Customs, Excise and Gold Tribunal - Mumbai
Sanghi Organization vs Commissioner Of Central Excise on 8 July, 2005
ORDER T. Anjaneyulu, Member (J)
1. Both appeals, filed by the same appellants, an assessee under Central Excise Act, were heard together; these are being disposed by this common order.
1.2 Appeal No. E/1334/2000 is against an order of CCE (A) for a proceeding of duty demands made on 11 SCNs, covering the period of March 1991 to March 1995 confirmed on the following findings:
The short question which arises for decision in the instant appeal is as to whether the appellants are liable to pay excise duty on 'Molecular Sieve Battery' (MSB) which activity the department holds to be 'manufacture'.
The appellants have submitted that they received the components of MSB in unassembled form and the same were subjected to the cleaning and painting and testing of the carbon seamless shells/cylinders for the purpose of checking the leakages and after reassembly at their premises, the components of MSB would be despatched by them to the customers at their site, where civil work and other fabrication work to erect MSB was carried out. The appellants further submitted that Molecular Sieve Battery is an immovable property which is firmly rooted to the earth by being fixed on a strong platform made of cement concrete. In this regard, the appellants relied on several case laws in support of their claim. I find that MSB is identifiable new products coming into existence warranting levy of Central Excise duty and that Tariff Heading 8421.00 specifically covers the goods. For the purpose of durability on the said item, I place reliance on the judgment of the Supreme Court in Sirpur Paper Mills, case . In this judgment, the Apex court held that assembly of paper making machine from bought out items as well as a few parts fabricated at the factory amounted to manufacturer as it was found that the paper making machine could be sold in the market. The court also held that just because a plant & machinery are embedded to the earth for better functioning, it does not automatically become an immovable property. I find that the test laid down in Sirpur Paper judgment was as to whether the machine can be sold in the market. I find that in the instant case, the MSB can be brought and sold in the market and, therefore, is covered by the aforesaid decision of the Supreme Court.
In the aforesaid view of the case, I hold in the case under consideration there is manufacture as defined in terms of Section 2(f) of the Central Excise Act 1944 as also there sale as held by the aforesaid decision of the Apex Court. Having regard to the aforesaid facts, the Molecular Sieve Battery is classifiable under tariff Heading No. 8421.00 at the appropriate rate of duty. The appeal is therefore rejected and the impugned order is upheld.
1.3 Appeal No. E/882/01 is against an order of CCE (A) condoning the delay in filing of the appeal and on similar grounds as regards merits, confirming the duty demands made on 4 SCNs issued for the period July 97 to December 98 dated 22-1-98 & July 97 to November 98 dated 16-12-98; Dec. 98 to Mar. 99 dated 29-4-99 & May 99 to July 99 dated 3-9-99 on same impugned entity i.e. Molecular Sieve Battery vide order in appeal.
1.4 The issue on levy of duty on 'Molecular Sieve Battery' (MSB for short) has to be determined, proceeding to do so, it is found -
(a) the process & the application are admittedly that the The appellants are engaged in the supply of Oxygen Gas Plant out of which certain components such as i) Air separation Unit ii) Filling Manifold iii) Expansion Engine iv) Liquid Oxygen pumps are manufactured by the appellants in their factory situated at Taloja. Besides the manufacturing activity, the appellants are also engaged in trading of goods other than the goods manufactured by them namely Molecular Sieve Battery (MSB). The appellants carry out the trading activities from a premises other than the factory premises situated near the factory premises. The MSB constitutes following components.
(a) fabricated case of MSB made out of Mild Steel Seamless pipe.
(b) Pipe fittings
(c) Flanges
(d) Platform
(e) Molecular sieves
(f) Control panel
(g) Valve
(h) Heating elements
(i) Temperature sensor The function of MSB is to purify and dry the air by removing moisture and carbon dioxide.
(b) During the period July 1997 to July 1999, the appellants purchased a duly assembled and fabricated MSB and got the same manufactured on job work basis from independent manufacturers.
