Custom, Excise & Service Tax Tribunal
Emco Limited vs Vadodara-Ii on 25 July, 2018
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Zonal Bench, Ahmedabad
-ooOoo-
Appeal No.: E/10975-10976/2015-DB, E/11932/17
Arising out of OIO: VAD-EXCUS-002-COM-016-017-14-15 dated 04.03.15
and OIA No. VAD-EXCUS-002-APP-113-2017-18 dated 30.05.2017
EMCO Ltd - Appellant(s)
Vs
C.C.E. & S.T. Vadodara-ii - Respondent(s)
Represented by For Appellant(s) : Sh. Prakash Shah (Advocate) For Respondent(s) : Sh. Amit Kr. Mishra, Dy. Commr. (A.R.) CORAM :
Shri Ramesh Nair, Hon'ble Member (Judicial) Shri Raju, Hon'ble Member (Technical) Date of Hearing: 03.07.2018 Date of Decision: 25/07/2018 ORDER No. A/11494-11496/2018 Per : Ramesh Nair , The brief facts of the case are that the appellant are engaged in the manufacture of structure and parts of structure for transmission towers, etc., falling under chapter 73 of the Central Excise Tariff, 1985. They are also engaged in the erection and commissioning of transmission towers at the site of the buyers namely, Power Grid Corporation Ltd., Rajasthan Rajya Vidhyut Parivahan Ltd. etc. They are clearing the structure for transmission manufactured by them on payment of duty to their buyers. Apart from supply of their own manufactured structure, they are also trading nuts and bolts. The same is sold to the same buyers. Such nuts and bolts are directly supplied from the supplier to the buyer's site. The case of the department is that the nuts and bolts are parts of
2 | Page E/10975-10976/2015-DB, E/11932/17 transmission tower. Therefore, the value thereof should be included in the value of transmission towers supplied to the customers.
2. Shri. Prakash Shah, Ld. Counsel appearing on behalf of the appellant submits that the nuts and bolts are not used in the manufacture of their final product i.e. transmission towers. Nuts and bolts are bought out items and the same is traded by supplying the same directly from the supplier's to the site of the buyer of transmission towers. Therefore, nuts and bolts are not taking part in the manufacture of transmission towers. He further submits that the nuts and bolts are required for erection and commissioning of transmission towers. The said activity is taking place only at the site and after erection and commissioning, the transmission towers become immovable goods and hence the same is not excisable goods, and since no duty is required to be paid on nuts and bolts and for the same reason value of nuts and bolts cannot be included in the assessable value of transmission towers. He further submits that the demand related to Show Cause Notice dated 12.03.2014 related to appeal no. E/10975/2014 is time barred to the extent the demand pertains to the extended period as there is no suppression of facts. He placed reliance on the following judgments:
1. CCE Bangalore V/s Electronics & Controls Power systems P. Ltd reported in 2011 (263) ELT 126 (Tri. Bang)
2. Kerala State Electronics Development Corporation Ltd Vs Commissioner of C.Ex. Cochin reported in 2004 (171) ELT 281 (Tri. Bang)
3. Commissioner Vs. Kerala State Electronics Dev Corporation Ltd reported in 2006 (199) E.L.T A130 (S.C)
4. Mihir Engineers (P) Ltd. Vs Collector of CE, Ahmedabad reported in 1999 (107) ELT 756 (Tribunal)
5. Essel Propack Ltd Vs CCE, Mumbai -III reported in 20011 (274) ELR 3 (S.C)
6. Greysham & Co. Vs CCC, Delhi-I reported on 2014 ELT 129 (Tri. Del)
7. Ericsson India Pvt Ltd Vs CCC Ponidicherry reported in 2007 (212) ELT 198 9Tri. Chennai)
8. Jupiter Enterprises Vs. CCE Ahmedabad0I reported in 2014 (314) ELT 301 (Tri. Ahmd)
9. Silson India Pvt Ltd Vs. CCE, Thane_I reported in 2006 (!($) E.L.T 37 (Tri.
Mumbai)
10.Gujarat Ambuja Cement Vs CCE Rajkot reported in 1996 (85) E.L.T 154 (Tribunal) 3 | Page E/10975-10976/2015-DB, E/11932/17
11.Collector of Central Excise Baroda Vs Dodsal Privat Ltd. Barodar reported in 1987 (28) E.L.T 352 Trinunal
12.Nizam Sugar Factory Vs Collector of CE A>P repo0rted in 2006 (197) ELT 465 (SC)
13.Commissioner Vs. Dodsal Pvt. Ltd reported in 2015 (320) E.L.T A36 (S.C)
14.S.A.E (India Ltd Vs collector of C.E reported in (36) E.L.T 613 (Trinunal)
15.Commissioner of C.E Mumbai-IV Vs Hutchison Max Telecom P. Ltd reported in 2008 (224) E.L.T 191 (Bom)
16.Triveni Engineering & Indus Ltd Vsl CCE reported in 2000 (120) E.L.T 191 (Bom)
17.Voltas Ltd Vs CCE, Mumbai0IV reported in 20011 (270) E.L.T. 541 (Tri. Mumbai)
18.Beam Engineering Pvt Ltd Vs Commissioner of Customs TRicht reported in 2000 (122) ELT 821 (Trinunal)
19.Circular: 58/1/2002-CX dated 15 Jan 2002
20.Speci8men invoice issued by the Supplier of Nut and Bolt
21.Collector of C. Ex. Bhubaneshwar Vs. Radiant Electronics Ltd [1996 (85) ELT 102 (Tribunal)
22.Electronics Services Vsl CCE Bombay [2000 (120) ELT 468 (tribunal)]
23.Collectro of ce Pune Vs statfield System (Coating) Pvt Ltd [1996 (87) ELT 510 (Tibunal)
24.Collector of CE, New Delhi Vs. Eicher Tractors [2001 (127)ELT 846 (Tri. Del.)]
