Custom, Excise & Service Tax Tribunal
Cce, Chennai vs M/S. Beehive Foundry Engineering Works on 26 August, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/492/2002 and E/CO/201/2013
E/545 to 547/2002 and E/CO/143 to 145/2003
(Arising out of Order-in-Appeal No.57/2002 (M-I) dated 16.7.2002 and Nos. 59 to 61/2002 dated 29.7.2002 passed by the Commissioner of Central Excise (Appeals), Chennai)
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
CCE, Chennai Appellant
Vs.
M/s. Beehive Foundry Engineering Works Respondent
Appearance Shri P. Arul, Superintendent (AR) for the Appellant S/Shri R. Raghavan & M. Kannan, Advocates for the Respondent CORAM Honble Shri P.K. Das, Judicial Member Honble Shri Mathew John, Technical Member Date of Hearing: 30.04.2013 Date of Pronouncement:
Final Order No. 4033 40337/2013 Per P.K. Das A common issue is involved in all these appeals and hence all the appeals along with cross-objections are taken up for disposal.
2. The relevant facts of the case in brief as revealed from the impugned order are as under:-
(i) The respondents were engaged in the manufacture of pre-fabricated structures classified under Heading 73.08 of the Schedule to the Central Excise Tariff Act, 1985 and filed declarations under Rule 173B of the erstwhile Central Excise Rules, 1944. The declarations were duly approved by the Department.
(ii) On 22.4.1999, they filed revised declaration under Rule 173B of the erstwhile Rules, 1944 declaring the said goods as pre-fabricated building claiming classification under sub-heading No. 9406.00 of CETA, 1985 at nil rate of duty.
(iii) The respondent by letter dated 3.9.1999 addressed to the Assistant Commissioner of Central Excise informed that they were proceeding to clear the goods at NIL rate of duty under sub-heading No. 9406.00 as per revised declaration filed by them, as anything contrary was not heard by them.
(iv) From 22.2.2000, the respondent started to clear the pre-fabricated buildings under sub-heading No. 9406.00 at NIL rate of duty.
(v) They were utilizing common inputs in the manufacture of dutiable goods (i.e. pre-fabricated structure) and exempted goods (i.e. pre-fabricated building). They paid the amount equal to 8% on the value of pre-fabricated building in terms of Rule 57CC of the said Rules, 1944 in respect of each invoices at the time of clearance of pre-fabricated building.
(vi) Five Show Cause Notices were issued proposing demand of duty and imposition of penalty classifying the goods under Heading No. 73.08 of CETA, 1985 which attracted duty @ 16% advelorem against the clearance of goods of various contracts, as under:-
S. No. Show Cause Notice No. & Date Period Contract of
1.
616/2000 dated 11.5.2000 2/2000 4/2000 Godrej & Boyce Ltd., Ambattur
2. 516/2001 dated 30.3.2001 5/2000 7/2000 Godrej & Boyce Ltd. Ambattur
3. 477/2001 dated 19.3.2001 3/2000 8/2000 Godrej & Boyce Ltd. Ambattur
4. 1168/2001 dated 30.8.2001 8/2000 5/2001
(a) Children Education Society
(b) Arunachalam & Co.
(c) Sanmar Alloy Castings
(d) Sundaram Finance Ltd.
(e) Godrej Agrovet
5. 377/2002 dated 25.2.2002 7/2001 10/2001
(a) Brakes India Ltd.
(b) Godrej Agrovet
(vii) The respondents submitted replies to the show-cause notices. The original authority passed adjudication orders and the goods were classified under Heading 73.08 of the CETA, 1985 and confirmed the demand of duty after adjusting the amount of 8% on the value of the goods cleared at NIL duty by the respondents along with interest. The total amount of demand of duty in respect of five show-cause notices is Rs.23,57,543/- and penalty Rs.4,40,500/-. Commissioner (Appeals) set aside the adjudication orders and allowed the appeals filed by the respondents. Hence Revenue has filed these appeals and the respondents have also filed their cross-objections.
