Customs, Excise and Gold Tribunal - Tamil Nadu
M/S. Sakthi Sugars Ltd. vs Commr. Of Cex, Chennai on 27 June, 2001
Equivalent citations: 2001ECR15(TRI.-CHENNAI)
ORDER
Shri S.L. Peeran
1. Both these appeals raises a common question of law and facts pertaining to the same assessee and hence they are taken up together for disposal as per law. The question arising in these appeals are as to whether the item which is erected by the appellant is Effluent Treatment Plant (ETP) or Bio-gas plant (2) whether it is movable and marketable, (3) whether it is excisable under the Central Excise Act and (4)whether there was any willful suppression with the intent to evade payment of duty for confirmation of demands.
2. In the show cause notice dated 24.3.99 at para 6 & 7, the process of erection of the item has been described which is extracted below:-
6. Verification conducted at the premises of M/s DSCL, and from the literature recovered from M/s SSL reveals that the Efflunent Treatment Plant consists of following major components viz. 1) 2 anaerobic digestors 2) 2 heat exchangers 3) pumps 4)Motors 5) Bio-gas Boosters, 6) Vent Seal, 7) Vaccum Breaker Tank, 8) 4 Recirculation Pumps 8) Feed Pump 9) Feed Sump, 10) Instrument Panel 11) Motor control panel and 12) PVC Modules. The anaerobic digestor tank is the main constituent part for Methane recovery anearobic digestor system. This tanks were made of mild steel having 22 meters dia and 11.00 metres of height. In order to prevent the digester from wobbling and to secure maximum operational efficiency and also for safety, a concrete civil foundation having depth of more than five metres and for the require diameter is built and first the base plate of the tank is first bolted to the giant size bolts and nuts in the concrete. Then with MS Sheets of 12 mm thickness the tank is erected by welding the MS Sheets piece by piece. Other items such as Motors, pumps, Blowers, Heat Exchangers Instrument Control system and Electrical system are erected by the side of the digestor. Motors and pumps help in feeding the effluent into the digestor as also for circulating the effluent. Blowers are utilised for desettling the effluents. Heat Exchange are used to control the temperature of effluent going into the digestors. The PVC modules are dropped into the digestor tank for giving more space for bacterial activity and production of gas.
7. From the literature of M/s SSL it reveals that in the Bio-methanisation plant, (ETP) the waste generated Spent Wash) during distillation for generation of alcohol consisting of toxic stillage flows into the buffer tank, and if needed gets neutralised by PH Control system and is cooled by heat exchangers. The effluent is then mixed with the recirculating flow and fed to the digester by a sophisticated distribution system that operates on the top of the digester. The distribution network is designed to distribute the effluent evenly through out the reactor. The PVC Modules cleared from the factory of M/s SSL helps in multiplying the bacterial population within the digester for performing effective anaerobic digestion. The recirculation pump helps to maintain a appropriate hydraulic circulation within the reactor and after digestion, the treated effluent exits through an over flow pot and a hydraulic seal. During the treatment of effluent, the methane gas is, generated and it is consumed captively in the boiler for manufacture of Steam.
On the basis of this process, the department proceeded to take a view that the item is an Effluent Treatment Plant and not a Bio-gas Plant and the assessee had misled the department to avail the benefit of Notification and hence clearances which they made and the erection they had carried out on the spot on orders received from their customers brought into existence goods for the purpose of excisability under Section 2 (d) of the CE Act and the department had also alleged that there was a clear and willful suppression of facts and mis-statement with an intention to evade duty and hence they were charged with show cause notice to explain as to why the Effluent Treatment Plant erected cannot be classified under Sub Heading 8419.00 of CET and duty and penalties be levied in the matter.