25.Andhra Pradesh Paper Mills Ltd Vsl Collector of Central E (1993 (65) ELT 447 (Trinunal)
26.Brew Force Machines Pvt Ltd Vs cce Delhi-II reported in 2016 (333) ELT 468 (Tri. Del)
27.Cimmco Birla Ltd Vs CCE Jaipur reported in 2003 (156) ELT 1019 (Tri.Del)
28.Bharat Heavy Electricals Ltd Vs. CCE Meerut reported in 2001 (133) ELT 584 (Tri. Del)
29.Relevant Extracts from the First schedule of C.E Tariff Act.
30.Collector of CE Bombay -II Vs Refair Industries Reported 1998 (103) ELT 331 (Tri.Mum)
31.CCE Bombay-I Vs. Automatice Engineering Works reported in 2001 (130) ELT 331 (Tri.Mum)
32.Collector of C.E Calcutta Vs. Alnoori Tobacco Products reported in 2004 (170) ELT 135 (S.C)
33.Calama Inds Pvt Ltd Vs. CCE, MUM [2016 (9) TMI 82-CESTAT Mumai)
34.Honeywell Automation India Vs. CCE Mum-III [2016 (9) TMI 90-CESTAT Mumbai]
35.Jayshree Electrodevices Pvt Ltd. Vs CCE, Pune-I Order dated 30.05.2016 passed in Appeal No. E/824/07]
36.M/s Cheema Boilers Limited Vs. CCE & ST Chandigarh reported in 2018- VIL-235-CESTAT-CHD-CE
37.Copy of Order No. A/86040/2018 dated 17/04/2018 in the matter of SS Engineers Vs. CCE Pune-II
38.KEC international Ltd Vs. CCE, Jaipur-I reported in 2017 (358) E.L.T 752 (Tri. Del)
39.Andhra Pradesh Paper Mills Ltd Vs. Collector of CE reported in 1993 (65) E.L.T. 447 (Tribunal) 4 | Page E/10975-10976/2015-DB, E/11932/17
40.Steel Crafts Vs. Collector Of CE, Belgaum reported in 1995 (75) E.L.T 897 (Tribunal)
41.Collector of Central Excise, New Delhi Vs. Eicher Tractors reported in 2001 (127) E.L.T 353 (Tri - Mumbai)
3. Shri Amit Kr. Mishra, Ld. Dy. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He also placed reliance on the following judgements:
1. 2013 (292) ELT 353 (Tri- Kol)- BSNL Vs . CCE, Kolkata-III
2. 2005 (182) ELT 336 (Tri - Mum)- CCE, Pune-I Vs. Thermax Bobcock & Wilcox Ltd.
3. 1988 (38) ELT 566 (SC)- Marne Tulaman Manufacturers P Ltd Vs CCE
4. 2007 (216) ELT 497 (SC)- CCE, Delhi Vs. Frick India Ltd.
4. We have carefully considered the submission made by both the sides and perused the records. We find that the fact is not in dispute that the nuts and bolts are bought out items and the same is not part of the manufacturing activity of the appellant. The said nuts and bolts were not brought into factory of the appellant. Hence the same is not taken part in the activity of manufacturing of transmission towers. The said nuts and bolts were supplied directly from supplier to site of the buyers. The goods manufactured and cleared by the appellant is the transmission towers in unassembled form which is only goods subject to assessment and the appellant have correctly discharged the duty on the said goods. The transaction of the nuts and bolts is clearly a trading activity on which neither the duty can be demanded nor the value thereof can be included in the value of transmission towers. The nuts and bolts supplied directly at site from the supplier of nuts and bolts were used at site for erection and commissioning of transmission towers. After this activity, the goods emerged at site is immovable goods and the same is not excisable. In these facts, by any stretch of imagination bought out nuts and bolts neither can be considered as manufactured goods nor its value can be included in the assessable value of transmission tower. The very same issue has been considered time and again by 5 | Page E/10975-10976/2015-DB, E/11932/17 various forums such as this Tribunal, High Court and Supreme Court and consistently the bought out items supplied directly at site for erection installation commissioning of excisable manufactured goods the value of bought out items neither can be included in the value of such machine or even leviable to duty independently. Though the Ld. Counsel relied upon catena of case laws.
However, we reproduce the following judgments which are identical to the present case.
4.1 In the case of Dodsal Pvt. Ltd. (supra) this tribunal held as under :
"We are, therefore, unable to accept the contentions of the Revenue that there has been a manufacture of excisable goods, the several members continued to be within Item 26AA and if there is no transformation into a different commodity, the recourse to Item 68 would not be justified. The Appellate Collector has rightly observed that the activity would not come under the purview of a- manufacture and „the transmission towers which were erected at the site from the structural material would be permanent structures and would not admit of the definition or description of the goods. The decisions under the Sales Tax Act cited by the SDR have been given with reference to particular provisions and do not have material bearing to determine the excitability of the products in this proceeding. The other decisions cited by the SDR are with reference to the facts and circumstances of those cases. Though the principle laid down in those decisions cannot be questioned the facts of the present case are different. The facts are more or less similar to the fact in Aruna Industries case."