Under receipt of MSB, the appellants would clean, check and test the entire assembly and refit the same before delivery to the customer the appellants dispatches molecular sieve to the customer's premises for charging the MSB at the time of installation. The Molecular sieve is a chemical, which is purchased by the appellants from the manufacturers in India like M/s. IPCL, Thane, or is imported by them. The Molecular sieve is in the form of pellet supplied in drums. The fabricated case of MSB purchased by the appellants consists of 2 cylinders made of seamless carbon steel pipes. The cylinders have dished ends and have flanges welded for connecting the pipes. The cylinders have led supports at the one end. These two cylinders are fixed to the base plates (platform) with nuts and bolts. The base plate is made of mild steel plates and mild steel angles. The base plate has four holes for grouting the vessels in vertical position when grouted on the foundation.
On receipt of the different components of MSB, first the appellants do cleaning of internal shell to remove the dust and dirt. The vessels are individually tested with nitrogen gas to ascertain the quality of welding and in case any leakage is observed, the vessel is sent back to the manufacturer for replacement and/or rectification. Thereafter, the vessel base plate and loose connecting pipes are painted to give anti-corrosive coating. The vessel with base plate and loose connecting pipes is supplied to the customer in the same manner as received by the appellants from the suppliers thereof. The valves are also supplied loose and the molecular sieve is also supplied in the packed drum as received from the manufacturer. The appellants say that at the customers premises first civil work is undertaken by the customer himself. The civil work consists of constructing about 7 feet x 3 feet. After the civil foundation work is over, erecting and installation of MSB starts. The appellants may or may not undertake erection and installation of MSB depending upon the contract with the customer. The erection and installation process at the customers site in short is as under.
(i) The base plate is placed on the foundation and is anchored with the foundation bolt which is grouted to the ground :
(ii) after the grouting is completed the vessel and the inter connecting pipes are properly cleaned with CTC flushed with nitrogen. The inter connecting pipes and vessels are then connected to the vessel in the bottom portion.
(iii) The molecular sieve (i.e. the chemical) is then charged from the top into the vessels. The balance pipe connections are then completed and proper gasket are fitted into joints to make the joints leak proof.
(iv) Once assembly is complete vessel with pipe which are once again tested for leakages through joints with Nitrogen gas and then vessel and the inter connecting pipes are properly insulated with mineral wool and aluminium cladding for proper functioning of the MSB.
(v) The inlet and outlet pipes of MSB are connected to the air inlet and outlet pipes. The heater box is connected to MSB and inlet connection of Nitrogen gas pipes are also connected with the air separation unit and the outlet Nitrogen pipe vented to atmosphere.
(vi) Thus it is permanently embedded to the earth and becomes immovable. It cannot be lifted without damaging foundation or other equipments.
(c) The appellants say that one of the components of Oxygen Gas Plant is Molecular Sieve Battery (MSB for short) which is also supplied by the appellants to their customers of Oxygen Gas Plant and therefore, constitute a part of trading activity of the appellants. The appellants say that the MSB consists of the following components.
(a) Fabricated case of MSB made out of Mild Steel Seamless pipe
(b) Pipe fittings
(c) Flanges
(d) Platform
(e) Molecular sieves
(f) Control panel
(g) Valve
(h) Heating elements
(i) Temperature sensor The function of MSB is to purify and dry the air by removing moisture and carbon dioxide.
(d) (i) During the period 1989 to 1995, the appellants purchased a duly assembled and fabricated MSB or got the same manufactured on job work basis from independent manufacturers. A few specimen copies of the delivery challans of the manufacturers of MSB in both the cases are hereto annexed and marked as Exhibit A (collectively)
(ii) Upon receipt of MSB, the appellants would clean, check and test the entire assembly and refit the same before delivery to the customer. While in some cases, the appellants charged MSB with molecular sieve to the customers premises for charging the MSB at the time of installation. The Molecular sieve is a chemical which is purchased by the appellants from the manufacturers in India like M/s. IPCL, Thane and other also. The Molecular sieve is in the form of pellets supplies in drums.
(iii) From 1995 onwards, the appellants purchased all the customers of MSB in loose condition. The fabricated case of MSB purchased by the appellants consists of 2 cylinders made of seamless carbon steel pipes. The cylinders has dished ends and dished ends have flanges welded for connecting the pipes. The cylinders have led supports at the one end. These two cylinders are fixed to the base plates (platform) with nuts and bolts. The base plates is made of mild steel plates and mild steel angles. The base plates has four holes for grouting the vessels in vertical position when grouted on the foundation.
