Customs, Excise and Gold Tribunal - Delhi
Aruna Industries Vishakhapatnam And ... vs Collector Of Central Excise And Ors. on 21 May, 1986
Equivalent citations: 1986(9)ECC35, 1986(8)ECR165(TRI.-DELHI), 1986(25)ELT580(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. As common question of facts (and) of law are involved in all these appeals, they were taken up together and are being disposed of by this common order.
2. The appellants in Appeal No. 322/85 and the respondents in the other appeals fabricate steel structures out of duty-paid materials supplied to them by Visakhapatnam Steel Project (hereinafter called as VSP). They have entered into contracts for the supply, fabrication and erection of structural steel and cladding works of Rolling Mills and Steel Melting Shop ( a shed ) in the project area. The above firms are contractors doing the fabrication work at the site allotted to them in the project area of VSP with their own machinery and workers. Show cause notices were issued to them on the basis that these contractors fabricate steel struct-urals from out of iron and steel products like plates, angles, joists, channels, rods and strips as per the specification of VSP. The steel structural so fabricated are shifted to the project site for the erection of the shed aforesaid. According to the Department, these steel structural fabricated from the iron and steel produces by cutting, drilling holes and welding is "goods" different from and has a distinctive character and use as compared to the raw materials. The entire work of fabrication and erection done by the firms amount to manufacture under Section 2(f) of the Central Excises & Salt Act, 1944. These goods would, therefore, attract duty under T.I. 68. They have not taken out necessary licences despite such a requirement under the Rules nor have they paid duty undr T.I. 68, CET. Replies were sent to the show cause notices alleging that fabrication and erection of structural steel were part of the execution of works on contract and that they were not goods as understood in the commercial parlance. The work of fabrication would not attract the provisions of the Central Excises & Salt Act, 1944. They have stated as follows: -
"What is being done by us is mere fabrication from duty-paid materials for fulfilling the contract works we have with Visakha Steel Plant. These processing/fabrication, are not manufactured, as no "goods" as defined in this context are obtained."
They have also placed reliance on the order of the Government of India (Order No. 264 dated 15-12-1981) in the case of Hindustan Steel Works Construction Limited. It was held therein that the nature of processing involved could not be considered to be manufacture for the production of any goods. The firms also contended that the site temporarily allotted for the ultimate purpose of enabling them to carry out their structural works could riot be treated as factory. They placed reliance on the judgment of the Gujarat High Court reported in 41 ELR 75 (M/s. Simon Carges (India) Limited). They also relied on an unreported judgment in criminal revision petition No. 267/78 relating to Engineering Construction Corporation.
3. The Deputy Collector of Central Excise, Visakhapatnam re-exarnined the case and dropped the proceedings. He held that steel structurals were not conventional goods distinctly different from the raw materials and they continued to retain to a great extent the essential properties and character of the original raw materials. The Collector of Central Excise, Guntur in the exercise of his powers vested under Section 35 E(2) of the Central ExciseAct called for and examined the records for the purpose of satisfying himself as to the legality or propriety of the said decision. He also made a spot inspection of the impugned goods at the factory. He directed the Deputy Collector, Madras for determination of points arising out of the order. A. reference application was filed before the Collector (Appeals) Madras. The Appellate Authority also visited the site. He ultimately rejected the reference application and upheld the order passed by the Deputy Collector.
4. The appeals before the Tribunal by the Department have been filed on the ground that in the case of Structurals and Machineries (P) Ltd. Bokaro v. Collector of Central Excise, Patna 1984(17) ELT 127 the Tribunal has taken a contrary view. The Department contends that jobs like cutting, drilling, welding, fastening, etc. constitute manufacture. The fabrication work undertaken by the firms is for the specific purpose of erection of structures. The structurals which are brought into existence by the work done by the firms would be different from the raw materials supplied to them. The work carried out by the firms is highly intricate, specialised and of a technical nature. They do not become immovables and merit classification as "goods" falling under Tariff Item 68. The appeal by M/s Aruna General Industries (322/85) is to set aside the demand for excise duty of Rs.7,79,340/- and the penalty of Rs.5,000/- imposed by the Collector of Central Excise, Guntur holding that the goods would attract duty.
