air Flow Meters, Valves, Starters, etc. are bought-outs, which are directly dispatched to the premises of the buyers and thereafter fitted on the Fume Hood. There are certain other items such as Granite Dished Work Surface, Marine Ply, which are also supplied along with the Fume Hood, but under Vendor goods category.
The appellants also supply option Vendor items like Fume Hood Base Unit on which Fume Hood Upper Unit will be rested at customer's premises. The appellants procure such Base Unit from an outside party and supply as a Vendor goods. This is an option item and some customers do not opt for these Base Units as they construct Concrete Slabs at their sites and position Fume Hoods on these.
DUCTS OR DUCTINGS are made of HDPE Pipes, PP/FRP Pipe, Galvanised Sheet, etc. as per the customer's requirements. The appellants supply HDPE Pipe, PP/FRP Sheet, Resin, etc. as such procured from the suppliers and the Duct is fabricated at customer's site through an Agency appointed by the appellants. In this case, the appellants, supply the Duct as Vendor Goods. Sometimes customers do not order Ducting from the appellants and they arrange by themselves also.
CENTRIFUGAL BLOWER is used in connection with Fume Hood and this is to exhaust Fumes from the Fume Hood. The appellants procure and supply this item as per the customer's requirement and fitted at site of the customer. Blower is grouted at suitable place in the customer's building, mostly on roof or terrace on thick Cement Concrete Foundation Block. This item is cleared as Vendor goods.
REAGENT SHELVES, CUP BOARDS :
Above goods are manufactured by the appellants and cleared on payment of duty.
STOOLS, CHAIRS:
The appellants do not manufacture above goods, but procure from a supplier from various places (if customer places order on the appellants) and supply as Vendor Goods. However, the appellants do not have much turnover of these items.
KITCHEN FURNITURE :
The appellants manufacture different types of Base Unit and Wall Unit Modules required in Kitchens. Base Units are rested on the Pedestals. Here also customers procure themselves Table Tops like Granite, Marble Stones, Kota Stones, etc. as per their choice.
ANTI-VIBRATION TABLE :
This is a product required to sustain vibrations to Laboratory Instruments such as Balances and other Instruments. The appellants do not manufacture Anti-Vibration Tables and supply them as Vendor Goods.
LABORATORY BRASS FITTINGS:
This consists of various types of Water Valves, Gas Valves for Dry and Wet Services. The appellants manufacture such items in different specifications and clear on payment of duty.
ENERGY DISTRIBUTION CONTROL PANELS :
These are the specially designed Panels for the various services required by the Scientists within the Laboratory for their requirements of Water, Gas, Chilled Air, Vacuum, Effluent Disposal, etc. These service panels are manufactured as per customer's requirements. There are various types of Service Panels such as Service Panel on Bench (fitted on Laboratory Benches); Service Panels under Bench (fitted below the Laboratory Benches); Service Lines (fitted behind the Laboratory Benches). The customer does necessary connections to respective services. The appellants manufacture and supply such Energy Distribution Control Panels and clear on payment of duty.
(ii) Bought-out items are procured from outside and directly taken to the site of the customers are not included in the value and no duty is paid by the assessee on such bought-out items supplied directly to the site of the buyer . The assessee is maintaining one set of invoices corresponding to the Excise Invoices issued at the time of clearance and "N" Series Invoices corresponding to Vendors products for bought-out items directly sent to the site of the buyers.
(iii) The appellants claim, the same he has not contravened before us, the Laboratory Furniture and Fume Hoods, which are major part in respect of which the present appeals relate were erected at site and become non-transportable goods i.e. immovable, as at the site of buyers Service Lines of Copper, PVC, Stainless Steel etc. running through them are also installed which are thoroughly connected with the said Laboratory Furniture in order to carry various requirements of the Laboratory in terms of Compressed Air, Nitrogen gas, other Gases, Water, fuel-gas as per the requirement of the customers. Different types of Taps or Valves are fixed to control the products in these Service Lines and Control Panels are also installed and connected to the Laboratory Furniture after the goods are erected and the entire system becomes a permanent one for all purposes. Similarly, in case of Fume Hoods, after erection, ducting of various shapes and length along with exhaust fan fitted above the Fume Hoods for suction of Fumes from the Laboratory site through plastic or similar ductings are welded together grouted to the wall or ceiling of the Laboratory Building and run into several meters of length with bends, elbows and fittings to convey the Fumes are erected and come into existence at the said of buyers. The said system is permanently embedded to the building and not marketable or transportable in such erected form. The same feature exists for Kitchen furniture installed at site.
iv) The erection charges collected by the appellants through Debit Notes and it is a fact of record and the submission of the appellants that Granite Tops which are fixed on the Laboratory Furniture are not ordered and placed on all such Furniture erected at site. In case of all customers, the design of the furniture and components is specified and many times, as is submitted by the appellant, the Granite Tops and other materials are being procured by the buyer themselves and whenever Stainless Steel Tops, Melamine Tops or Wood Tops or Ceramic Tops are manufactured at the appellants factory, due duty is discharged on them.
