Customs, Excise and Gold Tribunal - Delhi
Punjab Project & Construction Pvt. Ltd. vs Cce, Bhubaneswar on 28 February, 2002
Equivalent citations: 2002(142)ELT154(TRI-DEL)
ORDER
K.K. Usha, J. (President)
1. These appeals arise out of a common order passed by the Collector of Customs & Central Excise, Bhubaneswar dated 11-12-1992. Under the impugned order demand of central excise duty amounting to Rs. 27,28,710/- against M/s. Punjab Project & Construction Co. Ltd. and M/s. NALCO Ltd. was confirmed and a penalty of Rs. 2,00,000/- each was imposed on them under Section 173Q of the Central Excises & Salt Act, 1944. Aggrieved by the above order Appeal Nos, E/349/93-B and E/68/93-B are filed by M/s. Punjab Project & Construction Co. Ltd. and M/s. NALCO respectively.
2. In the year 1985 the above mentioned parties had entered into a contract for fabrication and erection of Pot Shells by M/s. Punjab Project & Construction Co. Ltd. at the premises of M/s. NALCO. The work was completed in 1986. Show cause notice was then issued on 18-5-92 proposing to levy duty on the manufacture of Pot Shells. While confirming the demand the Collector took the view that Pot Shell is distinct from the raw materials used in the manufacture of the same, has distinct name, character and use and therefore, an excisable goods. It was further held that M/s. Punjab Project & Construction Co. Ltd. as well as M/s. NALCO are manufacturers of the goods and therefore both are liable to pay the duty.
3. The main contention raised by M/s. Punjab Project & Construction Co. Ltd. in their appeal is that fabrication of Pot Shells which formed integral part of the Aluminium Smelter Plant of NALCO does not result in 'production of excisable goods' since they are not marketed and are also not marketable being tailor-made according to the design specified by NALCO and are specially designed for their plant. These parts are not bought and sold in the market in the course of trade and therefore, they are not excisable goods.
4. The Collectorate of Excise and Customs, Bhubaneswar, issued a show cause notice dated 18th May, 1992 to the appellants alleging that the appellants had manufactured sixty Pot Shells for the Aluminium Smelter Plant of NALCO and evaded payment of Central Excise Duty of Rs. 27,28,710/- thereon and violated the provisions of Rules 9(1), 43, 52A, 63, 173B, 173C, 173F, 173G and 174 of the Central Excise Rules, 1944. By this notice, the appellants were directed to explain as to why excise duty amounting to Rs. 27,28,710/- should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11 of the Central Excises and Salt Act, 1944 read with Section 11 of the Central Excises and Salt Act, 1944 and why penalty should not be imposed on them for the alleged contraventions.
5. Before the adjudicating authority the appellant contended that Pot Shells fabricated by them are not excisable goods. It is submitted that there is total non-consideration of this important aspect in the impugned order. We find merit in the contention raised by the appellant. There is no proper consideration of the issue whether Pot Shells fabricated by the appellant are excisable goods, whether it is, movable or immovable property etc. The learned Counsel for the appellant M/s. Punjab Project & Construction Co. Ltd. brought to our notice the instructions dated 15-1-2002 issued by the Central Board of Excise & Customs in exercise of its power under Section 37B of the Central Excise Act, 1944 to be followed by the assessing authorities in the matter of deciding excisability of plant and machinery assembled at site. These instructions are issued in the light of the several decisions of the Apex Court. Since such an examination has not been done in the present case, we are inclined to set aside the order and remand the matter for proper consideration of the question of excisability of Pot Shells fabricated and installed by M/s. Punjab Project & Construction Co. Ltd. at the premises of M/s. NALCO.
6. The issue raised in the appeal filed by M/s. NALCO is that under no circumstances M/s. NALCO can be treated as the manufacturer of the Pot Shells. The learned Counsel appearing on behalf of the appellant submitted that even if on remand it is found that Pot Shells fabricated and installed by M/s. Punjab Project & Construction Co. Ltd. is an excisable commodity, no liability shall be cast on M/s. NALCO to pay the excise duty. Under the impugned order the Collector has held that M/s. NALCO is also to be treated as manufacturer of Pot Shells in view of the provisions contained under Section 2(f)(ii) of the Central Excises and Salt Act, 1944. The relevant provision reads as follows :-
"Section 2(f) - 'manufacture' includes any process
(i) incidental or ancillary to the completion of a manufactured product; and
(ii) which is specified in relation to any goods in the section or chapter notes of the schedule of Central Excise Tariff Act, 1985 as amounting to manufacture and the word 'manufacturer' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture on his own account, but also any person who engages in their production or manufacture on his own account."
According to the Collector it was M/s. Punjab Project & Construction Co. Ltd. who brought into existence by its own skill and labour a separate excisable commodity, namely, Pot Shells as per requirements of M/s. NALCO. Therefore, M/s. Punjab Project & Construction Co. Ltd, is the actual manufacturer of the excisable goods. Then he proceeds to observe that since the goods are manufactured by M/s. Punjab Project & Construction Co. Ltd. on behalf of M/s. NALCO, M/s. NALCO is the principal manufacturer of the subject goods in terms of Section 2(f) of the Central Excises & Salt Act, 1944. It was on this basis, both parties were found as manufacturers of the very same goods.
7. We are afraid that the adjudicating authority has wrongly applied the provisions contained under Section 2(f) to rope in M/s. NALCO as a manufacturer. Definition of the "manufacturer" in Sub-clause (ii) provides that term shall include two categories of persons (i) persons who manufacture the goods themselves in their own account and (ii) persons who get the goods manufactured through hired labour. The adjudicating authority has taken the transaction between M/s, NALCO and M/s. Punjab Projection & Construction Ltd. as a contract of labour. On going through the terms of the contract, we find that the above assumption is totally misconceived. The terms of the contract would show that apart from manufacture, fabrication, testing, transportation and erection at site M/s. Punjab Project & Construction Co. Ltd. has to provide even design. The reference to a term in the agreement that agreement being a work contract no sales tax/excise duty will be payable on the contract value or part thereof and if at any later date the seller is required to pay sales tax/excise duty on contract price the seller shall be reimbursed at actual by M/s. NALCO, is of no help to hold that Pot Shells fabrication was being got done by M/s. NALCO under an agreement of hired labour. Therefore, we are of the view that M/s. NALCO cannot be treated as a manufacturer even if ultimately in the remand proceedings the adjudicating authority comes to a conclusion that Pot Shells fabricated and erected by M/s. Punjab Project & Construction Co. Ltd- are excisable goods.
8. With the above clarification regarding the liability of M/s. NALCO to pay excise duty we set aside the impugned order and remand the matter to the adjudicating authority for fresh consideration on the question of excisability of Pot Shells fabricated and erected by M/s. Punjab Construction & Co. Ltd. Appeal No. E/349/93-B is allowed by remand and Appeal No. E/68/93-B stands allowed.
Operative part of the order already pronounced in the open Court on 28-2-2002.