5. Mrs. Zutshi, SDR, appeared for the Department in all the cases and S/Shri C. Natarajan & Kampani, Consultants appeared for the asse-ssees.
6. Mrs. Zutshi raised the following points:
She argued that the nature of the structurals fabricated by the firms acquired a name, character and use different from the raw materials. They were tailor-made to suit the customers' requirements. The test of marketability would not apply because of the specific nature of the activity. The raw materials such as, channels, angles, joists, etc. were fabricated into articles such as, 'trusses, purlins, columns and platforms. These fabricated materials ultimately become integral parts of the structure. The items were not embedded in the ground. The identity of the goods supplied by VSP was lost by these fabrication and it amounted to manufacture. At the time of removal they were movable property. The decision in 1984(17) ELT 127 squarely applies to the facts of this case. The lower authority should have followed the decision. The fabrication was made according to the designs and drawings and was of a highly technical nature. Some of the items were brought to the site in CKD condition. The term "angles" has been defined in Engineering Encyclopaedia by Franklin D. Jones and Paul B. Schubert as follows:
"Structural Angle: This is one of the conrnon standard structural sections.
Structural Shapes: Steel roiled to standard sections is widely used in building construction and in the manufacture of railway cars, agricultural implements, automobiles and numerous other products. By using a standard shape which is on the market and is adapted to a given structure or design it is often possible to secure a Stronger, lighter construction and a reduction of manufacturing cost. Shapes which have been widely used are shown in the accompanying illustration. There are many other more or less special shapes for use in the agricultural, automotive, railway cars, ship building and other large industries."
"Channel" has been defined as the name applied to a standard structural steel shape consisting of a web and two, flanges projecting at right angles to the web and on the same side, thus forming a channel or U-shapped section."
"Column" has been defined as a structural member which has considerable length in proportion to its width, depth or diameter, so that failure in compression is most likely to occur by the effect of bending stresses rather than by crushing. Generally, a structural member subjected to compression is known as a column, strut or post if its length, exceeds from six to ten times its width, depth or diameter."
7. The contract entered between the parties refer to manufacture as per the drawings and designs. It is not merely a works contract but also supply of materials as per parties specifications. The activities were carried on at the site which would be a "factory' under the Factories Act.
8. She relied on the following rulings in support of the case:
: 1961 (12) STC 590 (Devgun Iron and Steel Rolling Mills, Gobindgarh v. The State of Punjab and Ors.,) (P & H.H.Ct.) "When steel is rolled into rolled steel sections the outcome is a different and new commodity and when it is sold, there is a sale of a different commodity and not a sale of steel over again."
1967 (20) STC 430 (Devi Dass Gopal Krishnan and Ors. v. The State of Punjab and Ors. - Supreme Court) "When oil is produced out of oil-seeds, the process certainly transforms raw material into different article for use and oil-seeds can therefore be said to be used in the manufacture of goods."
1971 (27) STC 573 (Vijaya Cycle & Rickshaw Co. V. Commissioner of Sales Tax, UP - Allahabad High Court) "The process of assembly produces a different entity having a new identity. That process is as much a part of the manufacturing process as is the production of the components. Assembled cycles are therefore liable to be treated as manufactured cycles,"
1976 (37) STC 319 (State of Tamil Nadu V. Pyare Lal Malhotra -Supreme Court) "The mere fact that the substance of raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax."
1980 (6) ELT 775 (Madras) (Garware Nylons Ltd. case) (supra) "The of drilling and trimming or chamferring is a process which has to be essentially applied in order to render the brake lining blanks fit to be straightaway used in vehicles. Consequently, the process of drilling and trimming or chamferring of brake lining blanks is a process essential, incidental or ancillary to the completion of the brake linings as a manufactured product as without drilling and trimming or chamferring the product could not be used in vehicles."
1981 (48) STC 378 (Agra Metal Perforators v. Commissioner, Sales Tax, UP Lucknow - Allahabad High Court) "After performation, the iron sheets emerges as a different commercial commodity."
