Customs, Excise and Gold Tribunal - Delhi
Ajit India Pvt. Ltd. vs Collector Of Central Excise on 28 September, 1984
Equivalent citations: 1985(19)ELT541(TRI-DEL)
ORDER S.D. Jha, Member (J)
1. Appeal No. 350/1978-B originally a Revision application to Government of India-transferred to the Tribunal to be disposed of as an appeal presented before it. is directed against order dated 20-11-1977, passed by the Appellate Collector of Central Excise, Bombay. By the said order, the learned Collector upheld the order dated 15-1-1977, passed by the Deputy Collector of Central Excise, Bombay. By this order, the learned Deputy Collector appropriated a sum of Rs. 500.00 for not producing the goods before him in terms of the bond executed by the appellants and committed a breach thereof, directed the appellants to pay Central Excise Duty amounting to Rs. 606.52 for removing excisable goods during the period 30-7-75 to 10-8-75 without payment of duty and also imposed penalty of Rs. 250.00 for breach of and under Rule 173Q. In this case, it appears that the appellants were charged with having cleared goods without payment of duty and without properly accounting the same and thus having committed breach of certain provisions of Central Excise Rules, 1944.
2. Appeal No. 2041/83-B is directed against order-in-appeal dated 21-6-83, passed by the Appellate Collector of Central Excise, Bombay. In this appeal, the learned Collecter, after the matter was remanded to him by the Tribunal by order No. B-62/83, dated 5-2-83 held that items manufactured by the appellants and cleared from the factory will attract Central Excise duty and would be assessed accordingly. He thus upheld order dated 10-4-78, passed by the Assistant Collector of Central Excise, Thane-Dn. II. By this order, the A.C.C.E. declined to differ from the conclusion reached by A.C.C.E. Dn. III in according approval to appellants classification list. By the said list the appellants goods were classified as Items falling under T.I. 68. He has also held that it was obligatory on the part of the appellants to file price lists or opt for assessment under Notification No. 120/75 dt. 30-4-1975 and lapse on their part was breach of Rule 173-B punishable under Rule 173Q. He however imposed no penalty but cautioned the appellants to be more careful and regular in future.
3. Appeal No. 2719/83-B is directed against order-in-appeal No. 304/83 dt. 5-9-1983, passed by Collector of Central Excise (Appeals), Madras. By the said order, the learned Collector rejected the appellants appeal and upheld the order dated 4-2-1983, passed by the A.C.C.E., Madras-VII Dn. By this order, the A.C.C.E. rejected the appellants contention that their products were semifinished non-excisable goods and held that assembled items as well as component parts manufactured by the appellants at factory premises were excisable goods classifiable under T.I. 68 of the Central Excise Tariff.
4. Appeal No. 2720/83 is directed against order-in-appeal No. 350/83, dated 5-9-83, passed by the Collector of Central Excise (A), Madras. By the said order, the learned Collector held that appeal did not lie against provisional assessment and so holding dismissed the appeal filed against order dated 24-2-83, passed by the A.C.C.E., Madras VII Dn., the order by which A.C.C.E. had directed the appellants to file price list in part-II for every contract entered into by them in the manner directed in the order.
5. This order will dispose of all the above described appeals.
6. The appellants have another appeal No. 785/84-B fixed for hearing on 24-9-82. On Departmental Representative's request to which Shri Habbu had no objection, records and order in that appeal, so far as material is to be read, as evidence in these appeals.
7. Appeal No. 2720/83-B may be considered first. In this appeal it was inter alia argued by Shri R.K. Habbu that the Collector was in error in holding that no appeal was maintainable against an order of provisional assessment. He explained how the directions of the A.C.C.E. calling upon the appellants to file price list in part-II for every contract entered into by the appellants was not a practicable proposition and not capable of compliance. Shri V. Lakshmi Kumaran, learned S.D.R. for the respondent at first attempted to argue that an appeal against the order of the Collector of Central Excise (Appeal) was not maintainable before the Tribunal having regard to the nature of the order but later stated as follows :
"If the grievance of the appellant is regarding the part of proforma in which price list has to be filed (whether part II or part VI) it is submitted that so long as the quantification of the value for assessment purposes is not disputed at this stage before the Tribunal in fact, dispute does not arise at this stage, it is purely procedural as to which part of the proforma the price list has to be filed."
In view of the foregoing, this appeal would have to be allowed and it is hereby ordered that the order of the lower authorities calling upon the appellants to file price list in part-II for every contract is set aside and it is open to the appellants to file price list in part-VI or such other appropriate form which the A.C.C.E., after discussion with the appellants may allow them to file keeping the practical problems involved in the matter in view.