4.2. In case of S.A.E. (India) Ltd. (supra), this division of this tribunal held as under "In view of the above we hold that the activity carried out by the appellants would not come within the purview of the "manufacture" and the transmission towers which was erected at the site from the structural material would be permanent structure and would not admit the definition and description of the goods and consequently we hold that the angles in question would be classifiable under Tariff Item 26AA. We order accordingly and allow all the five appeals which relates to the classification."
4.3. In the case of SS engineers vs CCE (ii) Mumbai tribunal order number A/86040/2018 dated 08.08.2018. This following order was passed :
"We find that the adjudicating authority has ultimately confirmed the demand against Appellant on whole agreement/ contract price by discussing and relying upon one of the Contract of Boiler of 80 TPH. The demand has been made considering the contract price as value of goods. We find from the agreement 6 | Page E/10975-10976/2015-DB, E/11932/17 that the said agreement is for supply of goods for the 80 TPH Boiler and supervision of erection and commissioning. The Appellant themselves did not carry out erection or commissioning of the said Boiler but after supply of goods only supervised the erection. In such case no duty can be demanded from the Appellant as they are only supplier of goods. It is not the allegation of the department that the Appellant‟s own manufactured goods and the bought out goods when put together would result into emergence of new product i.e Boiler. The Appellant do not clear the Boiler in Complete knocked down Condition or Semi Knocked Condition. The Appellant‟s own manufactured goods, at the time of clearance from the factory, have identity of individual components or equipments which has not been disputed by the revenue. Though the adjudicating authority held that the bought out items are critical components of the Boiler but we find that even not a single bought out component has been named as critical component which shows that the allegation has no basis. Simply by alleging that the value of bought out goods are liable to be included in the assessable value, duty cannot be demanded. Even though the show cause notice mainly alleged that the bought out items are liable for duty but in the impugned order the demand has been made on whole contract price which shows that the demand has no basis. Nevertheless we find that the 80 TPH Boiler on the basis of which demand has been confirmed against the Appellant is a huge structure which was erected at site and is permanently attached to earth. It was erected piece by piece and not by merely putting some goods together viz. the Appellant‟s own manufactured goods alongwith bought out components. We have gone through all the contracts/ agreements entered into by the Appellant during the impugned years as well as photographs of some of the contracts placed in the appeal. We find that all the contract were for either erection and set up of sections of the Sugar factory or the Sugar factory itself. All these Section are part of Power plant system of Sugar factory i.e Boiler or turbine system or the factory itself which are in huge set up of machinery and equipment embeded permanently to earth. None of these sections can be removed as such or in Knocked down condition or semi knocked down condition. It has to be dismantled and to be broken up into pieces if it is to be shifted which will lead to losing its identity of any goods. The impugned order has relied upon some instances where some goods were brought from other sugar factory and were used in installation at Appellant‟s factory. We find that these goods were brought to Appellant unit by dismantling the system of old sugar plants. However the adjudicating authority failed to appreciate that after dismantling into prices the identity of the goods did not remain as of goods which was recognizable in old sugar factory. It turned into individual components or goods since they were not in the form of knocked down condition. We are thus of the view that by means of any imagination the agreements under which the goods were supplied by the Appellant or in case where the Appellant themselves erected the plants or their sections cannot be held to be any contract for manufacture of excisable goods. We are unable to comprehend that huge boilers erected on site piece by piece with the Appellant‟s manufactured goods and bought out goods which become immovable property are excisable goods. It cannot be removed in knocked down condition or semi knocked down condition. It has to broken up into pieces which would not even recognizable as boiler. What has come into existence at site are huge boiler systems which were part of power systems or whole sugar manufacturing sections or plants. Undoubtedly the whole property which came into existence are immovable property. Without dismantling these systems they cannot be shifted. Thus there is no reason to demand duty on the contracts undertaken by the Appellant. Further as far as demand of duty under the guise of bought out goods is concerned we find that when the bought out goods are not being part of any excisable goods at the time of their clearances in that case no duty can be demanded. In case of M/s Intech Surface Coating Pvt. Ltd. Vs. CCE, Pune - III, this bench on the issue of inclusion of bought out items in the assessable value has held as under :
7 | Page E/10975-10976/2015-DB, E/11932/17 "We have gone through the rival submissions. We find that it is not in dispute that the Revenue is seeking to include the cost of bought out items supplied directly to site for the purpose of charging Central Excise duty. It is not in dispute that no manufacturing activity in respect of such items has been done by the appellant. The liability to Central Excise duty arises only when there is a manufacturing activity undertaken and in the absence of manufacturing activity the liability of Central Excise does not arise. On a similar issue in the case of Acer India Ltd. (supra) observed as follows:
55. It must be borne in mind that central excise duty cannot be equated with sales tax. They have different connotations and apply in different situations.
Central excise duty is chargeable on the excisable goods and not on the goods which are not excisable. Thus, a goods which is not excisable if transplanted into a goods which is excisable would not together make the same excisable goods so as to make the assessee liable to pay excise duty on the combined value of both. Excise duty, in other words, would be leviable only on the goods which answer the definition of excisable goods and satisfy the requirement of Section 3. A machinery provision contained in Section 4 and that too the explanation contained therein by way of definition of transaction value can neither override the charging provision nor by reason thereof a goods which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires.