3. The learned AR on behalf of the Revenue reiterates the grounds of appeal. He submits that Note 4 of Chapter 94 provides the expression pre-fabricated building means building which are finished in the factory or put up as elements cleared together. He submits that in the present case the respondents had not cleared pre-fabricated buildings from the factory. They had cleared pre-fabricated structures which was classifiable under heading 73.08. It is contended that as revealed from the show-cause notices the respondents had manufactured pre-fabricated structures of iron and steel materials. He drew the attention of the Bench to the relevant portion of the Central Excise Tariff and HSN. It is submitted that the Commissioner (Appeals) had proceeded on the basis of purchase orders and had not considered the material on record that the respondents had not manufactured the pre-fabricated buildings at its factory. He further submits that the pre-fabricated structural materials cleared by the respondents from their factory were without walls and roofs and that cannot be treated as pre-fabricated building under sub-heading 9406. He relied upon the decision of the Tribunal as under:-
(a) Amiya Corporation Vs. CCE 1999 (113) ELT 336
(b) CCE Vs. PMG Structurals Pvt. Ltd. 2010 (250) ELT 113 which has been upheld by the Honble Supreme Court as reported in 2010 (254) ELT A101 (SC).
(c) Sangameshwar Pipe & Steel Traders Vs. CCE 2002 (141) ELT 252
(d) Aarti Steels Ltd. Vs. CCE 2002 (144) ELT 360
4. The learned counsel on behalf of the respondents reiterates the findings of the Commissioner (Appeals). He submits that it is apparent from the purchase orders that the fabricated items supplied by the respondents are pre-fabricated buildings. He submits that it is not an ordinary fabricated item. In other words, the fabricated items were manufactured as per drawing of the pre-fabricated buildings and removed in unassembled condition. It is also contended that as per HSN Note incomplete buildings unassembled with the necessary elements may be presented partially assembled for setting up on the site and it would come within the purview of pre-fabricated building. He also referred to the relevant portion of the HSN Notes and the Chapter Note of Chapter 94. He relied upon the decision of the Tribunal in the case of CCE Vs. PMG Structurals Pvt. Ltd. 2010 (250) ELT 113 which has been upheld by the Honble Supreme Court as reported in 2010 (254) ELT A101 (SC) and Cethar Vessels Ltd. Vs. CCE 2002 (143) ELT 336 and 2009 (241) ELT 580 and also National Tube Industries Vs. Commissioner of Central Excise, Chandigarh 1999 (111) ELT 80 (Tribunal). He further submits that the adjudicating authority had overlooked the various purchase orders of different companies. It is submitted that the Commissioner (Appeals) had examined each and every purchase orders and thereafter allowed the appeals and therefore the impugned order is liable to be upheld.
5. After hearing both the sides and on perusal of the records, we find that the dispute is whether the goods cleared by the respondents would be classifiable under Heading 7308 as claimed by the Revenue @ 16% advelorem or under Heading 94.06 as claimed by the respondents at nil rate of duty. For the purpose of proper appreciation of the case, the relevant portion of the Tariff and HSN Notes are reproduced below:-
(i) Chapter heading CH 73.08 in CETA 1985 read as follows:-
Structures (excluding prefabricated buildings of heading No. 94.06) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns), of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures or iron or steel.
(ii) Note4 / Chapter 94 of CETA, 1985 reads as follows:-
4) For the purposes of heading No. 94.06, the expression prefabricated buildings means buildings which are finished in the factory or put up as elements, cleared together, to be assembled on site, such as housing or work site accommodation, offices, schools, shops, sheds, garages or similar buildings
(iii) The Explanatory Note in CCCN for CH 94.06 Pre-fabricated Buildings reads thus-
This heading covers prefabricated buildings, also known as industrialized buildings of all materials.