8. In the remaining three appeals, Shri Habbu, learned Advocate for the appellants argued that the appellants' main business consists of accepting and executing works contracts for erection of false ceilings, doors, windows, partition, etc. Customers work orders give designs and specification. The appellants purchase duty paid extruded aluminium sections from the market. For executing the works contract the appellants subject the aluminium sections in their factory to processes consisting of cutting the aluminium sections to required lengths, drilling, punching, revetting, take rolls, screwing, etc. The sections so processed are carried to the customers' sites they are fitted in combination with sheets and hardwares items like locks handles etc. which are purchased from the open market the appellants install, erect doors, windows, partition, false ceilings etc. on site taking the requirements of the customers into consideration. Sh. Habbu's argument is that false ceilings, windows, doors etc., come into being only after installation/erection is completed at the work sites of the customers. He argued that what are removed and cleared from the factory are only aluminium sections and in spite of the processes like punching, drilling, taping holes, etc., aluminium Section remain only aluminium sections. These sections are not commercially identified as "component parts". He submitted that as a result of the processes a new and different article having distinct name, character or use had not emerged and therefore there was no manufacture. He also submitted that the pieces so cleared from the factory were not "goods". They were not something which could ordinarily come to the market to be bought and sold. For this argument he relies on certain observations made by the Bench in remand order No. B-162/83, dated 25-3-1983 in appeal No. 42/80-B (para 7 of the order). Both in his arguments and in the grounds set out in the memo of appeal to explain the processes done by the appellants and the nature of their activities photographs of appellants products certificate dated 5-5-1983 of M/s. C.R. Narayana Rao (Consultants) Private Ltd. Architects, consulting engineers & planners, certificate dated 2-5-83 of M/s. East Coast Constructions and Industries, Engineers and Contractors, three specimen works orders in appellants favour by M/s. Rajeswari Enterprises, Sh. Bharathi Mills and M/s. Lucas TVS have been filed. Sh. Habbu argued that appellants' activity was in reality works contract and the aluminium sections after the processes remain aluminium sections and at the time of their removal and clearance from the factory they were neither manufactured nor were they "goods". In support of his submission, Sh. Habbu relied on the following decisions: (1) order dated 1-4-81 in appellants' own appeal passed by Tamil Nadu Sales Tax Appellate Tribunal, Madras. (In this order the appellants activities were held to be works contract hot liable to sales tax as sale). (2) South Bihar Sugar Mills v. Union of India, 1978 E.L.T. J 336. (3) Vanguard Rolling Shutters and Steel Works v. Commissioner of Sales Tax, 39 S.T.C. page 372. (4) Maharashtra Agro-Industrial Corporation v. C.C.E, Bombay-1984 (18) E.L.T. 14. (5) C.C.E., Jaipur v. Fine Marbles & Minerals Pvt. Ltd., 1984 ECR 1493 (CEGAT) (6) Dunlop India v. Union of India, 1983 E.L.T. 1566 (S.C.).
9. It was noticed that while Sh. Habbu, learned Advocate in his arguments was emphasising only about windows and doors the entire range of appellants' activities or the products which are the subject-matter of present appeals were not very clear. Sh. Habbu was asked to state about the precise nature of the appellants activities and the processes in which the appellants were engaged in making windows, doors, partitions, false ceilings and layers, grills, rails, curtain walling, sun-precautions. Brochure titled Architectural Aluminium showing range of appellants activities was then filed. This brochure gives pictures, designs and diagrams about the appellants' products and they cover wide range like Aluminex North light glazing, Louvre Windows, false ceilings, horizontal sliding windows/doors, aluminex entrances, various kinds of circular grills, concealed doors, fix-o-form, aluminex furniture. The brochure also tells about Secural Aluminium Railings. This item and some other items are described to be ready, delivered in standard lengths ready for assembly. Components of these railings are set out in detail. The same is true of Secural railings and architectural aluminium demountable partitions. Some diagrams details component parts for sliding doors. The same is true for sliding windows. For suspended folding partitions they have similar diagrams and details. For doors and entrances also they have similar details. In fact standard frame sizes for doors and windows of different models are set out. For windows model 101 RT we have number of plates and model 101LV we have number of plates, blades measurement both in inches and metres, along with necessary details about fitting and parts thereof. Parts of aluminex twin slide doors and frames are described in the diagrams of the door and their fittings shown. Kwiklock concealed false ceiling would give out that it is made from galvanised irone frame work for concealed type of false ceiling and not from aluminium sections as claimed in this appeal. Aluminex roof, side wall and north light glazing Mark-II is designed showing component parts of these, all these component parts is given place for fitting. In the details it is given out that aluminex roof glazing are produced in a number of standard sizes designed for spans up to 10 feet 8 inches without intervening support.