3. The appellant's main contention was that the item was erected piece-by-piece after laying down the foundation and what came into existence was an immovable property in the form of huge metallic tank of a size of 22 Meter diameter and 11 meters in height and weighing 200 tonnes. All the raw materials which were used were all duty paid and the erection was carried out at great length of time by fabrication and welding and the said item cannot be dismantled. On dismantling, it loses its characteristics and the same materials cannot be utilised for erecting the same plant elsewhere of the same size. They also relied on the Board's circular No. 17/89 dated 21.4.1989 which was in force during the relevant period which clearly laid down that such structures which are attached to the earth is immovable property and not goods liable to Central Excise duty. They also denied the allegation of suppression of facts and stated that the department was well aware of all the facts and there was no suppression willfully as alleged for the purpose of invoking larger period. The Ld. Commissioner considered the matter in the impugned order and after examining the literatures and submissions, rejected their plea that the item is a Bio-Gas plant and concluded that it is an Effluent Treatment Plant in the finding recorded in para 9 to 14. In para 15 to 21, he has dealt with the aspect of the item being movable goods. The main consideration for him to arrive at this conclusion that it is movable item is that since one Shri R. Rajendran in his cross-examination had stated that M.S. sheets can be cut and can be re-fabricated to form another digester though the volume of digester would get reduced after such re-fabrication, The Commissioner has held in para 17 to 21 as follows:-
17. Normally, in assembling, various components are bolted together to form a composite machinery which after dismantling would give back the components. Here, it is only the MS plates and not components that are used for fabrication. The dame are not bolted but are welded together. As such, dismantling would give back only the MS plates. As already said, irrespective of the size and weight of the Digester as a whole, if dismantled, it is possible to be re-fabricated into another Digester. It can be sold in the market even though it may have to be dismantled before being sold.
18. In the instant case, the MS plates were removed to the site for fabrication of a Digester. As such, after dismantling, the dismantled MS plates along with the bought out components would only be moved to another site for re-fabrication. Since, the excisable goods like ETP emerged only at the site, the same after dismantling and re-fabrication would re-emerge only at another site. Dismantling always involves certain expenditure. Some may cost less and some others may be more expensive. It is only the capability of dismantling and re-fabrication that decides the movability and marketability of a plant to be called as 'foods' and not the cost associated with such dismantling and re-fabrication. As already said, the Digester, irrespective of its size and weight, can be dismantled and re-fabricated or re-loacted at another site, thus proving its movability and marketability.
19. Hon'ble CEGAT in the case of CCE, Jaipur Vs. Western India Enterprises Ltd. (1998(98) ELT 725 (TRIB) had held that "Erection and installation of plant and machinery at site by cutting, welding vetting etc. of materials which were brought in assembled or partially assembled or in various other forms amount to manufacture as the form in which the various items have been finally set up are different from the materials which have been received at the site." The ratio of the decision is sqarely applicable to the instant case.
20.SSL in their replies and further submissions, have quoted various Court/CEGAT decisions to contend that anything attached to Earth or permanently embedded to the land and not capable of being brought to the market for being sold as they were as not excisable.
Some of the case laws cited are
(i) Mittal Engg. Works Vs. CCE [1996(88) ELT 622 (SC)}
(ii) Thungabhadra Steels Vs. UOI [1998(98) ELT 334 (KAR)]
(iii) Gujarat Machinery Manufactures Ltd. Vs. CCE [1983 ELT 825 (CEGAT)] In all the above cases, the facts clearly show that the components and structures were actually sections or portions of another structure that came into existence by the fabrication of various such portions. Thus, simultaneously after such fabrication, they becoming part of the bigger structure and hence becoming immovable in character. However, the facts of the above cases are not comparable or relatable to SSL's case, since, the MS plates which were welded together to form the Digester tank, can be re-fabricated to form another Digester, if they were cut carefully. As such, the ETP fabricated by SSL are excisable and dutiable.
21. In view of the above discussions, I hold that the ETP fabricated by SSL at the site of DSCL are excisable goods within the meaning of Section 3 of the Central Excise Act, 1944.