1983 (14) ELT 2382 (CEGAT), (Orissa Construction Corporation Ltd. Bhubaneswar v. Collector of Central Excise, Bhubaneswar) "While it may be that the gates themselves are not made out of iron in a primary form but by use of duty paid iron and steel sheets, still, when the gates had been manufactured, they are assessable to duty, not as iron and steel products made out of iron in a primary form, nor even as iron and steel sheets falling within item 26 AA OF the First Schedule to the Act, but as goods falling within item 68 thereof, in view of the transformation that had taken place in consequence of the fabrication/manufacture."
1985 (20) ELT 170 (SC) (Empire Industries Ltd. and Ors. v. Union of India and Ors.) "It is well-settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case."
1985 (20) ELT 280 (Delhi) (Metal Forgings P. Ltd. and Anr. v. Union of India and Ors.) "Now once an article comes into existence with the definite identity, the process of manufacture is complete and it is exigible to duty."
FACTORY: AIR 1956 (43) Bombay 219, (State V. Ardeshir Hormusji Bhiwandiwala) "The expression 'premises including precincts' merely shows that there may be some premises with precincts and some premises without precincts. The expression does not exclude lands."
AIR 1961 (48) Allahabad 301, Sita Ram and Anr. v. State.
9. Shri C. Natarajan raised the following points:
The respondents did not manufactrure any goods. They were allotted a site in the fabrication yard and they carried on the fabrication work according to the designs and drawings of VSP. The citation in 1984 (17) ELT 127 will not apply to the facts of the present case as finished products like, trusses, purlins, etc. were sold in the same form by the appellants. But in this case, the products were removed to the erection site and put together according to specific designs. They acquired the name of trusses, purlins, columns, etc. only after fabrication. In a way, there were ad-hoc creations arising consequent to the fabrication. There was no manufacture.
10. He further urged that these structural cannot be goods and they were part of a works contract. There was a composite contract for work and labour. In the case of Union Carbide (India) Limited (Civil Appeal 1103 of 1972), the Supreme Court has held that aluminium cans cannot be described as goods in as much as they are not marketable. The transaction therein was construed as works contract and nothing more. It was held that there was no manufacture of exciseable goods. It was further contended that there was no manufacture in a factory as Notification No. 46/81 envisaged goods other than those manufactured in a factory.
11. Mr. Kampani, Consultant for appellant in Appeal No. 322/85, raised the following points:
Duty paid materials were handed over as per the terms of the contract and the processing was carried out at the site. There was no manufacture in the factory. The iron and steel products could not be put to any other use until those processes were done. The columns were embedded, 3m x 7m in depth to bear the heavy weight and to withstand the variation of heat. The shed constructed had no pillars in the centre and the columns had to be embedded to withstand the weight of the super structure. The trusses were triangular in structure of large dimension and the entire structure was permanently fixed to the earth. He also raised objections regarding valuation of products.
12. The assessees placed reliance on the following judgments in support of their case:
:
1980 (6) ELT 249 (Bom) (Garware Nylons Ltd. v. Union of India and Ors. - Bombay):
"The essence of making or manufacturing is that it shall be a different thing from that out of which it is made. In other words, we come back to the same test, namely, whether the product that emerges is something different from the thing out of which it is made."
1985 (19) ELT 541 (Ajit India Pvt. Ltd. Madras v. Collector of Central Excise, Bombay/Madras)-
"Merely cutting aluminium sections to different sizes, punching, drilling and revetting would not constitute manufactrure."
Works Contracts:
1955 (16) STC 827 (Richardson and Cruddas Ltd. v. The State of Madras - Madras High Court) "The crucial question is whether the agreement between the parties was that such parts should be treated as sold separately or they were merely supplied in the course of carrying out a works contract. In order to make it a contract for sale of goods, there should be clear proof of an intention to sell and purchase the materials as such, independently of the work that was to be carried out. If the contract is an entire indivisible contract in the sense that the consideration for the entire work including the fabrication and supply of materials is the payment of an inclusive lump sum, there is no scope for applying the notion of a contract of sale of goods. The materials supplied for the performance of a contract are merely accessory to the work and labour.