These buildings which can be designed for a variety of uses, such as housing, worksite accommodation, offices, schools, shops, sheds, garages and greenhouses are generally presented in the form of:
- Complete buildings, fully assembled, ready for use
- Complete buildings, unassembled
- Incomplete buildings, whether or not assembled, having the essential character of prefabricated buildings In the case of buildings presented unassembled, the necessary elements may be presented partially assembled (for example, walls, trusses) or cut to size (beams, joists, in particular) or, in some cases, in indeterminate or random lengths for cutting in the site (sills, insulation etc.) The buildings of this heading may or may not be equipped. However, only built-in equipment normally supplied is to be classified with the buildings. This includes electrical fittings (wiring, sockets, switches, circuit breakers, bells, etc.) heating and air-conditioning equipments, (boilers, radiators, air-conditioners etc.) sanitary equipment (baths, showers, water heaters etc.) kitchen equipment (sinks, hoods, cookers etc.) and items of furniture which are built in or designed to be built in (cupboards etc.) Material for the assembly or finishing of prefabricated buildings (e.g. nails, glues, plaster, mortar, electric wire and cables, tubes and pipes, paints, wallpaper, carpeting) is to be classified with the buildings, provided it is presented therewith in appropriate quantities.
Presented separately, parts of buildings and equipments, whether or not identifiable as intended for these buildings are excluded from the heading and are in all cases classified in their own appropriate headings.
6. Revenues main argument is that in some cases the appellant did not supply walls and roofing sheets which are essential for a pre-fabricated building. In such cases the classification should be as structures of Heading 7308.
7. The adjudicating authority vide Order-in-Original dated 20.8.2001 observed that though the purchase order termed the supply as supply of pre-fabricated building, the actual supply made by the assessee are only structures. They were undertaking the work of erection of structure at site supplied by them, all other items of works were bought out items. The AC sheets which cover the structure are supplied by the customers themselves. The work order is not for a complete building but it is only for supply of pre-fabricated structure along with certain fixation work to be done at the site.
8. The Commissioner (Appeals) vide Order-in-Appeal dated 16.7.2002 after examining the purchase order observed as under:-
3. The customer for the sake of reduction in the contract value is procuring AC roof sheet and supplying to the appellant. The work order is inclusive of provision for the walls and roofs. In this regard, the learned Advocate urged that just because AC sheets are supplied by the customer, the lower authority held the view that the work order is not composite. He further argued that if the impugned goods are dutiable, then, the department would say that value of AC roof sheets is includible in the assessable value even though supplied by the customer. Just because the impugned goods are supplied at NIL rate of duty, the department cannot separate the value of the supply of AC sheet. I find force in the above argument. On perusal of the drawing which is placed at page No. 61 of case records. I observe that the whole contract is only pre-fabricated building. Even though the AC sheets for the roof is supplied by the customer the contract says that the appellant is to fix the AC sheets and the work order includes the cost of fixing of AC sheets. Further, I observe from the work order as per para 13(f), the appellant is to stand guarantee for any defects after completion of the work for a period of six months or 2 months after rectification of the last defect, whichever occurs later. So the onus of providing a leak proof and stable building lies with the appellant. Therefore, it cannot be said that the impugned goods are iron and steel structures only. I hold the view after perusing the work order as well as the diagram (placed at page 61 of case records) that the goods supplied by the appellant are only pre-fabricated building. In this regard, I do not agree with the findings of the lower authority in para 24 & 25 as the work includes the provisions for making the wall by the appellant with 0.5 mm TCT RMP coated galvanized steel glading sheet. Further, on perusal of the HSN Notes at P 1706 1707, I am of the view that walls is not an essential part of pre-fabricated building which is also known as industrialized building as per HSN Notes. On perusal of the photos found in pages 41 to 53 of the case records, my above view is strengthened. Therefore, by no stretch of imagination, description mentioned under Chapter 73 can be applied to the present goods, as that chapter description mentions only about the bridges, towers, scaffoldings etc. whereas on perusal of the work order, I observe that the appellant is to supply pre-fabricated building with provision to fix the roofs as well as walls.
4. In the light of the above discussions, I hold the view that the impugned goods are pre-fabricated buildings only and are rightly classifiable under CSH 9406.00. The impugned order is therefore set aside. The appeal filed by the appellant company, is accordingly allowed.