4. Ld. Counsel Shri Nambirajan appears for the appellants and at the outset submits that the issue is no longer res integra and this bench in an identical matter of storage tank, huge in size having a capacity of 650 Cub. Meter or more, manufactired in parts at site welded together piece-by-piece by embedding in the foundation was considered in the light of the very Board Circular and also in the light of the Apex Court judgment and Tribunal judgments and concluded that the item is not goods and cannot be excisable as recorded in the judgment rendered in the case of Beam Engineering Works Pvt. Ltd. Vs. CC Trichy [2000 (122) ELT 821-Trib.] Ld. Counsel further referring to the findings recorded by the Commissioner adverted to the Apex Court judgment rencered in the case of Triveni Engineering & Industries Ltd. Vs. CCE [2000 (120) ELT 273 (SC)] and forcefully submitted that the findings recorded by the Commissioner was contra to the ruling and ratio laid down on this very point in the cited judgment. He took us through the Apex Court had looked into various earlier judgments and distinguished the Sirpur Paper Mills Ltd. case and in the present case relied by the Revenue and clearly held that the judgment rendered in Quality Steel Pvt. Ltd. Vs. CCE [1995 (75) ELT 17(SC)] and Mittal Engineering Works (P) Ltd. Vs. Collector [1996 (88) ELT 622 (SC) were clearly applicable and once an item on dismantling is not in a position to re-fix and becomes function a, then it looses the test of mobility and such item is required to be considered as immovable. The details of the entire judgment was read out to show that the point arrived at by the Commissioner has been overruled by the Apex Court in Triveni Engineering & Industries Ltd. case. He submits that the case of the appellants is that the item is an immovable property and the applicability of Board's Circular has been accepted in the case of Beam Engineering Works (P) Ltd. (supra) and therefore, the matter being conclusive and finally decided by the Tribunal and the Apex Court, both the appeals are required to be allowed.
5. On the contrary, Ld. SDR made a valiant effort to distinguish the facts. He pointed out to the show cause notice to show that the allegation was that the appellant had misdeclared the item to be a Bio-Gas Plant while in fact on scrutiny by the Commissioner in the light of the evidence , it was found to be Effluent Treatment Plant. There was a clear distinction between a Bio Gas Plant and Effluent Treatment Plant and the distinction has been brought out by the Commissioner in para 14 of his order which the Ld. SDR read out. Ld. SDR read para 16 to 21 to show that the item was movable and it was excisable in view of the admission made by shri R. Rajendran that it can be re-fabricated although the Commissioner has recorded that the volume of the digester would get reduced after such re-fabrication. Ld. SDR submits that merely because the size of the digester gets reduced that should not be taken into consideration to hold that the item is an immovable property. The Commissioner in para 20 after referring the Apex Court judgment has distinguished the facts which has been rightly done so, therefore as there was clear suppression and mis-declaration, hence the larger period was invoked. Ld. SDR attempted to distinguish the Apex Court judgment rendered in the case of Triveni Engineering & Industries Ltd. and also the Tribunal judgment rendered in the case of Beam Engineering Works (P) Ltd. Ld. SDR also submitted that the Board Circular No.17/89 (refer only to Effluent Plant) and the Commissioner has also given his findings on this aspect and there is no infirmity in the order.
6. On a careful consideration of the submission, we notice from para 6 & 7 of the show cause notice which has been extracted above, that the department proceeded on the premise that the appellants were carrying out the activity by erecting the tank of the size of 22 meters diameter and 11 meter height by a process of first laying down a concrete civil foundation having depth of more than 5 meter and that the required diameter is built and the plate of the tank is first bolted to the giant size bolts and nuts in the concrete. Then with MS sheets of 12 mm thickness the tank is erected by welding the MS sheets piece-by-piece. Other items such as Motors, pumps, blowers, heat exchangers instrument control system and erected by the side of the digestor. On a perusal of the facts on which the Revenue has proceeded in the present case which is undisputed fact is that there is a concrete civil foundation having a depth of more than 5 meters which is first laid and on which a giant size bolts and nuts are fixed in the concrete. Thereafter, the MS sheets of 12 mm thickness are erected by welding piece-by-piece. Whether this activity amounts to manufacture of goods or it remains an immovable property has not been satisfactorily dealt with by the Commissioner in the impugned order. The Commissioner has skipped the facts on the judgments cited in para 20 and holds that "Thus, simultaneously after such fabrication, they becoming part of the bigger structure and hence becoming immovable in character. However, the facts of the above cases are not comparable or relatable to SSL's case, since the M.S. Plates which were welded together to form the Digester tank, can be re-fabricated to form another Digester, if they were cut carefully. As such, the ETP fabricated by SSL are excisable and dutiable". We are not agreeable with the above findings