In cases, where the contract consists of the fabrication and erection of steel structures of buildings on the site of the customer, the main test is to find out whether the customer ever bargained for the sale' and purchase of the component parts used in the work of fabrication and erection or construction. If, under the contract, structural materials are to be affixed to the land and only thereafter the property therein would pass to the customer notwithstanding that they were approved by him, and even paid for, the contract would be a works contract."
FACTORIES ACT:
CMP 2081/82 dated 3-8-84 (Madras) (Dr. P.S.S. Sundra Rao v. Inspector of Factories, Vellore - Judgment of Justice Quadar) "Laundry attached to medical college and hospital cannot be separated from the main institution. Employees are not workers and the laundry is not a factory."
1984 (18) ELT 14 (Tribunal), (Maharashtra Agro Industries Development Corporation Ltd., V. Collector of Central Excise, Bombay)-
"Assembling of bullock cart parts at site held not a factory."
Madras High Court - The South India Floor Mills P. Ltd., 37 FJR 101 -
"The Workers employed in the construction of a new unit of an existing factory are not employees as defined in Section 2(2) of the Employees State Insurance Act."
1962 (1) LLJ SC 427 - Regional Provident Fund Commissioner V Sri Krishna Metal Manufacturing Co.
"Factory engaged in the manufacture of hydrogenated oil or vegetable ghee. Had a Department in the factory where the tin containers for storing and packing oil so manufactured were fabricated. Tin containers were not sold in the market nor the customers were supplied ghee were charged the price of the tin containers. The factory could not be considered engaged in the manufacturing of tin containers. The fabrication of tin containers had been undertaken by the oil mills only as a feeder activity."
Gujarat High Court - Crl.R.267/78 (Engineering Construction Corporat-Ltd.) "Petitioner's main work was erection of the construction while the work of preparing articles in the period of work of construction was incidental to the main work. It had no fixtural work of manufacturing etc. Held that the provisions of the. Factories Act could not apply."
Gujarat High Court - Crl.R.237/78 -
"Temporary work done at certain places outside the factory do not amount to factory within the meaning of S.2M "
13. The point for determination in these appeals are whether (1) there was a manufacture under Section 2(f) of the Central Excises and Salt Act, 1944?
(2) Whether the place where "manufacture" had taken place is a factory within the meaning of Section 2(m) of the Factories Act?
(3) Whether the assessee firms have manufactured "goods" to attract central excise duty?
14. On the first issue, the position is well-settled by several judicial pronouncements of the Supreme Court and other High Courts to the effect that manufacture implied a change but every change is not manufacture excisable to duty. The manufactured product should be known as such in the commercial community for consideration whether an article in question becomes an article as mentioned in the First Schedule of the Act. There are several criteria for determining whether an article is manufactured or not. The nature and extent of processes may vary from case to case. But it is well-settled that only when the change or series of change take the commodity to a point where commercially it can no longer be regarded as the original commodity but recognised as a new and distinct article that a manufacture would be said to have taken place. Admittedly, the taxable event is "manufacture" and the burden of establishing that a new commodity commercially known as a distinct and separate commodity having its own character, name and use is on the Department.
15. With these settled principles, we have to analyse the facts of the case in order to find out whether there was a manufacture. In the show cause notice issued by the Department on 5-5-84 we find the following allegations in respect of the work done:
"Iron and Steel Products like plates, channels, angles, joists, and beams are provided by VSP to the Contractor. These raw materials are drawn by the Contractor from the stores of VSP and taken to their fabrication yard. The new materials ate then cut to size as per the design already given to the Contractor by VSP. Thereafter through simple processes of cutting, drilling and welding these raw materials are assembled into members that eventually go to form different parts of the shed like trusses, purlins, columns, platforms, walkways, bracings and girders. The extent of fabrication done in the yard is subject to the limitations of weight and dimension of the members, and transport and handling problems. In other words, a column may be fabricated in three parts in the yard and thereafter transported to the site and installed in stages on the concrete foundation; the bottom piece of the column is fixed to the concrete foundation by holding-down bolts. Similarly, trusses are removed in two or three parts to the site, assembles through welding and with belts and nuts and then hoisted to its place in the shed and bolted and welded. When all the members (fabricated steel structural) are transported to the site and erected it becomes a single permanent structure. The bottom portion of the columns which are fixed to the concrete foundation by holding-down bolts are then embedded permanently in concrete. The Contractor thereafter fixes AC/GI sheets on the roof. All the fabricated steel structurals are given a primary coating of red-oxide before, they are transported to the site for erection."