10. When during arguments it was pointed out to Sh. Habbu that according to appellants' brochure windows and doors and some of their other products were in standard sizes, it was given out that though descriptions were for standard sizes, the standard sizes were never adhered to and customers wanted tailor-made items only according to individual requirements as per architects, advice and opinion. It is unfortunate that we have no details of each and every article or piece which is the subject-matter of the present appeal and the appeal has to be decided generally.
11. On behalf of the respondent Shri V. Lakshmi Kumaran, S.D.R. strongly defended the orders passed by the lower authorities. As to the nature of the appellants' products Shri Lakshmi Kumaran read out to the Tribunal the order of the Collector of Central Excise, Madras in appeal No. 785/1984-B (we have already said that with the agreement of parties the records in this case so far as material have to be read as evidence in the present appeal). He submitted that as result of the processes performed by them (the appellants) on the Aluminium Sections definite identifiable articles or products come into existence. These products are complete frames, windows, doors and the like or parts or members of such windows, doors and the like. He submitted that in ISI 1948-61 specification of aluminium doors, windows and ventilators and their parts have been given, According to him this would mean that not only these door frames, windows frames and ventilators frames and the like are goods for the purpose of central excise duty but even their members are also goods. He submitted that while mere cutting, drilling, punching and the like processes may not by themselves transform aluminium sections into different identifiable products the effect of these processes is to change aluminium sections into different. Therefore, they would have to be called goods and there is manufacture. As to Sh. Habbu's strong reliance on the Supreme Court decision in Vanguard Rolling Shutters & Steel Works v. Commr. of Sales Tax, U.P., 39 STC 372 and the following observations at page 375 therein.... "The circumstances that the materials have no separate identity as a commercial article and it is only by bestowing work and labour upon them, as for example, by affixing them to the building in case of window-leaves or wooden doors and windows that they acquire commercial identity would be prima facie indicative of a works contract."
In support of the argument that just as window leaves have not acquired any commercial identity, the appellants aluminium Sections after the processes mentioned do not acquire any commercial identity and therefore are not "goods" at the time of clearance from the factory, Sh. Lakshmi Kumaran submitted that these observations of the Supreme Court were factual observations and was not the law laid down by the Supreme Court within the meaning of Article 141 of the Constitution of India nor were they the ratio of the decision nor they could be called obiter dicta of the Supreme Court. He submitted that this factual observation could be used in a subsequent decision if on facts it was found that the processes performed by the appellants on aluminium Sections resulted into bringing into existence of goods liable to excise duty. He proposed to cite a number of decisions in support of his this coqtention but Sh. R.K. Habbu, learned Advocate for the appellants at this stages stood up and said that this observation was neither law laid down by the Supreme Court nor was it obiter but being observations made by the Supreme Court they were entitled to the greatest respect. Fortunately, in this case, we are not deciding the question of sales vis-a-vis works contract, therefore, the observation made in the decision supra with reference to window leaves though entitled to greatest respect may not be strictly applicable for determining excisability of products like doors, frames, window-frames, etc. Window leaves as such do not arise for consideration in the present appeals. This argument and observations are mentioned only to make the record straight. For this very reason Sh. Habbu's reliance on decision of Tamil Nadu Sales Tax Tribunal wherein appellants activity was held to constitute works contract and not as sale does not help the appellants.
12. As to Sh. Habbu's argument about the appellants' products cleared from the factory not being in marketable condition, Sh. Lakshmi Kumaran had two fold arguments to make : Firstly, he urged there was evidence that appellants themselves in some cases had sold such members or pieces to certain parties and appellants had given out advertisement in Newspapers inviting parties to manufacture such pieces and that appellants in future propose to purchase them. He submitted that for being 'goods' general marketability was not the test and relied on Allahabad High Court decision in Union Carbide v. C.C.E., Madras, 1978 E.L.T. 1. Shri Lakshmi Kumaran also relied on the following decisions in support of his submissions.-
(1) T.I. Cycles v. Union of India-1983 E.L.T. 681;
(2) Order No. 220/83-B, dated 31-3-1983 Collector of Customs v. B.H.E.L.-1984 ECR 1057 (3) Anil Ice Factory v. Union of India-1984 (15) E.L.T. 333.
