Customs, Excise and Gold Tribunal - Delhi
Standard Industrial Engineering Co. vs Collector Of C.E. on 19 May, 1988
Equivalent citations: 1988(38)ELT196(TRI-DEL)
ORDER H.R. Syiem, Member (T)
1. There are two orders in these two appeals : one is order-in-original No. 10/85, dated 30-9-1985 passed by the Collector of Central Excise, Guntur and the other, order-in-original No. 7/85, dated 27-7-1985 passed by the Additional Collector of Central Excise, Guntur.
2. The dispute is the same in both the cases. The appellants, M/s. Standard Industrial Engineering made what the Central Excise say were goods viz. purlins, trusses, rafters bracings etc. from MS plates, channels, angles, rounds, supplied to them by another person. The department say that the trusses, purlins, bracings were all goods assessable under Item 68, because they were fabricated from the angles, MS plates, channels etc. and that in the fabrication, the finished goods have come to acquire new names, characters and uses and that the processing constituted a manufacture within the meaning of Section 2(f) of the Central Excises and Salt Act.
3. At the hearing, the learned counsel for M/s. Standard Industrial argued that the Tribunal had already decided this dispute in 1986 (25) ELT 580 re: Aruna Industries; and the Collector has accepted that decision of this Tribunal.
4. They made sheds and set them up on behalf of another party from materials and steel sections supplied to them. In terms of the Aruna decision of this Tribunal, they are not liable to pay any duty, because there was no manufacture; and I agree with him.
5. The learned counsel for the department, however, said that the facts in these cases were different from Aruna, but I am not able to agree with him. The facts may differ in one or two particulars, but in substance and in principle and most details the cases are alike and the decision in Aruna must apply here.
6. The appellants manufactured the purlins, trusses etc. from materials they received from a party called VSP. The materials were steel channels, steel angles, MS plates and other steel products. From these they made purlins, trusses, rafters, bracings etc. for the shed or structure they put up on behalf of VSP. The materials were drilled, cut, sized, and according to the Additional Collector, removed in CKD condition; the Collector says that they were removed in semi-finished condition to the site. It is clear from this that the angles, channels, sheets were only sized and drilled at one place, but were actually put up and fitted in the structure only at the site. It is not that they removed trusses, purlins, braces, but channels, angles and sheets which had been suitably sized according to the measurements required for the planned structure. The Collector and the Additional Collector both say that these were made to intricate and complicated drawings, which may well be. There would certainly be drawings, specifications etc., because you cannot simply take an angle or a channel and a sheet made in the steel factory and start applying your band-saw cutting machine to them, and fix them hugger mugger every which way, because that is the most eminent way adapted to producing a cut channel or a sheet that fits nowhere. If a shed or structure of a given size is to be set up and you need purlins, trusses for the roof, you will jolly well have to measure before cutting or drilling or whatever you do, if you want the cut, channels and beams to fit where they are meant to be fitted. If the Additional Collector and the Collector find all this intricate or complicated, I would not contradict them; but there are few who will find them so. They speak of the Intricate building structural; we have found nothing more intricate than measuring, cutting and drilling - nothing very intricate or difficult about this. And a structure of this kind is the simplest one you can have because it hardly needs any architectural design: it is a strictly utility structure for doing...in, and is not for human occupation. That it needs to be strong is only to be expected, and that is why steel sections are used, but that it is intricate or complicated is difficult to accept.
7. The Additional Collector says that what was fabricated in Vijayawada factory was nothing but components for the structure directly used for construction of the shed. If components of the shed are liable to duty, then the shed is also liable to duty. This is the logical process of reasoning but one which the two learned adjudicating authorities did not follow to its conclusion. I can see that they have not sought to charge duty on the shed itself, perhaps labouring under the mis-apprehension that the shed is immovably planted in the earth and, therefore, not excisable. If so, they should disabuse their minds because to take only one example, a weighbridge is created as a complete unit only after it is firmly embedded in the ground, but it is an excisable item of the Central Excise Tariff. In the new Harmonised Tariff there are even more items which would normally be fixed permanently to the earth, or which arise in their excisable identifiable form only after they have become firmly entrenched in the earth.