We find further particulars from the personal visit made by the Collector (Appeals), though we could not see the items which were fabricated by the assessees, he was able to see similar fabrication work done by others in the fabrication yard. He was shown the raw-materials which were supplied by VSP with plates, channels, etc. He saw the process of cutting, drilling, welding done by the fabricators on the raw-materials supplied by VSP. He also saw the factory sheds under erection wherein the pillars had been erected and the roof was being erected by lifting sections and placing them at appropriate position and thereafter welding different sections of the beam were also noticed by him. The raw materials were cut to size and joined together by rivetting or welding or fastening, depending on the ultimate purpose for which they were required. Of course, these cutting etc. were done as per the designs and drawings furnished by VSP. The Deputy Collector also made a visit on 5-4-84 and noticed the processes involved in the fabrication work. He saw the fully assembled trusses at the site ready to be hoisted on to the roof and some partially erected columns and beams. We must point out that the Deputy Collector has observed on inspection that the processes of cutting, drilling and welding did not completely change the identity of the individual members nor a new commercial commodity with the distinct name, character and use. The raw materials no doubt underwent a change but such activity was not sufficient in his opinion to hold that a commercially different and distinct commodity has emerged. These observations by the authorities who had actually inspected the fabrication work cannot easily be brushed aside.
16. We have also seen the photographs of the works done on the raw materials and also the fabrications carried on at the spot. A close scrutiny of the photographs indicate that except for cutting to size, drilling holes for the purpose of fastening their raw materials with nuts and bolts and such other fabrication activity, there was no manufacture, in the strict sense of the term. As already pointed out it must be shown that the finished product had acquired a different name in the commercial community and had a distinct use. The process of cutting by itself cannot be considered as a highly technical or sophisticated engineering activity. The drilling of holes or revetting the cut-plates and angles after mounting them on the columns are merely processes of manufacturing structurals. The cutting of steel plates, drilling of holes, rivetting or fastening are not operations from which one could hold that the identity of the original, product was lost and a transformation had taken place.
17. It is also seen that the raw materials which were subjected to cutting and welding were placed at the respective positions. Several structural shapes were used in building constructions and in the manufacture of numerous other products. If standard shapes are given structural designs, it is possible to secure a stronger construction and a reduction on the manufacturing costs. Structural beams, channels, bulb angles, beams, etc. are different structural shapes widely used in such constructions. The structural shapes are items which acquire certain distinct names by virtue of the functions performed and will not be known nor amount to manufacture. As rightly pointed out by the Collector (Appeals) a structure refers to something that is building or constrcuted to sustain a load. The trusses, beams, girders, etc. are merely structural shapes and assembling them for the purpose of constructing a building or shed would be a fabrication activity and not a manufacturing process. The Collector (Appeals) has rightly held that these terms are used to refer to functions performed by the articles and not to the articles themselves. The foundation for pillars and columns is first put up. Even the column is not constructed out of a single structural shape but with the aid of several structural members. These vertical pillers and columns are erected stage by stage. Thereafter, the fabrication work is done until the entire structural fixture becomes a shed or a building or construction. The learned counsel for the assessees rightly argued that the various bars supplied by VSP are so welded, rivutted, cut and fastened to construct the structure.
18. We also notice that the work is done under a contract of labour awarded by V.S.P. Smt. Zutshi urged that the contracts referred to "manufacture" and that VSP had a general right of supervision over the work. We have perused the contracts and we notice that the agreements were for construction, that is, supply of fabrication and erection of structural steels and clading works. The contracts comprise of the construction and the completion of the works. There is nothing in the contracts to hold that there was a sale of raw materials by one party to the other. In (supra) it was held that if the contract was an entire indivisible contract in the sense that the construction for the entire work including the fabrication and supply of material is the payment of an inclusive sum, there was no scope for applying the notion of a contract of sale of goods. In this case, the contract consists of merely the fabrication and erection of the steel structures and the buildings.Such a contract has been held to be a works contract. Applying principles of this decision it is manifest that it is a composite contract for work and labour and it is not a contract for sale of goods.