13. While Sh. Habbu, learned Advocate for the appellants was at pains to convince the Bench that what was cleared from the factory was only aluminium sections subjected to certain processes which could not be called 'manufacture' or the such products "goods", Sh. Lakshmi Kumaran was at pains to convince that the process of cutting, drilling holes, punching, revetting, etc., had so altered the aluminium sections that they had become a different identifiable items with name, character and use.
14. Again while Sh. Habbu would have us believe that there is nothing like window or door frames and like frames which may be had in the market, Sh. Lakshmi Kumaran would have us believe that the processes brought into existence a new product which was component part of a window frame or door frame and the like. While Sh. Lakshmi Kumaran was in the midst of his arguments, the Bench felt that door frames, window frames and the like items when complete, had name, character and use different from that of, the raw material i.e. aluminium sections and known as such and were marketable. During arguments after some discussion with Sh. Habbu and Sh. Lakshmi Kumaran, the Bench put the following propositions to the parties :
Duty shall be levied on these items only if, at the time of clearance from the appellants' factory :
(i) they are in fully assembled condition,
(ii) in CKD packs or in ready-to-assemble condition. Minor operations, however, outside the factory to be ignored.
15. Sh. Lakshmi Kumaran stated that decision on these lines would satisfy the Department. He also informed that the term "ready to assemble" is a well understood term in commercial and industrial circles. Sh. Habbu, however, had his own reservations about the propositions.
16. Collector in paras 18, 19 & 20 of his order dated 4-4-84 in appeal No. 785/84-B describes the appellants' activity as under :
"18. It is seen from the seized records viz. the works order blueprint/ invoices etc. that doors, windows partitions etc. manufactured at the factory for which the fabrications are undertaken to the exact measurements given by the party or as ascertained by the factory's people. It appears from the works order listed below (the list illustration) that fabrication of the materials is not done just as a matter of course but it is doubly ensured that the factory does not go ahead with fabrication based on the works order details, wherever there was the slightest doubt regarding the dimensions. It is also seen from the terms of the contract that the customer has no option to reject the goods once they were made as per the dimensions mentioned in the supply order on the ground that the site conditions had varied subsequent to the placement of the order :-
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SI. Works Order No. Special Instructions No.
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1. Work Order No. 1063A Do not fabricate as final measurements are to be decided. Fabrication to be started after getting correct sizes.
2. Works Order 1932A/9/6 Fabrication to be started after getting correct dated 16-9-80 sizes.
3. W.O. 1094/2/14 Except for items 3 and 7 sizes of other items dated 28-2-82 should be measured at the site before fabrica-
tion.
4. W.O. 1109/10/3 dated Erector who goes there should take the 26-10-78 exact dimensions and send us in advance.
5. Bangalore 1/5/79 Mr. Muthiah telephones that the width of dated 26-10-78 the door should be taken as 4.625 metres instead of 4.265 metres as mentioned in the works order. Please make note of this change and fabricate accordingly.
6. W.O. 1037/D/4/5 Before fabrication factory should consult dated 19-4-77 Mr. K. Muthiah.
7. W.O. 1078A/7/9 Measurements to be confirmed at site before starting the fabrication.
8. MD/We/1032A/12/l Fabrication after getting correct dimensions.
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19. Also the cutter's report appears to bear ample testimony to the fact that the products are fabricated to the minutest details, the lowest unit of measurement adopted being millimetre.
20. Even in cases where the factory claims to have cleared not the assembled frames but their members only, it may be stated that even such members themselves are liable to suffer excise duty under Tariff Item No. 68 (NES) as component parts of the respective product viz. window door, north light glazing etc. as detailed below :
(a) Component parts of windows and doors :
1. Verticle member of outer frames.
2. Horizontal member for outer frames.
(The top horizontal member is known as 'Head Member, The bottom horizontal member is known as 'Sill Member',
3. Vertical member for inner frame or shutter frame.
(This is also known as 'Shutter and Jamb and Shutter inter'locking Jamb' in the case of sliding windows.)
4. Horizontal member for inner frame or shutter.
5. Architrave (for windows)
6. Sliding Rails (for windows)
7. Cleats
8. Hinges
9. Handles
10. Locks (for doors only)
11. Weather strip (for windows)
(b) For the manufacture of partitions :
1. Horizontal members
2. Vertical members
3. Cleats
(c) For the manufacture of false ceiling :
1. Main'T'
2. Cross 'T
3. Spice Plates
4. 'EYE' hook
5. 'J' Bolts.