4.1. Tribunal in the case of Emerson Network Power India P. Ltd.(supra) in a similar circumstance observed as follows:
"4.The entire duty demand on bought-out items pertains to installation of air- conditioning machines at site. From the perusal of the list of bought-out items such as floor grills, piping, cabling etc., it would be seen that they are not parts of air-conditioning machines manufactured and cleared, but items required purely at site. Therefore, the appellants are right in contending that the cost of bought-out items cannot be included in the assessable value."
Relying on the aforesaid decisions the appeal is allowed.
8. Drawing parallels from the above order we find that there is no reason to demand duty on the bought out goods as the Appellant has not manufactured any goods which are recognizable as excisable goods. Further we find that the same controversy arose in the earlier period and the matter travelled upto the Tribunal. The findings of the Tribunal as recorded in case of S.S. Engineers Vs. CCE, Pune - III 2008 (221) ELT 54 (TRI) are as under :
3. It is the case of the department that the disputed items were not supplied by the appellants as a whole at the site of the sugar factories but assembled out of the various parts and components supplied by the sugar factories, as seen from the chart herein below :-
Sr. Description of Parts/components brought at the site of No. Excisable Goods M/s. Rajarambapu SSK and Mohanrao SSK for Manufactured manufacture of excisable goods A. B. C. 1 Cane Unloader Gantry Girders, Ladders, Working Platforms, Railing Shed for Trolley, Two (Motion) Cane Unloader Bridge, Trolley (complete with CT Drive, Hoist & Holding Drums, Wire Ropes, Spur Gears Gear Boxes, Motors, Brakes, Trusters, Limit Switches etc.) with sling attachment, Electrical Control Panel, Operator‟s Cabin etc. including electrical hardware.
2. Cane, Rake and Columns, Side Plates, Runner Beams, Runner Baggase Carriers Hooks, Chutes, Rake, Staircase, all Sprockets & 8 | Page E/10975-10976/2015-DB, E/11932/17 Shafts with Plummer Blocks, Bearings, Stretching Gear, Idler Pulleys with Shafts, Brackets, Bush Bearings, Chain for 1st Cane Carrier, Slats, Motor with variable speed drive, Reduction Gear Box, Spur Gear, Pinion Set, Starter. Base Frame. Foundation Bolts for Cane Carrier Drive. Troughs Rakes, Chain, Runners, Service Gangway, Tensioning Devices, Set of Bagacillo Collecting Hopper with Bagacillo Screens and Sliding Door for feeding bagasse to boilers.
3. Cane Kicker Central Shaft, Knives, Plummer Blocks & Bearings, Drive Base Frame, Motor with Starter Reduction Gear Box, Coupling etc.
4. Cane Leveller Shafts & Hubs, Flywheels, Bearing & Plummer Blocks. Couplings, Set of nuts & bolts for knives, knives. Motor with starter, Rails, Rotor Assembly complete with hubs, Flywheels, Bearing Plummer Blocks, Nuts & Bolts for Hammer, Hammers, Deflector & Anvil Plate, Anvil Suspension Gear Hood Rear Chutes, 750 HP SPDP Slipring Motors.
5. Cane Feeding Assembly of Automatic Cane Feeding Devices Device complete in all respects.
6. Mill House Head Stock with Wear Plate, Side Cap with pins Top Cap with pins, Side Bearing, Top Half of Top Bearing, Bottom Half of Top Bearing.
Mill Roller with crown pinion, Trash Beam with bolts, Trash Plates, Scrapper Plate Holder, Scrapper Plate Massecheart Knife Holder with knives, Tail Bar. Service Gangway with staircase and railing. Hydro-pneumatic System Control Panel. Tank with pumps, Pipes & filings. Roller Movement Indicator, Hydrolic Accumulator Set of Forced Feed Lubricator with pipe & fittings, Set of Juice Troughs under the mills, Square Coupling for Tail Bar, Set of Base Frames for DC Motor of mill, set of Foundation Bolts & Anchor Plates. Under Feeder Roller complete with Brackets, Pinions, Donnelly type Chute, Level Sensing Device, DC Drive for Mills, Mill Reversing Arrangement complete in all respect, Slow Speed Gear Box, Gear Box complete with Oil Pump, Spur Gear for 1st motion, Spur Pinions for Mill Gearing, Shaft for 1st motion Gear - 2nd motion Pinions, Set of Gear Guards, Pedestal Bearing for Mill Gearing. Base Frames for Mill Gearing complete with foundation Bolts, Turbine complete with Base Frame. Enclosed Reduction Gear Box, Main & Auxiliary Panel and Safety Devices, Pressure Gauge, Steam Flow Meters. Tacho meter Panel complete with oil pipes & fittings, Alternator complete with Air Cooler. One Set of Battery 9 | Page E/10975-10976/2015-DB, E/11932/17 AVR & Excitation Panels.
7. Juice/Water/ Registering Counter, Weighed Water Receiving Molasses Tank, Check Weighing Scale, Juice Weighing Weighing Scales Scale, Weighed Juice Receiving Tank, Check Weighing Tank, Check Weigh Bridge - for "Juice Weighing Scale, Working Platform, Railing, Ladder, Weighed Molasses Receiving Tank, Molasses Diversion Arrangement.
8. Juice Heater 170 MS H.S.A. Juice Heater, 300 M2 H.S.A. Juice Heater, Condensate Receivers
9. Juice Clarifier Flash Tank Shell, Tray of the Clarifier, Set of Central Tubes with arms & scrappers, Drive Head complete with Drive, Mud Tank, Clear Juice Column, Set of Valves, Pipes, Wheels, Chairs etc., Working Platform, Railing, Ladders.
