Customs, Excise and Gold Tribunal - Delhi
Ludhiana Bottling vs Collector Of Central Excise on 6 December, 1996
Equivalent citations: 1997(93)ELT776(TRI-DEL)
ORDER Archana Wadhwa, Member (J)
1. Being aggrieved with the order passed by the Collector of Central Excise, Chandigarh confirming demand of duty of Rs. 2,42,629.77 and imposing personal penalty of Rs. 40,000/-, the appellants have filed the said appeal. Brief facts of the case are as follows:
The appellants are engaged in the manufacture of aerated waters for which they were licensed during the relevant period. During the period August 1988 to December 1989, the appellant fabricated and erected two conveyer systems in their factory for the extension of the already existing plant and machinery. It is this conveyer system for transmission of crates of bottles which is the subject matter of dispute before us. Whereas it is the Revenue's case that the said conveyer system falls under sub-heading No. 8428.00 of the Central Excise Tariff Act, 1985 and assessable to duty, the appellants contention is that the same is outside the scope of Central Excise law being immovable property as the same is embedded to earth. A show cause notice dated 8-6-1992 was issued to the appellants alleging that they had assembled a conveyer system in their newly constructed building and installed the same for the smooth transmission of bottle crates and the said conveyer system was classifiable under sub-heading 8428.00 of the schedule attached to the Central Excise and Tariff Act, 1986 and attracted duty at the rate of 15%. The said show cause notice culminated into the order passed by the Collector which is under challenge before us.
2. Appearing on behalf of the appellant Shri V. Sridharan learned Advocate took us through the allegations made in the show cause notice, reply filed by the appellant and the impugned order passed by the Collector. Explaining the processes undertaken by them in the erection of the said conveyer system, the learned Advocate took us to the reply filed by them before the Collector and contended that the conveyer system was erected by them in their factory brick by brick and the same came into existence in the 'embedded to earth form'. The same cannot be considered as movable goods capable of being bought and sold in the market as the length of the system itself was 300 feet and the same rests on the stands which are in turn embedded to the earth. He also explained that it is not possible to transport such a big and lengthy system which cannot be, by any stretch of imagination considered as commercially a marketable commodity. The learned Advocate also took us through the observations and findings of the learned adjudicating authority and submitted that though in principle Collector has observed correctly but he has not applied the same law to the facts and circumstances of the instant case correctly. He also submitted that the two decisions of the Hon'ble Madras High Court relied upon by the Collector were considered by the Hon'ble Supreme Court and were found to be not applicable in respect of the goods which are erected at the first instance by being embedded to the earth itself. He also submitted that the Hon'ble Supreme Court while considered these two decisions in the case of Municipal Corpn. of Greater Bombay and Ors. v. Indian Oil Corpn. Ltd. - 1991 Supp. (2) SCC 18 has laid down the test under which circumstances the goods attached to the earth can be held to be immovable goods. He also argued that the order of the Tribunal in IGE reported in IGE Ind. Ltd. v. Collector -1991 (53) E.L.T. 461 (Tribunal) relied upon by the Collector has since been recalled as observed in Para 4 of the Tribunal's order reported in Elpro International v. Collector -1996 (84) E.L.T. 406. He also submitted that his case was covered by decision and judgment of the Tata Robins Fraser Ltd. v. CCE reported in 1990 (46) E.L.T. 562 as the erection conveyer system was more akin to turn key projects. He submitted that the Collector has gone by the fact as if he was considering the excisability of the parts and components which have been used by them in the manufacture of conveyer system and not the excisability of the conveyer system as a whole as was clear from the observations made by him. He clarified that most of the parts and components are purchased by them from outside parties on which proper duty of excise leviable thereon has already been paid by respondent manufacturers. The lastly he relied upon the decision and judgement of the Hon'ble Supreme Court in the case of Quality Steel Tubes Pvt. Ltd. reported in 1995 (75) E.L.T. 17. He drew our attention to the judgment of the Tribunal passed in the said case reported in Quality Steel Tubes Pvt. Ltd. v. Collector - 1995 (6) RLT 136 (Tribunal) which was subsquently reversed by the apex court and submitted that in the said judgement it also relied upon two High Court judgments which had been relied upon by the Collector but the decision was not favoured with by the apex court. In the circumstances he submitted that the conveyer system in question may be held to be immovable property and their appeal be allowed. Learned Advocate also argued on the limitation aspect and the question of imposition of penalty.
3. Appearing on behalf of the Revenue, learned SDR Shri M. Jayaraman drew attention of the bench to the statement of Shri Harbans Singh and submitted that the said Shri Harbans Singh has clearly admitted that they have assembled and erected a conveyer system in their factory. This means that the conveyer was first manufactured and then installed in the factory and same has been attached to earth so as to avoid the vibrations in the working of the same. He also relied upon the Supreme Court's decision reported in Collector v. Ambalal Sara Bai Enterprises -1989 (43) E.L.T. 214 to support his contention that the captive use of the conveyer system in their own factory is not relevant for the purposes of Central Excise duty. He reiterated the arguments adopted by the adjudicating authority for invoking the larger period of limitation and submitted that there has been a contravention of provisions of law with intent to evade duty inasmuch as the appellant neither informed the Department about the erection of the said system in their factory nor filed any classification list or price list as required under the law. As such, he contended that the larger period has rightly been invoked by the Department and penalty has rightly been imposed.