6. After hearing both sides and considering the material in this appeal filed consequent to a proceeding launched due to a visit on 28.06.2003 by the Central Excise Officials, which resulted in a Show Cause Notice, alleging -
(a) The amounts so collected through debit notes being erection and commissioning charges and the amounts so collected through Vendor's invoices of "V series as detained in Annexure-II to the show cause notice should not be included in the assessable value under Section 4 of the Central Excise Act, 1944 from 01.07.2002 for the purpose of Central Excise Duty;
(b) Central Excise Duty amounting to Rs. 1,33,53,670/- (Rupees one crore thirty three lakhs fifty three thousand six hundred seventy only), as detailed in Duty calculation sheet in form Annexure-III to this Show Cause Notice, should not be demanded and recovered from them under the proviso to Sub-section (1) of Section 11A of the Central Excise Act, 1944.
(c) Penalty equivalent to the duty amount determined under Section 11A(2) as above should not be imposed upon them under Section 11AC of the Central Excise Act, 1944; and
(d) Interest at appropriate rate on the duty as determined should not be charged under Section 11AB of the Central Excise Act, 1944 and penalties on the Director and authorized signatory.
7. After hearing both sides, it is found -
a) Differential duty has been confirmed by invoking larger period for recovery of Central Excise Duty under the proviso of Section 11A(1) on
(i) Erection and commissioning charges collected from the buyers through debit notes and no duty have not been paid on them;
(ii) All bought-out items procured from outside and supplied directly to the buyers' site on the grounds that the Granite Tops are produced in the factory of the supplier as per drawings and design supplied by the assessee and directly dispatched.
Whereas no such allegation appears in the Show Cause Notice that the said Granite Tops were produced in the factory of the assessee or were obtained from the supplier and brought to the assessee's factory and cleared along with the furniture. There are a variety of Optional Table Tops such as Melamine Laminate Tops, Asbestos Cement Tops, Ceramic Tile Tops, Stainless Steel Tops and Granite Tops and duty is proved to have been paid on supplies of the furniture with Melamine Laminate Tops, Asbestos Cement Tops, Ceramic Tile Tops or Stainless Steel Tops.
Therefore, it can be concluded that Granite Tops are accessories to the furniture and it is well settled that value of accessories cannot be added to the value of excisable goods. Relying on the decision in the case of MIL India Ltd. v. C.C.E., Noida [2003 (59) RLT 985 (CEGAT-Del.] and Cimmco Birla Ltd. v. C.C.E., Jaipur [2003 (57) RLT 754 (CEGAT-Del.], value of bought-out items to assess duty on manufactured goods cannot be added, more so when the chapter heading for furniture includes parts also and in this case, the bought-out items are directly being supplied to the site of the customer where they are an accessory to become a part of immovable structure/ system.
b) Rule 2(a) of the Rules of interpretation of the Schedule to the Tariff when applied to the clearances effected, will not permit addition of any value other than the values of the un-erected components of the furniture which were cleared at the assessee's factory gate.
c) As regards Fume Hood Chambers, it is found that the Commissioner's finding to levy duty, interest and penalties on erection and other charges and other bought-out charges on this account cannot be sustained due to the reasons -
(i) The appellants manufacture Fume Hood Upper Units, specifications of which vary from customer to customer. On front fascia of the Fume Hood Panels as per customer's requirements are fitted Valves, Sash Position Monitors, Air Flow Meters, Electrical Switches, Starters, etc. at the site of buyer by using bought-outs and if a specific type of Remove Control Valve, which the appellants also manufacture, if desired by the buyer, the same is cleared from the appellants' factory on payment of duty. In the premises, items such as Sash Position, Monitors, Air Flow Meters, Valves, Starters, etc. are bought-outs, which are directly dispatched to the premises of the buyers and thereafter fitted on the Fume Hood. There are certain other items such as Granite Dished Work Surface, Marine Ply, which are also supplied along with the Fume Hood, but under Vendor Goods category. The appellants also supply Optional Vendor items like Fume Hood Base Unit on which Fume Hood Upper Unit will be rested at customer's premises. The appellants procure such Base Unit from an outside party and supply as a Vendor Goods. This is an Optional Item as some customers do not opt for these Base Units as they construct Concrete Slabs at their sites and position Fume Hoods on these slabs.
(ii) Fume Hood Chamber is installed at the site of the buyer and connected with different sizes of Ducts, Pipes, Fittings, Valves of HDPE, PP/FPR, Galvanised Sheets, depending upon the requirement of the buyers. Pipes or Ductings, along with various fittings, are connected to carry the Fume at appropriate height of the Building and the Ducting is a very complex configuration and in the Ducting, Blower or Fan is also fitted and such Fume Hood Chamber with Valves, Ductings, Measuring Instruments, etc., and such a system may have a length of 15 to 30 Metres and the whole assembled system cannot remain erected without fixation on the Grounds, Walls, etc. When the Fume Hood Chamber is completed at the site of the buyer, it turns out to be a very long and tall structure and in the form and case, it is not marketable nor such a system ever comes to market for buying and selling.