as the Commissioner ought to have first come to the conclusion that on such activity as already noted whether any movable property comes into existence or not, Shri R.Rajendran in his cross-examination stated that on dismantling the parts can be taken to another place for re-fabrication but what emerges gets reduced on re-fabrication in volume. In para 17, the Commissioner has only drawn a premise that "it is possible to be re-fabricated into another Digester. It can be sold in the market even though it may have to be dismantled before being sold". This is a conjucture and without any evidence on record. The Apex Court has gone into great detail on the aspect of excisability, movability and immovability of items, more particularly in the recent judgment rendered in the case of Triveni Engineering & Industries Works Ltd. The Apex Court has laid down the test to consider whether an item fabricated brings into existence goods or immovable property. We have gone through the judgment and find the ratio laid down by the Apex Court in this judgment clearly applies to the facts of the present case. In para 17 to 20, the Apex Court has referred to the earlier judgments and also answered the question as to whether the aspect is immovable property or goods. We extract para 17 to 20 the above judgment for the purpose of clarity, applicability and appreciation to apply the ratio to this case:-
17.The question whether mono vertical crystallisers answer the meaning of goods fell for consideration of this Court in Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut [1996 (88) E.L.T. 622 (S.C.) =1997 (1) SCC 203]. Mono vertical crystallisers are used in sugar factories to exhaust molasses of sugar. The component parts of mono vertical crystallisers were cleared on payment of excise duty from the premises of the appellants therein and they were then assembled, erected and attached to the earth at the site of the customers' sugar factory. The process involved welding and gas cutting, The CEGAT held that the mono vertical crystalliser was complete when it left the factory and upheld the demand of excise duty on clearance thereof. This Court pointed out that the mono vertical crystalliser, had to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory and it was not capable of being sold as it is, without anything more. Bharucha, J., speaking for the Court, observed:
"The erection and installation of a plant is not excisable and to so hold would, impermissibly, bring into the net of excise duty all manner of plants and installations."
The case of Narne Tulaman Manufactures (P) Ltd. (supra) was distinguished on the ground that in that case the contention that weighbridge was not 'goods' within the meaning of the Act, was not raised and no evidence in that behalf was brought on record. It was observed : "We cannot assume that weighbridges stand on the same footing as mono vertical crystallisers in that regard and hold that because weighbridges were held to be exigible to excise duty so must mono vertical crystallisers".
18. Here, the decision of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad [1998 (97) E.L.T. 3 (S.C.) = 1998 (1) SCC 400], which is relied on by the learned counsel for the Revenue, needs to be referred to. In that case, the question was whether paper-making machine which was assembled and erected by the appellant by using duty paid components and by fabricating certain parts in their factory, was liable to excise duty. The CEGAT recorded the finding that the whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and also for safety. This court held that in view of those findings it was not possible to hold that the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to earth like a building or a tree. The test, it was noted, would be whether the paper-making machine could be sold in the market and as the Tribunal had found as a fact that it could be sold, so the machine was held to be not a part of immovable property of the company.
19. It appears that the aforementioned two cases- Mittal Engineering Works (P) Ltd. and Quality Steel Tubes (P) Ltd. (supra), were not referred to in Sirpur Paper Mills Ltd.'s case.
Further, in the instant case it is a common ground that a turbo alternator comes into existence only when a steam turbine and alternator with all their accessories are fixed at the site and only then it is known by a name different from the names of its components in the market. The Tribunal recorded the finding that fixing of steam turbine and the alternator is necessitated by the need to make them functionally effective to reduce vibration and to minimise disturbance to the coupling arrangements and other connections with the related equipments. It also noted that removal of the machinery does not involve any dismantling of the turbine and alternator in the sense of pulling them down or taking them to pieces but only undoing the foundation bolts arrangement by which they are fixed to the platform and uncoupling of the two units and, therefore, the turbo alternator did not answer the test of permanency laid down by this Court in the case of Municipal Corporation of Greater Bombay (supra). In our view, the findings recorded do not justify the conclusion of the Tribunal inasmuch as on removal a turbo alternator gets dismantled into its components - steam turbine and alternator, It appears that the Tribunal did not keep in mind the distinction between a turbo alternator and its components. Thus, in our view, the test of permanency fails.