19. The SDR mainly relied on. The present appeal is mainly on the ratio of this decision. But if we analyse the facts of that case we find that the ratio of that decision will not apply to the present instance. From a perusal of the judgment we find that the appellants therein brought into existence new goods called structurals which were different from the raw materials supplied. This finding was based on several factors including the terms of the contract therein. In para 8 we find the following passage:
"A perusal of the contract shows that the appellants have to transport raw steel from Bokaro Steel Plant and to keep account of the raw steels issued to them. This established that the appellants have to perform processes of raw steel."
20. From the facts of the present case, we find it is not raw steel that was supplied to the respondents herein nor did-they perform processes of raw steels. Again, the nature of the work examined with reference to the contracts, the work order, the design, the drawings denoted in the case of Structurals that the work was of a highly intricate and highly technical nature. The Tribunal has based its decision in "Structurals" case on the special nature of the work. The terms of the contract in this case show that the assessees were given raw materials like angles, girders, purlins, etc. They only cut them to size and welded them and the fixtures were fabricated according to the drawings. The mere fact that they were done in accordance with certain designs or drawings alone cannot be the decisive factor though it is one of the several factors which should be adverted to. The Tribunal has also drawn the analogy of a free-fabricated, house so constructed and fitted with pre-fabricated materials which on being fixed on the location and are rivutted transformed the structure into a pre-fabricated house. Such a proof is wanting in this case. From the facts of the present case, it is clear that the shed was erected stage by stage and step by step right from the foundation till the fabrication of the roof. In this connection, the decision in 1983 ELT 2390 (JK Export Industries) would show that in respect of erection of a dal mill, the Tribunal has come to the conclusion that the plant in question was assembling at the site and could not be considered as excisable goods.
21. Though the general principles state'd by the SDR in respect of manufacture cannot be disputed, on a scrutiny of the facts of the present case, we are of the view that the nature of the work carried on by the assessees would not amount to manufacture.
22. Even assuming that there is a manufacture we have to find out if the goods were manufactured in a "factory". The explanation to Notification No. 46/81 indicates that the expression "factory" has the meaning assigned to it in clause(m) of Section 2 of the Factories Act. It is common case that the respondents erected the structures on the site allotted to them by VSP. It was urged on behalf of the respondents that an open yard could never be a factory. In AIR 1962 SC 29 (Ardeshir H. Bhiwandiwala V. State of Bombay (now Maharashtra) it was held that the expression "premises" must not be restricted to mean building and be taken to cover open land as well. In that case, even the salt works were treated as factory. But on the facts of the present case we have already held that the assessees were only erecting a construction and that they were fabricating the materials on the spot. In the case of Engineering Construction Corporation (Criminal Rev.267/78) the Hon'ble Gujarat High Court has held that the provisions of the Factory Act would not apply. To a similar effect is the decisions of the (supra), the decision of the Madras High Court in LPA 22-24/74 (ESIC V.K. Ramachandran), it was held that construction workers who put up the additional constructions have no similar nexus with the factory as they are birds of passage and the moment they completed the construction they are out of the picture. In the present cases, the workers were merely birds of passage and cannot be considered as workers working within the factory.
23. In Maharashtra Agro Industries (supra) the Tribunal has held that assembling bullock carts at the site of the customers would not amount to a manufacture. Hence even assuming that the respondents are manufacturers since the goods are not manufactured in a factory under Section 2(m) of the Factories Act or cleared from a factory, the provisions of the Central Excise Rules could not apply.