10. Vacuum Filters Vacuum Filter complete with drive, Filterate Receiver, Mud Belt Conveyer including supporting structure at the Mud Discharge End, Mud Mixer, Catchall installed in the line going to condenser.
11. Evaporators Calandria with bottom saucer for 2000 M2 H.S.A, body semi-kestener (1st body).
Calandria with, bottom saucer for 1000 M2 H.S.A. body semi-kestener (2nd A body), Calandria with bottom saucer for 600 M2 H.S.A. body semi-kestener (2nd B body), Calandria with bottom saucer for 450 M2 H.S.A. body semi-kestener (3rd body), Calandria with bottom saucer for 250 M2 H.S.A body semi-kestener (4th body). Body of Evaporator, Catchall for Evaporator. A set of incondensibles collecting coils, syrup/juice samples etc. 12 Vacuum Pans Calandria for 60 T. vacuum pan with bottom saucer. Body for 60 T vacuum pan, Catchall for vacuum pan. Pan Discharge Valve complete with operation mechanism, Set of pan washing coils, feeding headers and all other pan accessories.
13. Grass Hopper Plain Tray-Grass Hopper, Multi Tray Grass Hopper, Drive Motor for Grass Hopper with pulley starter, V Belt etc., Hot Air Blower with air heater, Cold Air Blower.
14. Sugar Elevators Casing, chain, buckets, drive etc.
15. Feeder Table Shafts, Sprockets, Plummer Blocks with bearing drive motor complete with variable speed drive, reduction gear box, starter etc.
16. Juice Sulphiter Juice Sulphiter(with stirrer, drive etc.), S02 recovery tower with chimney. Lime proportionating device, syrup sulphitation unit, S02 recovery tower.
17. Condensors Multi-jet condensor for 750 MM diameter (vapour) pipe including tail pipe, Multi-jet condensor for 1100 MM diameter vapour pipe including tail pipe.
10 | P a g e E/10975-10976/2015-DB, E/11932/17 It is also the case of the department, as seen from the show cause notices and the impugned orders, that the items are huge items encompassing wide area and cannot be transported and installed as such in any other premises but require to be dismantled before transport and installation at any other site. In view of this admitted position, the ratio of the Apex Court in Triveni Engineering & Indus. Ltd. v. CCE, 2000 (120) E.L.T. 273 (S.C.) is directly attracted to the facts of this case. In paragraph 20 of that decision, the Apex Court held that the marketability test requires that the goods as such should be in a position to be taken to the market and sold. In that case, for taking turbo alternator to the market, it has to be separated into components, viz. turbine and alternator and then would not remain turbo alternator and therefore the turbo alternator cannot be excisable goods falling within the meaning of Heading 85.02. The Supreme Court set aside the finding of the Tribunal that the turbo alternator was excisable goods. The above decision has been followed by the Tribunal in the case of CCE, Chandigarh v. Bhagwanpura Sugar Mills, 2001 (134) E.L.T. 673 and Indica Chemical Indus. (P) Ltd. v. CCE, Meerut, 2005 (185) E.L.T.
67. We further note that vide Circular No. 58/1/2002-CX dated 15-1- 2002, the CBEC has clarified inter alia that if any goods installed at site are capable of being sold or shifted as such after removal from the base and without dismantling into its component parts, the goods would be considered to be movable and thus excisable and if the goods are incapable of being sold, shifted and marketed without first being dismantled into component parts, the goods would be considered as immovable and therefore not exigible to duty. The clarification has been issued in the light of the Apex Court‟s judgment cited supra as well as in the case of Quality Steel Tubes Pvt. Ltd. v. CCE, 1995 (75) E.L.T. 17 (S.C.) and Mittal Engineering Works Pvt. Ltd. v. CCE, 1996 (88) E.L.T. 622 (S.C.).
4. The Commissioner has relied upon the decision of the Tribunal in CCE, Chennai v. Binny Ltd., 2003 (151) E.L.T. 106, holding that similar items were excisable, however, as rightly pointed out by the learned counsel for the appellants, the assessees did not challenge the Commissioner‟s order treating some of the sugar manufacturing equipment as movable and hence excisable, for the reason that the demand was dropped on the ground that it was barred by limitation and hence the finding of excisability was not contested by the assessees.