20. The marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into its components - turbine and the other alternator - but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional.
7. We notice that the Boards Circular 17/89 clearly referred to Effluent Plants and the Board clearly indicated that on such fabrication, the item would not be goods. This very fact was examined by this very bench in Beam Engineering Works (P) Ltd. and in the light of the Apex Court judgment rendered in the case of Paper Products Ltd. Vs. Commissioner [1999 (112) ELT 765 (SC) and Ranade Micronutrients Vs. Collector [1996 (87) ELT 19 (SC),the bench held that the Board Circular 17/89 is required to be followed by the authorities below. The issue in Beam Engineering Works (P) Ltd. is also identical to the facts of the present case and we notice from the findings recorded in para 4 which is noted below is completely applicable to the facts of the present case:-
4. We have considered these submissions and find that-
(a) The Commissioner in the impugned order as extracted above, has admitted that the immovable property has come into existence at the site. When the Commissioner has come to this conclusion, we fail to understand how thereafter he has applied the Rule 2(a) to hold all the parts taken together to be steel tanks classifiable under heading 73.09, as Rule 2(a) would not be applicable in the facts of this case as held by the Tribunal in the case of Nikhil Equipments Pvt. Ltd.
(b) We find that the present decision of the Commissioner is against the Board's instructions vide Circular No. 17/89 dated 21-4-1989. The Commissioner cannot decide against the Board's instructions as held by the Hon'ble Supreme Court in the case of Ranadey Micronutrients v. CCE as reported in 1996 (87)E.L.T. 19 ending with the case of Paper Products Ltd. v. Commissioner as reported in 1999 (112) E.L.T. 765 (S.C.).
(c) We also find that in the case of J.K. Synthetics Ltd. as reported in 2000 (124) E.L.T. 643 (Tri.) = 1999 (33) RLT 129, the Tribunal held that fuel tanks embedded and erected at site were held to be non-excisable and we allow the said decision.
5. In view of the above findings, we set aside the order impugned and allow the appeal in this case, with consequential relief, if any, as per law.
In the Beam Engineering Works (P) Ltd. case, the Tribunal in previous paragraphs have noted all the facts and the judgments which clearly indicates that fabrication of the tank is embedded into 1.5 meters of the cement concrete platform would not bring into existence goods but the resultant activity would bring into existence only immovable property and it is not excisable for the purpose of levy of duty in terms of Section 2 (d) of the Central Excise Act 1985. We are of the considered opinion that the impugned order suffers from various infirmities in the light of the Board's Circular, Apex Court judgments and the Tribunal judgment in the case of Beam Engineering Pvt. Ltd. Revenue has not established that after erection of the hugh tank on a well laid down concrete foundation, the resultant product is goods, and not immovable property. What happens thereafter on dismantling and re-construction into a smaller item is not the question for consideration. What is required to be decided is whether on erection on a concrete base and a foundation, piece-by-piece by welding bringing into existence a huge metallic tank of the size noted will amount to manufacture of goods emergence of an immovable property. In the light of the test and ratio laid down in the case of Triveni Engineering & Industries Ltd. and also in view of the Board's Circular which clearly state that it brought into existence an immovable property, therefore the provisions of the Central Excise Act cannot be enforced to levy duty. In that view of the matter, we respectfully follow the judgment in the case of Triveni Engineering & Industries Ltd. and Beam Engineering (P) Ltd. in the present case by setting aside the impugned order and allow the appeals with consequential relief, if any. We find that there is not necessity to go into the question of suppression and extension of larger period as we have held that the item itself is not excisable. Thus the appeals are allowed by setting aside the impugned orders.
8. (Pronounced & dictated in open Court)