24. The third question that remains to be considered is whether the appellants have manufactured goods. The term "goods" has not been defined under the Central Excise Act though Section 2(d) talks of excisable goods. Obviously, the term cannot include immovable property. The words "movable property" and "Immovable property" have been defined under the General Clauses Act Sections 3, 26 and 36. Immovable property includes land benefits arising out of the land and things attached to the earth or permanently fastened or attached to it. Movable property means property of every description except immovable property. The Tribunal in Order No. 114/86-D, Collector of Central Excise, Madras v. Madras Industrial Linings Ltd., considered the scope of these expressions. In that case also the tanks were mounted on concrete foundations and attached to these foundations by means of anchor bolts, etc. The question whether such attachment by anchor bolts would amount to permanent fastening. If they are permanently fastened they would become immovable property and vice versa. The assessees have set out in detail the nature of the work carried' on by them. It is manifest therefrom that the pillars are first erected and the super-structures are fabricated thereon. It must also be noticed that foundation sometimes ranged from 3 to 17 mtrs. The constructions are such that there could be no pillars in the centre or within the shed. The entire weight including the overhead trollies have to be borne by the beams and trusses. The triangular trusses "are merely fabrications of the bars to give a particular shape and form. The trusses or fabrication or rivutting at the roof level are attached permanently to the beams which are themselves fixed to the columns. From these facts, it is abundantly clear that the fabrications or fixtures cannot be considered as movable properties. They are not in any event "goods" to attract central excise duty.
25. In view of the above discussion, we hold that the appeals by the Department are not maintainable and are dismissed. The appeal No. 322/85-B1 is allowed.
H.R. Syiem, Member (T)
26.The department's case is due to their perception of trusses, purlins, beams, columns, platforms, as goods which have been manufactured from channels, angles, joists, sheets, and therefore, must be subjected to duty. Nothing could be more fallacious. There are no such goods as trusses, columns, purlins, made from channels, angles, joists. A truss is only a frame made from steel, timber, concrete etc. All the members remain unchanged; but their length etc. may have to be modified by cutting to the desired length; they may be joined by bolting, welding etc. to hold them together in a given position to fit a given application. But and this is very important, it is not a truss except when it trusses say, a roof, to hold it up in a particular shape. Its function is to provide a firm support to a superincumbent weight like the roof of a building, or a Bridge. The steel members of a truss may be items of merchandise, but a truss never. A truss 'does not form a recognisable article of commerce in the same way that an angle or a channel does, because a truss is only a function to which a steel member article performs when placed in a position ordained by the engineer (builder). It is very necessary to see this very clearly in one's mind's eye for it is almost impossible to define or explain by explicit words and sentences why a truss is not a goods to be excised. Any steel member may be put to work as a truss - it has no definite shape or size, a different roof or bridge will require a different method of trussing. To repeat, there is nothing like a truss - it is only a steel or concrete or wooden member that trusses up some incubment weight.
27. A purlin is nothing but a roof beam, generally perpendicular to the trusses or rafters: it is also made from steel products which are manufactured in steel factories. It may be cut, drilled to take bolts, or treated in several ways, but always to fit it for that particular job it is to be put to. The steel product remains' what it was - an angle, a channel etc.
28. A column is nothing but a large member of sheets, drilled, sized, joined, welded, bolted together so that, in their newly acquired strength, they form a pillar which will hold up part of a structure like a building. It may be a mass of concrete compacted to great strength so that it supports a bridge. But for all the cutting drilling that the steel products received, they remain what they were, not changed, only adapted to a particular use. Let us remember, no steel factory makes a sheet, an angle, a beam, that fits all uses. All products of a steel factory must be sized, drilled, cut etc. to enable their use as such sheets, angles, beams. This is because the steel factories make only standard sheets, beams, angles, but the actual user seldom has a use that accepts the product as it comes out of the steel factory. The sheet is no good to the buyer except when it is a sheet to meet his requirement. A steel factory can meet specifications of thickness, strength, carbon content, as these are all standardised specifications; but size is more often than not, a matter of individual need. Or when the size is right, the holes must be only at given spots - no factory can ensure this. It is only the man at the location of the building project who can determine where the holes must be, and who can drill them so that they fit into other sections or shapes for bolting. At other times, the sheet may be too large and so must be cut and sized suitably, that it may go into the place chosen for it. That sheet, however, cut or drilled with holes it may be, does not cease to be a sheet - one can still see it as a sheet, the shape it took at the steel factory. The 'I' beam retains this shape but in perhaps, a shorter length because it has been cut to fit. A person can see the 'I' beam as it was and one can also see the `I' beam doing the work for which its shape best fits it for, a shape it was given by design at the steel factory, because in these applications an 'I' does it better than any other shape.