When different components of MSB are received by the appellants first the appellants do cleaning of internal shell to remove the dust and dirt. The vessels are individually tested with Nitrogen gas to ascertain the quality of welding and in case any leakage is observed, the vessel is sent back to the manufacture for replacement and/or rectification. Thereafter the vessel, base plate and loose pipes are painted to give anti-corrosive coating. The vessel with base plate and loose connecting pipes is supplied to the customer in the same manner as received by the appellants from the suppliers thereof. The valves are also supplied loose and the molecular sieve is also supplied in the packed drum as received from the manufacturer. The appellants say that at the customers premises first civil work is undertaken by the customer himself. The civil work consists of constructing strong platform made of cement concrete admeasuring about 7 feet x 3 feet. After the civil foundation work is over, erection and installation of MSB starts. The appellants may or may not undertake erection and installation of MSB depending upon the contract with the customer. The erection and installation process at the customers site in short is as under.
(i) the base plate is placed on the foundation and is anchored with the foundation bolt which is grouted to the ground.
(ii) after the grouting is completed the vessel and the inter connecting pipes are properly cleaned with CTC flushed with nitrogen. The inter connecting pipes and vessels are then connected to the vessel in the bottom portion.
(iii) The molecular sieve (i.e. the chemical) is then charged from the top into the vessels. .The balance pipe connections are then completed and proper gasket are fitted into joints to make the joints leak proof.
(iv) Once assembly is complete vessel with pipe which are once again tested for leakages through joints with Nitrogen gas and then vessel and the inter connecting pipes are properly insulated with mineral wool and aluminium cladding for proper functioning of the MSB.
(v) The inlet and outlet pipes of MSB are connected to the air inlet and outlet pipes. The neater box is connected to MSB and inlet connection of Nitrogen gas pipes are also connected with the air separation unit and the outlet Nitrogen pipe vented to atmosphere.
(vi) Thus it is permanently embedded to the earth and becomes immovable. It cannot be lifted without damaging foundation or other equipments.
(vii) The Molecular sieve battery cannot function on its own, but can be operational only after connecting with other equipments of oxygen plant, at the customers site.
(e) From the above, it is apparent that the MSB that leaves the appellants premises and is proposed to be brought under Central Excise Duty in the form and manner purchased (procured) by the appellants, prior to 1995 & thereafter in loose unassembled form i.e. components and the findings of a new identifiable product arrived by the authorities, therefore, cannot be upheld. The appellants during the period 1989 to 1995 purchased or assembled fabricated MSBs or got them fabricated on job work from independent units. The assessee merely did cleaning, checking and testing the entire assembly, refit it and dispatched the same. The activity conducted, per se, at the appellants premises, therefore, cannot be resulting in a new products. It cannot amount to manufacture as understood in Central Excise Law. After 1995 the components processed were despatched as such to buyers site & erected/installed by the buyers. Therefore there can be no levy under Central Excise Act 1944 on such an activity on the appellants from the clearances of and at their premises.
(c) The plea of MSB coming at site as a commercially understood entity would be immovable property, has not even considered by the Id. CCE (A). Application of Sirpur Paper Mills by the CCE (A) without arriving at a clear finding on this vital issue cannot be upheld. The plea of embedding in earth being crucial to its function is not rejected by the lower authority.
(d) The stipulation of Note 6 to Section XVI of CETA, 1985 and the reliance also placed on the decision of Tega Industries Ltd. will lead one to conclude that since the Heading 8421.00 makes no distinction between, refitted and recharged entities therein, no manufacturer and/or levy would take place on refit/recharge/tests done at the appellants premises on MSB received fully fabricated from job workers.
2.2 In view of the findings, the levy of duty proposed & upheld on the appellants premises on MSB cannot be upheld under 8421.00 2.3 Since duty is not being upheld, as no levy arises at appellants premises is called for. The CCE (A) has not indicated any reasons for not considering the condonation of delay; the delay is considered in appeal E/882/2001 and the appeal is also to be disposed on same grounds.
Therefore, we find that both the appeals are to be allowed after setting aside the orders.
3. In view of the findings, the orders are set aside and appeals are allowed.
(Pronounced in Court)