(iii) Much has been canvassed by the Authorities below about the visual observations and inspection of the Product Literature of Fume Hood, whereby a conclusion is drawn that the Fume Hoods are of normal sizes and that where the Authorities have erred. What is shown in the appellant's literature is merely the Fume Hood, produced in their factory and cleared on payment of Central Excise Duty at appropriate rate on the proper value of the said Fume Hood cleared as such in isolation. When the said Fume Hood is taken to the site of the buyer, Fume Hood shown in the literature is connected with a number of bought-outs such as Remote Control Valves, Sash Position Monitors, Air Flow Monitors, Starters, etc. at the site of the buyer and the said Fume Hood is connected with a lengthy Ducting, which generally goes to the top of the Building and the whole system when viewed as a single item, one would find that it cannot be taken to market for buying and selling in that form and therefore, it is the only Fume Hood in skeleton, manufactured in the appellants' factory, is chargeable to Central Excise Duty, which the appellants have already paid.
(iv) A plethora of decisions have been cited before us in connection with the Laboratory Furniture and the corresponding bought-outs and the same are applicable in case of Fume Hood to rule over the additions to values as proposed.
(v) Erection & Commissioning of the Fume Hood at the site of the buyer does not bring into existence again a new product at the said site. Fume Hood in completely erected position consists of Fume Hood, Fan, Blower, Ductings, Remote Control Valves, Air Flow Meters, Electrical Switches, Starters, Position Monitors, etc. as a huge structure of abnormal height or length and in that form it cannot be transported and even in completely erected position, the Fume Hood remains Fume Hood and accordingly, no new goods have come into existence at the site of the buyer and therefore, question of chargeability of Central Excise Duty on erection or commissioning charges and bought-outs is out of place in case of Fume Hood Chambers.
(d) The impugned order discusses in detail about various series of invoices and debit notes issued in this case. These documents by themselves cannot make out any case for the Department to demand Central Excise Duty on bought-out items, accessories and erection and commissioning charges. The differential series of invoices have been explained to be maintained for convenience of accounting and thus their maintenance itself exhibits the bonafides of the assessee to contest the invocation of the larger period in the facts of this case. It is well settled that when materials are removed from a factory, batch-wise/section-wise or CKD/SKD condition, which have essential characteristics of finished excisable goods and when Central Excise Duty has been discharged on such goods in the form in which they are removed, re-assembly of the same at the site of buyer will not attract further excise duty as held in the case of -
(a) Electronics Corporation of India Ltd. v. C.C.E., Hyderabad-III [2004 (167) ELT 420 (Tri.-Bang.],
(b) Suz-Dent (India) Pvt. Ltd. v. C.C.E., Ahmedabad-III [2004 (165) ELT 364 (Tri.-Mumbai] and
(c) C.C.E., Coimbatore v. Servall Engineering Industries [2004 (168) ELT 125 (Tri.-Chennai].
Following the same, the duty demand ,as made in this case on merits, therefore, cannot be assessed.
(e) Under Section 4 of the Central Excise Act effected on 1.7.2000, reliance placed based by the ld. Commissioner on the proviso to Section 4(2)(d) of the Central Excise Act for demanding Central Excise Duty on erection and commissioning charges cannot be upheld as it is found that in case of Emerson Network Power India Ltd. v. C.C.E., Mumbai & vice versa, appeared in 2004 (114) ECR 689 (Tri.-Mumbai), the Tribunal after examining the charges of duty on installation/commissioning charges and bought-out items maintained that neither of these charges nor value of bought-out items directly dispatched were charged to Central Excise Duty even with effect from 1.7.2000. Nothing contrary has been shown, therefore, the finding of the Commissioner in this regard cannot be upheld.
(f) The submission that the date of issue of Show Cause Notice and its service on the assessee clearly reveals that the Show Cause Notice has invoked larger period under Section 11-A and for recovery of duty under this proviso, it was not only necessary for the Department to have canvassed allegations of suppression of fact or willful misstatement or collusion or fraud on the part of the Central Excise assessee, with an intent to evade payment of Central Excise Duty or with mala fide motives to follow the provisions of the Central Excise Law. But it was also imperative for the Department in the facts and circumstance of this case to establish on the strength of corroborative and documentary evidence such allegations which is missing. The assessee is registered with the Central Excise Authorities for the last 10 years or so and has been mentioning the goods clearly in the application for registration and filing the required declaration and availing MODVAT credit. No material to allege invocation of the proviso of the clause has been brought on record to justify the invocation of the larger period. We, therefore, find merits in the plea made that the demands are barred by limitation.
8. We do not find any reason to upheld any less charge of duty. We , therefore, find no reason especially of invocation of large amounts of penalties under the Central Excise Rules in all the appeals herein.
9. In view of the findings, the order is set aside and the appeals are allowed.