29. Let us examine this further. An '!' shape is the cross section of the beam called by this name. It is useful only in some purposes and not in others. There is an engineering and physical basis for this. A beam of this shape takes higher lateral weights than a simple straight beam. This is just one example - there are several others. An angle resists bending much better than a flat product of the same thickness and measurements. In short, mass for mass, length for length, a shaped metal product, has greater stress tolerance, i.e. strength, than an unshaped product.Corrugation of iron sheets gives them a stress resistance that an uncorrugated sheet of the same thickness, width and length can never equal; conversely, a product of a given thickness width etc. can be made three to four time stronger by simply giving it a certain shape, a shape that depends on the work it will be called upon to perform. Metal drums can be banded to make them less likely to bulge at the middle or to sag. But banding is expensive and requires further application of banding metal strips. By the simple process of ribbing them in the middle, the drums or barrels are made as strong as they are desired to be, without any additional band or- hoops; in the same way, a straight flat metal section is made immeasurably stronger by giving it an 'L' shape. A given amount of metal, when manufactured as an 'L' shape, acquires a strength far in excess of what it could ever possess as a plain '1' cross section. The physical forces at work all round us are taken advantage of so that, in a man (mass?) given shape, a metal does more than it would, without that shape.
30. All the shapes of the steel products are given with this objective -that when the product is used, it will be used by reason of its shape to the best advantage. The 'T' shape, the 'I' shape and the 'L' shapes are no mere engineering flights of fancy. Their virtues were discovered by long and hard experience by men who led in their fields. Every product has a shape which pre-eminently fits it for the application to which it is put, and this has to be driven home very strongly; that shape must be kept when it is used in the structural if it to give of its best. Thus every T beam, every 'L' angle, every 'U' channel will be seen in the structural to have retained it T or 'L' or 'U' shape; even if it is shorter after cutting at site, it has the same shape and form it had when it left the steel factory. The angle is still an angle, the channel a channel, the sheet a sheet, the beam a beam. To be sure, they had to be sized, cut, drilled so that they could be put up together into one structure; but unless one just bound them together, say with wire, or just piled them one on top of another, we cannot see how else the building or shed would be erected. The people at the construction site did not make trusses, purlins, platforms - they took angles, beams, sheets and by putting them together in a new form, made what are called trusses, purlins and so. A section or sections were sections and alone or with other sections and members were used to truss up the roof, to form rafters or whatever they formed. They come into being only because of the roof they support, or the wall they hold up. They are not hawked the way goods like sheets, angles can be hawked and sold. These last are well known commodities in the market place, - no one has heard of a truss or a purlin as an item of trade. They can of course, be sold, but only as the complete or finished structure - the shed, building, the cage, the bridge: they do not form a merchandise; they are just parts of a larger, differently designated unit. The man who buys the structure will not buy the truss, though there may be dozens of them - he will buy only the structure the whole construction.
31. We will take a leaf out of the SDR's book. She quoted an encyclopaedia that defined structural shapes. It is a steel rolled to standard sections and is widely used in building construction and in the manufacture of railway cars, agricultural implements, automobiles and numerous other products. By using a standard shape which is on the market and is adopted to a given structure or design it is often possible to secure a stronger, lighter construction and a reduction of manufacturing cost. This supports the view that the steel sections are used for and in the shape they are rolled or made, as they are better adapted for such uses. The judgment the SDR quoted 1980(6) ELT 775 may be examined. This judgment dealt not with our kind of problem but with the question whether drilling, trimming, manufacturing were processes essential to render brake linings fit for use on vehicles. The conclusion of the court was that the lining were not fit for use as brakes on vehicles unless they went through there processes. The person affected said he did not manufacture brake linings; the man from whom he bought the blanks did. No one disputed the presence of brake linings on the scene; only, who made them ?
32. The other cases do not help resolution of this dispute.
33. The question of whether an appeal from an order under Section 35E arose; but by order in stay application order No. 226/1986-B1, this Tribunal by a majority decided that such an appeal lay.
34. I endorse my learned brother's order.