9. We have also perused the purchase orders as under:-
(i) Purchase Order dated 2.8.2000 of Children Education Society Supply, fabrication and erection of 3 Nos. pre-fabricated building of size 40 x 120 long structure at site Bommanchalli, Bangalore Roofing included
(ii) Purchase Order dated 4.9.2000 of M/s. M. Arunachalam & Co. Project for M/s. De Zurik at MM Nagar, Chennai. Structural Steel Work pre-fabricated building. The scope of work with including Main Building, Lean to shed, scrap yard and cycle shed Roofing included.
(iii) Purchase Order dated 17.1.2001 of Sanmar Alloy Castings Ltd.
1. Pre-fabricated steel building for Moulding Bay Extension II
2. Pre-fabricated steel building for main factory at Viralimalai
3. Pre-fabricated steel building for furnace bay extension
4. Pre-fabricated steel building for steel bay extension
(iv) Purchase order dated 22.12.2000 of C.R. Narayana & Co.
Pre-fabricated building 12m x 24m learn on first floor of M/s. Sundaram Finance Ltd.
(v) Purchase order dated 24.2.2001 of Godrej Agravet Ltd. Structural work for Shrimp Feed Plant
(vi) Purchase order dated 14.1.2000 of C.R. Narayana Rao M/s. Godrej & Boyce Mfg. Co. Ltd. Construction of pre-fabricated steel building and cloaking for the New Storage System Equipment Factory at Ambattur.
Schedule of Quantities & Prices of the pre-fabricated steel building and cloaking for the New Storage System Equipment Factory at Ambattur Description Qty.
UM Unit Rate Amount A NEW ITEMS Fabricate, supply, deliver, assemble, hoist and fix in position to alignment and level on foundation prepared by another agency, structural steel work comprising of columns, lattice girders, trusses, purlins, bracings and glazing runners etc. complete with necessary base plates, gussets, cheats, HD bolts and nuts and joint bolts and nuts and painted with one shop coat of red oxide paint (3% of calculated weight of steel will be added towards bolts / nuts / rivets / welding and will be paid for at the quoted rate for steelwork).
410MT 23,324.00 9,562,840.00 B DISMANTLING & RE-ERECTION OF EXISTING ITEMS
10. It is seen from the appeal filed by the Revenue that the respondent in their reply dated 20.6.2000 to Show Cause Notices contended that they manufactured and cleared steel structure under Heading No. 73.08 on payment of duty. They also cleared pre-fabricated building in SKD/CDK condition under Heading No. 94.06 at NIL rate of duty. So, it is required to examine each and every purchase order / contract to determine the supply of steel structure or pre-fabricated building. On perusal of the purchase orders as mentioned above, we find that purchase order dated 24.2.2001 of Godrej Agrovet Ltd. is structural work for shrimp feed plant. Similarly, purchase order dated 14.1.2000 of C.R. Narayana Rao is construction of pre-fabricated steel building and cloaking for New Storage System Equipment Factory of M/s. Godrej & Boyce Mfg. Co. Ltd. But the schedule of the said purchase order indicates that the respondent would undertake structural steel work and Dismantling and re-erection of existing items which cannot be classifiable under Heading No. 94.06 as pre-fabricated building. In the case of Amiya Corporation (supra), as relied upon by the learned AR, the Tribunal observed that every structure is not necessarily a building. The building must have a wall as is apparent from the HSN Explanatory Notes. It has been held that the structure supplied by the appellants in unassembled form cannot be treated as prefabricated building under Tariff heading 94.06.