5. In the light of the above discussion, following the ratio of the apex j court‟s decision in Triveni Engg. & Inds. Ltd. supra, on the basis of which CBEC Circular No. 58/1/2002-CX., dated 15-1-2002, which is binding on the Revenue authorities, was issued, we set aside the demands and penalties and allow both the appeals. The above order of the Tribunal has been upheld by the Hon‟ble High Court as reported in Commissioner v. S.S. Engineers - 2008(232) E.L.T. A200 (Bom.)]. We find that in the present case also the show cause notices alleged that the Appellant manufactured the same goods as above and duty demand has been made. Applying the above ratio of the Tribunal we are of the view that the demand of duty made against the Appellant on goods erected, installed at site are absolutely not sustainable. We also find from the Miscellaneous application filed by the Appellant that the jurisdictional Commissioner vide noting dt. 11.11.2008 viewed that the value of the bought out items cannot be included in the assessable value of the manufactured goods in view of the fact that the bought put items did not enter into the factory of the Applicant and no credit is being taken of the duty paid on such items. After this noting the Appellant were not issued 11 | P a g e E/10975-10976/2015-DB, E/11932/17 show cause notice and thus the department itself appreciated the fact that the duty demand is not sustainable. Even otherwise also we find that if the revenue demands duty on bought out goods in that case it has not been disputed that the goods were itself duty paid and the Appellant did not avail any credit of the same. Further even the bought out goods have been used in erection of the Sugar plant or its sections at site which are non excisable. Thus we are of the view that bought out goods which were taken directly to the site for erection/ installation does not invite any excise duty. The revenue has relied upon the judgments in case of Commissioner Vs. Thermax Bobcock & Wilcox Ltd. 2005 (182) ELT 336, Walchandnagar Ind. Ltd. Vs. CCE. Pune - III 2014 (311) ELT 274, CCE, Delhi Vs. Frick India Ltd 2007 (216) ELT 497 (SC), CCE, Aurangabad Vs. Lipi Boiler Ind. Ltd. 2011 (263) ELT 271 (Tri, Mum) amongst others. We find that in all these judgments the facts were altogether different whereas in the present issue the goods which came into existence and being immovable goods do not fall under the definition of excisable goods. Whereas in case of Thermax supra the bought out items were cleared from the factory and thus it was held that the boiler was cleared in unassembled condition. In the present case the bought out items were cleared to the customer‟s site directly and in turn was used in erection of immovable property. It itself is not clear as to what were the bought out items. Clearly the whole demand is fallacious. In case of Walchandnagar Industries supra the goods cleared were in assembled form and were excisable goods before their clearance from the factory. In case of Frick India Ltd., the issue involved was whether the value of bought items is includible in the value of Compressor whereas in the present case the issue is demand of duty under the guise of bought out goods which itself is not clear and even the goods coming into existence at site does not merit consideration as excisable goods. Thus we find that all the judgments cited by the Appellant does not have any effect on the present controversy. whereas the Appellant‟s case for the previous period stands decided in their favour. We also find that even if it is assumed that any duty is demandable from the Appellant, it would not be liable to be paid as the alleged activity of installation of goods took place at the factory of customer and hence they are eligible for exemption in terms of Notification No. 67/95 - CE.
9. The adjudicating authority has confirmed duty demand on the contract price. However since we have held that the goods which came into existence after using the bought out goods and the Appellant‟s own manufactured goods has resulted into immovable property i.e whole sugar plant or its part in the form of Power section or other sections, we do not find any reason to demand duty on the same. In case of Kerala State Electronics & Controls Power Systems P. LTD. 2004 (171) ELT 281, the Tribunal held as under :
5. On a careful consideration and perusal of the impugned orders, we notice that the bought out items were independently supplied to the site and they are in the form of junction boxes, signal heads and cables. They are not part of the traffic controller. All these items go to form traffic signal system, which according to the appellant is an immovable property. The authorities below have held that the value of the bought out items is to be added to the assessable value of traffic controller. On a perusal of the judgments cited by the Counsel we find that the value of the bought out items is not required to be added to the duty paid goods cleared by the assessee from their factory. These judgments clearly apply to the facts of the case while the citations relied by the SDR 12 | P a g e E/10975-10976/2015-DB, E/11932/17 pertains to a situation where bought out items are essential parts of the items supplied by the assessee and hence its value was required to be added. The situation is not the same in the present case as all the bought out items are sent to the site for erection of traffic signal system. Hence, they become part of the immovable property and cannot be considered as part of the traffic controller unit cleared by the appellant.
Therefore, respectfully following the ratio of the judgments cited by the Counsel, the impugned order is set aside and appeals allowed.
The above order was upheld by the Hon‟ble Apex Court as reported in Commissioner v. Kerala State Electronics Development Corporation Ltd. - 2006 (199) E.L.T. A130 (S.C.)]. In case of India Tube Mills and Metal Industries Vs. CCE, Mumbai 2017 - TIOL - CESTAT - MUM this bench on the similar issue by relying upon the judgment of Hon‟ble Apex Court in case of Triveni Engineering & Indus Ltd. - 2000 (120) ELT 237 (SC) = 2002-TIOL-14- SC-CX has held as under :
2.1 As regards the bought out items, it is supplied directly from the supplier to the site and the same do not involve any manufacturing activity of LPG Bullets. All other activities such as fitting out of the bought out items and erection & installation is taking place at the site of the customer. All these activities are carried out to make the LPG Bullets as immovable goods, therefore, all such activities are not part and parcel of the manufacturing activity of the appellant in respect of LPG Bullets.
Therefore, inclusion of any amount over and above the price of the LPG Bullets adopted for clearing of the goods from the factory is incorrect and without authority of law. In support, she placed reliance on the following decisions:-
a) Triveni Engineering & Indus Ltd. - 2000 (120) ELT 237 (SC) = 2002-TIOL-14-SC-CX
b) Milestone Aluminium Co. Pvt. Ltd. - 2007 (214) ELT 417 (T)
c) Sanmar Weighing Systems Ltd. - 2005 (190) ELT 228 (T) = 2005- TIOL-1298-CESTAT-MAD
d) Emerson Network Power India Pvt. Ltd. - 2004 (176) ELT 168 (T)
e) Fuse Base Eltoro Ltd. - 2000 &116) ELT 179 (T)
f) Goetze (India) Ltd. - 2004 (169) ELT 274 (T) = 2004-TIOL-366- CESTAT-DEL
g) Kerala State Electronic Dev. Corpn. - 2008 (224) ELT 88 (T) = 2007-TIOL-1558-CESTAT-BANG
h) BHEL Vs. CCE - 2001 (138) ELT 1223 (T)
i) Neycer India Ltd. - 2005 (192) ELT 620 (T)
j) Mahindra & Mahindra Ltd. - 2015 (321) ELT 513 (T)
k) Pace Marketing Specialities Ltd. - 2000 (119) ELT 77 (T) I) Jai Hind Oil Mills & Co. - 1994 (71) ELT 902 (Bom).