8. There was said to have been transformation of the goods, otherwise Steel Authority of India would not have got their jobs done by paying approximately Rs. 1500/-per tonne as job charges over and above the cost of transportation to go from Vijayawada. Is this argument supposed to mean that whenever a cost of Rs. 1500/- per tonne is Incurred in a job work, and it entails a transportation of 400 kms, there is a transformation of the raw materials? The adjudicator does not really pursue this line; he merely poses the question and leaves it hanging in the air. Because labour was done on the raw material, the goods laboured upon must be treated as goods attracting Item 68. The logic here gets well and trully intricate: it is risky to make a blanket statement of this kind, because not all labour on raw materials produce goods under Item 68. The process must be properly spelt out and fully understood, because one can reach fallacious conclusions.
9. The goods are said to be marketable and that they are known as such in trade and commerce. There is not one shred of evidence to show that purlins and trusses have been traded. They have never been traded to my knowledge and are unlikely to be known in trade. As I have already observed in the Aruna judgment, a purlin or a truss etc. are nothing but steel sections which do the work of a purlin, a truss or a beam when it is in position in the structure. When not in the structure, it is not a purlin, a truss or a beam or a rafter; it is merely a steel Section or an angle or a channel. In fact, for anyone to buy a truss or a purlin is to buy a pig in a poke. More likely than not, the purlin or the truss will not fit the roof he is building. That is why these people had to have the so-called intricate drawings and designs, because unlike marketable goods like a motor car or a watch or a camera, a truss, a purlin, a rafter must fit that particular structure: it may not fit another structure. This is one reason why no one will sell, and still less will anyone buy, a truss or a purlin. But there will be plenty of sellers and buyers of channels, angles, sheets, sections, to make trusses, purlins, rafters with.
10. The learned counsel for the department read paragraph 5.6 of the Additional Collector's Order in which he records that the cost of labour alone was Rs. 75 lacs. This proves nothing. It may cost Rs. 75 lacs or twice that amount depending on how much work was done, and that that much work had to be done is not in any manner of doubt. But we are not on the subject of how much work was done, but on whether these people have produced goods liable to be charged to duty under Item 68.
11. The learned counsel also said that in paragraph 5.4 of the Additional Collector's order there is a tacit acceptance of Rule 56C. But I am afraid this gets the department's case nowhere if the goods themselves are not liable to duty. We must not understand the mis-apprehension of an assessee for acceptance or acknowledgement. It is a two edged sword which can cut the victim as easily as the wielder.
12. The Collector accepts in his adjudication that it was not the contention of the department that the goods in question were produced at Visakhapatnam and, therefore, the question of invocation of provisions of Notification 46/81 -C.E. did not arise. He records in the same paragraph that the purlins, etc. were removed as semi-finished goods. It is clear to me that the goods went after cutting, sizing, drilling, that is to say, as angles, channels, sheets etc. The shapes and conditions in which they came before the job work and the ones which they acquired after the job work as a result of the treatment were the same: but an angle went as an angle, though a shorter one perhaps; a channel went as a channel, though with holes in it; and a sheet went bent or cut; but you could still see the angle, the channel and the sheet unmistakably in the so-called semi-finished goods, just as you can see them equally unmistakably and clearly when they become finished goods. Neither of the two learned adjudicators pin point the precise time when they achieve finished goods status, but I am certain they have not seen the purlins, trusses, rafters etc. Had they gone to the site and seen the trusses, purlins, rafters, etc. In the structure, they would have seen the original steel products, angles, rounds, channels etc. etc., but fitted in predetermined places allotted to them by the builder and which they were able to fill and occupy by reason of the sizing and treatment they received at the hands of these appellants.
13. Just one more point and I shall be done. The original authorities say that the items i.e. the purlins, trusses, etc. made out of the inputs constitute manufacture within the meaning of Section 2(f) of Central Excises and Salt Act attracting levy under Item 68. What meaning? Section 2(f) says not one word about any meaning. It does not say that when materials are taken and sized to fit them for the job, as in this case, there is a manufacture for the purpose of central excise levy. There is even less in this Section to sanction item 68 levy. Section 2(f) does not define manufacture and I do not understand how the two learned adjudicating authorities understood processing, drilling, cutting that went into the working of making purlins, trusses out of angles, channels and rounds to be manufacture within the meaning of Section 2(f).
14. I set aside the two orders-in-original and decree that no duty is payable by these appellants as demanded by the two lower authorities.