11. In respect of other purchase orders, it appears that the respondent entered into contract for manufacturing pre-fabricated building as per drawing and specification of the contract. On reading of Note 4 of Chapter 94 and HSN Explanatory Notes, it is clear that pre-fabricated building whether in assembled form or unassembled form and to be assembled at site, it would cover within Heading No. 94.06. Regarding the submission of the learned AR that every pre-fabricated building should have wall as a component, we find from the diagrams for the factory at Viralimalai, that the walls are made of pre-fabricated concrete slabs. In our considered view, the classification as pre-fabricated building cannot be changed for the reasons that roofing sheets or walls were bought-out items or supplied by the buyer of the product. The classification has to be decided by the facts whether the goods manufactured are made to measurements of a building and that the components manufactured and supplied will give essential characteristics of a building as may be seen from purchase orders and bills of materials. In the present cases, it is seen from letter dated 10.1.2000 of the respondent that they supplied pre-fabricated cut to size as per drawing of pre-fabricated building together with other bought out elements, such as roofing sheets, side walls etc. and as per HSN Explanatory Notes, it would be covered within the Heading 94.06 as pre-fabricated building. So, the goods supplied in respect of the other purchase orders are rightly classifiable under sub-heading No.9406.00. We have noted that the Revenue in the grounds of appeal had mentioned only the contract of M/s. Godrej & Boyce Manufacturing Co. Ltd.
12. In the case of PMG Structural Pvt. Ltd. (supra), as relied upon by both sides, but, it would help the case of respondent, the assessees undertook fabrication of steel structures and erection at site as per purchase orders and claimed them to be pre-fabricated structures under Heading No. 94.06. The findings of the Tribunal are as under:-
A holistic examination of the manufacturing activity in relation to the drawings and specifications of the customer reveals that they manufacture and clear only prefabricated buildings in un-assembled condition and are not clearing panels in random and uncertain lengths. They clear panels in specific and exact dimensions along with accessories, which when assembled at site gives rise to buildings. Hence, the same is classifiable under Chapter Heading 94.06 only. Reliance was placed on the decision of the Honble CESTAT, West Zonal Bench, Mumbai in the case of M/s. Beard Sell Ltd. v. CCE, Belpur, 2006 (193) E.L.T. 325 (Tri.) wherein it was decided that such goods are classifiable under Chapter 94.06 of CETA only.
7.?Our attention was invited to the copy of the order dated 24-1-2004 placed by M/s. APP Mills Ltd. M.R.. Palem, wherein the scope of the said order has been mentioned as fabrication, supply, erection and installation of Pre-Engineered Building structures and C.C sheets, which will form the lean to roof building and it has been specified that the design and fabrication of the building is to confirm to the relevant specifications of the customers. Therefore, it is clear that the order is for Pre-fabricated building only.
13. In the case of National Steel Industries (supra), the appellants entered into a contract for supply of 73 storage shelters and they had to supply pre-fabricated steel tubular shelters complete in all respects according to drawing and specification mentioned therein. The appellant claimed that they supplied under work order was structures of iron and steel manufactured by them along with certain duty paid bought out components. The Tribunal observed that prefabricated building may be cleared in knocked down conditions and assembled at site by welding etc. It is further observed that a prefabricated building can be assembled on the ground without separate flooring. It has been held that once it is a prefabricated building, there is no question of bifurcation between the manufactured items and bought out item. So, in the present case, we are unable to accept the contention of the learned AR that the respondent had used bought out item and it is not prefabricated building.
14. We find that the finding of the adjudicating authority that though the purchase order terms the supply as supply of pre-fabricated building, the actual supply made by the assessee are steel structure is without examining all the purchase orders in proper manner. The learned AR on behalf of the Revenue relied upon the case laws of Sangameshwar Pipe and Steel Traders (supra) and Aarti Steels Ltd. (supra), in that cases, the assessee claimed that the structural materials erected at site permanently attached to earth and not excisable, which are not applicable in the facts of the present case.
15. In view of the above discussion, we modify the impugned order passed by the Commissioner (Appeals) insofar as the demand of duty in respect of purchase orders of M/s. Godrej Agrovet Ltd. and Godrej & Boyce Ltd. are upheld and the original authority is directed to re-quantify the demand accordingly. It is a case of classification dispute and penalty is not sustainable. The appeal filed by the Revenue is disposed of in the above terms and cross-objections are also disposed of.
(Pronounced in court on ________)
(Mathew John) (P.K. Das)
Technical Member Judicial Member
Rex
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