(d) For the manufacture of berth light glazing :
1. Glazing bar
2. Cover strip
3. Glass stop
4. Fixing shoes
(e) For the manufacture of hand rails (or) balustrade :
1. Top rail
2. Bottom rail
3. Balustrade Post section
4. Top rail cover
(f) For the manufacture of louvre windows :
1. One set of verticle member
2. One set of horizontal member
3. Louvres
4. Cleast
17. The Central issues for decision by the Bench in these appeals may be summarised as follows :
(i) Classification and assessment of fully assembled windows, doors, shutters and other like products removed from the factory in fully assembled condition ;
(ii) Classification and assessment of such products, if cleared from the factory in CKD or in ready-to-assemble condition for subsequent assembly at site ;
(iii) Classification and assessment of pieces which have been subjected to processing like drilling, punching, revetting, etc. which the appellants claim to be aluminium sections and the department claims to be identifiable or component parts of windows, doors and the like whether they should be held to be aluminium sections only not liable to duty again under T.I. 68 or held assessable as component parts under T.I. 68.
18. The Bench feels that in respect of Central issues (i) and (ii) (i.e. completely assembled window frames, door frames and like items and ready to assemble items) the aluminium sections after being subjected to several processes result in bringing into existence complete door frame or window frame or like items. Similarly, if the pieces are in CKD packs or ready to assemble condition and may be fitted at site only after some minor operation, such pieces would be called goods and such processes 'manufacture' and these goods would be classifiable under T.I. 68 and liable to duty accordingly. This finding would thus answer issue No. 1 and 2. Taking up the 3rd issue, viz. classification and assessment of pieces subjected to processes like the drilling, punching and revetting, etc. which the appellants claim to be aluminium sections and the department as identifiable component parts of window doors and the like items, we have already pointed out that the entire range of the appellants' activity with regard to these pieces is only generally before us. These processes by themselves do not constitute manufacture of excisable goods. The meaning of the term 'manufacture' and goods which alone attract Central Excise duty have been interpreted by the Supreme Court in the leading cases of Union of India v. DCM, AIR 1963 S.C. 791 and South Bihar Sugar Mills v. Union of India, 1978 E.L.T. J 336 wherein it has been held that manufacture involves bringing into existence a new substance and it does not mean merely producing same change in substance. Manufacture implies change but every change is not manufacture and yet every change of article is the result of the treatment labour and manipulation. But something more is necessary and there must be transformation and a new and different article must emerge having a distinct name, character and use. About the goods they held "these definitions make it clear that to become goods an article must be something which can ordinarily come to the market to be bought and sold". It is true that the appellants have in some cases sold doors and window frames and door frames. However, we are not now considering such window frames, door frames etc. but pieces of aluminium sections. From the evidence produced by the Department, it is not possible to make out whether these pieces have acquired any distinct name, character or use i.e. whether they are "goods". We might observe that while in order-in-appeal No. 304/83 dated 5-9-1983, the learned Collector of Central Excise (A), Madras in para 10 of his order generally observes that manufacture of such identifiable parts would constitute manufacture and that they have distinct name in the market. We find that the discussion is very general and does not disclose the evidence on which these findings are based. Another learned Collector of Central Excise (A) by his order-in-appeal No. E-1203 dated 18-6-1983 does not deal with these pieces at all and deals only with frames and windows. He holds that the appellants are preparing frames and supplying them. Another Appellate Collector of Central Excise, Bombay by his order dated 29-11-77 (in para 3, of his order observes, "True, item is not available in the market as manufactured articles for sale/ purchase or trade but it is not necessary that an item should be so available in the market to attract excise duty". As already stated the Bench reiterates that merely cutting aluminium sections to different sizes, punching, drilling and revetting would not be constitute manufacture. The lower authorities should with respect to these pieces have given a clear cut finding based on evidence with respect to each class of pieces, whether there is 'manufacture' and or whether they are 'goods'. The basis for the findings should also have been clearly stated to justify levy of excise duty thereon. In absence of this, we hold that these are not liable to excise duty.
19. Another point requires mention. Different considerations might arise while coming to a finding regarding component parts of standardised frames and doors and windows and the like and tailor-made items. In respect of tailor-made items there can be no question of component parts but only of replacements. Again, even a tailor-made item, if produced in large quantities, may become a standard item and the concept of component parts may then emerge. All these considerations may be kept in mind for deciding the excisability of such parts.
20. In Appeal No. 350/78, a penalty of Rs. 250 has been imposed against the appellants. On the facts and circumstances of the case, we do not think that the imposition of penalty was called for. Penalty imposed against the appellants in order appealed against relating to this appeal is set aside.
21. The lower authorities will rework out the Central Excise duty to which the appellants are chargeable in the light of this decision and observations made therein. The appeals are disposed of accordingly and partly allowed.