4. In rejoinder Shri V. Sridharan, learned Advocate submitted that the reference to the statement of Shri Harbans Singh in the capacity of a Works Manager is not relevant in as much as in the said statement he has neither discussed nor explained the process of erection of the said system and has merely admitted that the said system was assembled and installed in their factory. The process has been given by them in their reply to the show cause notice in detail and the same has been not disputed by the learned adjudicating authority. It was his submission that it is now not open to the SDR to take a all together different stand.
5. After hearing both sides we are of the view that the appellants have a goods case on merits. The process of erection of the said conveyer system as given by them in their reply dated 16-10-1993 to the Collector of Central Excise, Chandigarh which has not been disputed by the adjudicating authority is as follows:
"The process of installation may briefly be explained like this that first of all the driver unit and the driven unit is grouted at both ends. This results in fixing these units permanently to the earth. Thereafter stands are placed in between both ends at required distances. Then channels are placed on these stands for driving the mechanical chain. Thereafter Gear Box and Electric Motors are grouted and then connected with the driving unit to put the mechanical positive drive conveyer system in working order. It would thus be seen that conveyer system gets permanently fixed to earth before it comes in existence working order. It is not a case of bringing into existence by the process of assembling, an article capable of being moved from one place to another. On the contrary the process starts with the fixing or embedding the ends permanently to the ground and thereafter other components are jointed. The entire system acquires the character of an immovable property right from the start of the process. The Conveyer System cannot be described as goods to attract duty under 8428.00. Apart from the fact that as per facts (anz solsvxrheuscr bd haor sere ). Conveyer System gets permanently fastened to earth and acquires the character of immovable property so as to take it outside the scope of excise levy, yet even otherwise activity of like nature i.e. erection of Plant and factory shed have been held to be not attracting duty by the Hon'ble Tribunal in series of decision. The activity of assembling and installation of conveyer system is also the same and the ratio of the Tribunal decisions applies with equal force. Few of the decisions are being cited hereunder :-
(i) 1983 (12) E.L.T. 825 (Tribunal) in the case of Gujarat Machinery Manufacturers Ltd. Karamsad. v. Collector of Central Excise, Baroda.
(ii) 1986 (25) E.L.T. 580 (Tribunal) - Anina Industries Visakhapatnam and Ors. v. CCE, Guntur.
(iii) 1990 (46) E.L.T. 562 (Tribunal) in the case of Tata Robins Fraser Ltd. v. CCE.
The last cited case i.e. 1990 (46) E.L.T. 562 (Tribunal) directly dealt with the issue of durability of Conveyer Belt System as per discussion in para 5.2 thereof.
In view of the foregoing the activity undertaken by the noticee cannot be held liable to duty as proposed in the show cause notice.
3. The Hon'ble Supreme Court has held in series of cases that the test of marketability be also satisfied before duty is levied on an article. In the instant case the Conveyer Belt System had been designed to work in specific factory location. It would have no value for other manufacturers. It does not satisfy the test of marketability. The judgment of the Hon'ble Supreme Court in the case of BHOR Indust. reported in 1989 (40) E.L.T. 280 (S.C.) is being cited.
4. It is submitted that extended period of limitation cannot be applied in given circumstances. The unit of the noticee is under excise control. The activity of installation of Conveyer Belt System, from its very nature cannot be undertaken in a secretive manner. As per facts mentioned in the show cause notice, work on Conveyer System was started in August 1988 and it was completed in December 1989. During this period the departmental officers had been paying visits to the factory. The noticee never bona fide felt the activity to be an activity of manufacture of excisable goods and did not feel called upon to take out a licence and observe formalities. But it cannot be alleged as suppression of material facts. The activity was neither suppressed nor it is capable of being suppressed. In the circumstances the demand cannot be sustained as extended period of limitation cannot be applied. In support, following judgments of the Hon'ble Supreme Court are being cited.
(i) 1989 (40) E.L.T. 276 (S.C.) in the case of CCE v. Champher Dmgs and Liniments Ltd.
(ii) 1989 (43) E.L.T. 195 (S.C.) in the case of Padmini Products Ltd. v. CCE.
5. For the same reasons as explained in the preceding paras, no penal action is warranted. Firstly no duty at all can be demanded as the activity does not result into manufacture of goods. Secondly the noticees never bona fide felt that duty is attracted in such a situation.
6. It is once against requested that the proposed proceedings be ordered to be dropped.' The noticee party request that an opportunity of personal hearing in the matter may please be afforded to them."
6. From the above we find that first the driven unit and the driver units are grouted to the earth at the requisite place and the stands are embedded to earth with equal distance in between them. Subsequently the system is erected on these stands and the driven units. We have also looked into the photos of the system and the process of erection of system as explained by the learned Advocate. The two decisions of Madras High Court in the case reported in AIR 1940 Madras 527 and in the case reported in AIR 69 Madras 346 have been taken note of by the Hon'ble Supreme Court in the case reported in 1991 Supplementary (2) SCC 18.
7. Reference was also made to the Supreme Court decision in the case reported in Name Tulaman Manufacturers Pvt. Ltd. v. Collector -1988 (38) E.L.T. 566 is not called for inasmuch as the goods in question was entirely different in that case and the issue involved before us. Respectfully following the decision of the apex court in the case of Quality Steel and by noting that the goods have been erected being embedded to earth, we hold that the same do not satisfy the test of being goods within Section 3 of the Act on account of their being immovable as also on account of their being non-marketable goods. As we are allowing the appeal on the first question of excisability of the goods, we do not find it necessary to go into the question of limitation. However in view of our above finding we hold that the penalty of Rs. 40,000/- on the appellants is not justified and the same is also being set aside.
8. In view of the foregoing the appeal is allowed by setting aside the impugned order with consequential relief to the appellants, if any.