3. On the other hand, Shri V. K. Shastri, learned Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both sides. We find that the Revenue has not disputed the value of Rs.42 lakhs for each LPG bullets. However, the demand was raised only on inclusion of the value in respect of bought out items and certain activities taken place at the site for erection and installation of the said LPG bullets. We find that all these elements such as bought out items are undisputedly supplied from the supplier to the site. It is not taking part in the 13 | P a g e E/10975-10976/2015-DB, E/11932/17 manufacture of LPG Bullets. These bought out parts are used only for erection and installation of LPG Bullets at site and other activity at site are also related to erection and installation. The said activity of erection and installation in our considered view is not amount to manufacture. Moreover, after erection and installation of the LPG Bullets, it become immovable goods. For this reason also, if at all any activity by any imagination is amount to manufacture, by virtue of immovability of LPG Bullets, the activities at site cannot be charged to excise duty. With these undisputed facts, we are of the view that the value of Rs.42 lakhs adopted by the appellant in respect of LPG Bullets, which is not in dispute, no further addition can be made.
5. As per our above discussion, the demand does not sustain. Accordingly, the impugned order is set aside and the appeal is allowed.
On the identical issue this Tribunal passed various other judgments in favour of assesses which are reproduced below:
(i) Cheema Boilers Limited Vs. Commissioner of Central Excise & ST, Chandigarh-2018-VIL-235-CESTAT-CHD-CE-
"5.Heard the parties and considered the submissions. The facts of the case are not in dispute that appellants are having purchase orders for Erection, Commissioning and Installation of Boilers at site. The appellant is clearing parts from factory to the site and certain bought out items are also directly supplied to the site from various vendors, on payment of duty. It is a fact on record that boiler in question emerges at site which become an immovable property, which is not excisable goods therefore, not leviable for duty. As the Boilers on which the Revenue is demanding duty are not excisable goods therefore, the question of payment of duty does not arise. Further, we find that bought out items have never came to the factory of the appellant and the appellant is liable to pay duty only on the goods manufactured by them. In that circumstance, for the bought items, the appellant is not required to pay duty. Therefore, we hold that demands in the impugned orders are not sustainable. Accordingly, the impugned orders are set aside."
(ii) Tycon Automation Pvt. Ltd. Vs. Commissioner of Central Excise, Noida- 2017 (357) ELT 861 (Tri.-All) "6.Having considered the rival contentions. We find that it is an admitted case of Revenue that the appellant have not brought the bought out items in their factory of manufacture and it is further admitted fact that the control panels are not cleared along with bought out items from the factory of manufacture. Under such circumstances, we hold that there is no application of Rule 6 of the Valuation Rules, 2000. We further hold that there is no misdeclaration of the transaction value by the appellant. Under the facts and circumstances that the appellant have placed the orders on third-party vendors for supply of the bought out items directed to their customers and have paid the applicable sales tax/VAT, the same does not attract levy of excise duty. We also take notice of the fact that in para No. 27.14 of the impugned order the Adjudicating Authority observed as follows :-
"I find that the bought out items have not been brought to 14 | P a g e E/10975-10976/2015-DB, E/11932/17 the factory premises and have not been used in the manufacturing of the goods - control panels. The bought out items were directly sent to their customers and being essential and inseparable part of the control panel, they were installed at the site by them."Thus we find that it is an admitted fact that the bought out items have never entered the factory premises of the appellant so as to become part of the manufactured control panel nor the same have been cleared along with the control panels. Accordingly, we allow these appeals and set aside the impugned order. The appellant will be entitled to consequential benefits in accordance with law including refund of amount deposited during investigation. Accordingly, the personal penalty on the Director Mr. Dinesh Kumar Bhardwaj is also deleted."
From the consistent views of this Tribunal‟s in above judgments, ratio of which squarely applicable to the present case, impugned order is not sustainable.
10. The appellant also raised the issue of Cenvat Credit on bought out goods. We agree with the submission of appellant that when revenue seeks to demand duty on the value of bought out goods the appellant shall be entitled for cenvat credit of duty paid on such bought out goods.
11. Regarding the issue of availability of Notification No. 67/95-CE dt. 16.3.1995 on the alleged excisable goods coming into existence at site, we find that if the contention of Revenue is accepted that the goods while erection/installation was manufactured at site, the same shall be eligible for exemption notification No. 67/95-CE dt. 16.3.95 which reproduced below:
"Inputs captively consumed within the factory of production In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts -
(i) capital goods as defined in rule 57Q of the Central Excise Rules, 1944 manufactured in a factory and used within the factory of production;
(ii) goods specified in column (2) of the Table hereto annexed (hereinafter referred to as „inputs‟) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (3) of the said Table;from the whole of the duty of excise leviable thereon which is specified in theSchedule to the Central Excise Tariff Act, 1985 (5 of 1986) :
Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products (other than those cleared either to a unit in a Free Trade Zone or to a 100% Export Oriented Undertaking or to a unit in an Electronic Hardware Technology Park or to a unit in a Software Technology Parks), which are exempt from the whole of duty of excise leviable thereon or are chargeable to „Nil‟ rate of duty.Explanation. - For the purposes of this notification „inputs‟ does not include -
(i) packaging materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packaging materials is being availed of for packaging any final products;
(ii) packaging materials or containers, the cost of which is not included in the assessable value of the final products under section 4 of the Central Excises and Salt Act, 1944 (1 of 1944).
15 | P a g e E/10975-10976/2015-DB, E/11932/17 TABLE S.No. Description of inputs Description of final products (1) (2) (3)
1. All goods falling within the Schedule All goods falling within the to the Schedule Central Excise Tariff Act, 1985 (5 of to the Central Excise Tariff Act, 1986), other than the following, 1985 namely, - (5 of 1986), other than the following,
(i) goods classifiable under any namely, heading of -
Chapter 24 of the Schedule to the (i) goods classifiable under any said Act; heading of Chapter 24 of the Schedule to the said Act;
(ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule (ii) goods classifiable under to the said Act; heading Nos. 36.05 or 37.06 of the
(iii) goods classifiable under sub- Schedule heading Nos. 2710.11, 2710.12, to the said Act; 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the (iii) woven fabrics classifiable said Act; under Chapter 52 or Chapter 54 or Chapter 55 of the Schedule
(iv) high speed diesel oil classifiable to the said Act. under heading No. 27.10 of the Schedule to the said Act.
On reading of above notification it is clear that capital goods manufactured and used within the factory of production shall be exempted. As per the facts of the case the machines which undoubtedly capital goods falling under Chapter 84/85 erected and installed within the Sugar Mills product of which i.e. Sugar/Molasses etc. is liable to duty. Thus all the conditions of Notification No. 67/95-CE stands fulfilled. Even though it is accepted that the Appellanthave manufactured the goods at site but fact remains that the capital goods manufactured within the premises of Sugar Mills and used there in only. Ownership has no criteria in the Central Excise Act, for levy of duty and exemption therefrom. Though we have given finding that erection/installation of machineries at site is not excisable goods having immoveable, however, even if it is assumed that revenue‟s contention of excisability is correct, the goods coming into existence at site which is well within the Sugar Mills shall be eligible for exemption Notification No. 67/95-CE. Hence on this count also the demand does not sustain. Accordingly we hold that no duty is demandable from the Appellants on merits.
12. The Appellant has pleaded that the demand is time barred. We find from the records that the facts were in the knowledge of the revenue since very beginning and even earlier to the demand confirmed against the Appellant which was eventually set aside by the Tribunal. The said order passed by Tribunal reported at 2008(221)ELT54 was upheld by the Hon‟ble Mumbai High Court. In such facts, we find that there is no ground to raise demand by invoking extended period of limitation as there is no suppression or malafide intention on part of the Appellant. Thus in our above observations and findings on fact as well as on the basis of orders passed by the Tribunal, Hon‟ble High Court and Hon‟ble Apex Court supra we do not find any reason to demand duty from the Appellant. We 16 | P a g e E/10975-10976/2015-DB, E/11932/17 thus hold that the demand and penalty confirmed against the Appellant are not sustainable on multiple counts as discussed above and requires to be set aside.
13. Accordingly the impugned order is set aside and the appeal is allowed with consequential reliefs, if any, in accordance with law. Miscellaneous application is disposed of accordingly.
4.3 The Honourable Supreme Court in the case of Triveni Industries Ltd.
dealing with identical issue observed as under :
"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.
21. It will be useful to refer to the Explanatory Note issued by the Harmonized System of Nomenclature (HSN) to which Mr. Sridharan invited out attention. We also note that HSN received the approval of this Court in CCE v. Woodcraft [1995 (77) E.L.T. 23 (S.C.) = 1995 (3) SCC 454], which explained the scope of Heading 85.02 as under :
"........Generating sets consisting of the generator and its prime mover which are mounted (or designed to be mounted) together as one unit or on a common base 17 | P a g e E/10975-10976/2015-DB, E/11932/17 (see the General Explanatory Note to Section XVI), are classified here provided they are presented together (even if packed separately for convenience of transport)."
The Explanatory Note further contained :
"Floors, concrete bases, walls, partitions, ceilings, etc., even if specially fitted out to accommodate machines or appliances, should not be regarded as a common base joining such machines or appliances to form a whole."
22. From a perusal of the above Explanatory Notes, it is clear that when generating sets consisting of the generator and its prime base mover are mounted together as one unit on a common base they are classified under the Heading 85.02; in this connection floors, concrete bases, walls, partitions, ceilings etc., even if specially fitted out to accommodate machines or appliances, cannot be regarded as a common base joining such machines or appliances to form a whole. On a combined reading of the Explanatory Notes, extracted above, there can be no difficulty in inferring that installation or erection of turbo alternator on the concrete base specially constructed on the land cannot be treated as a common base and, therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be 'excisable goods' falling within the meaning of Heading 85.02.
23. For these reasons, we are of the view that the Tribunal is not correct in coming to the conclusion that the turbo alternator is excisable goods. We, therefore, set aside the order under appeal and allow these appeals with costs."
4.4 In view of above judgments and other judgments cited by Ld. Counsel, we are of the view that nuts and bolts supplied directly to the supply of the supplier being out of the part of manufacturing of appellant is not liable for duty. Since we decide the matter on merit, we need not to address the issue on limitation.
Accordingly, the impugned order is set aside. The appeals are allowed.
(Pronounced in the open Court on 25/07/2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
DS