Customs, Excise and Gold Tribunal - Delhi
Mahavir Aluminium Ltd. vs Commissioner Of Central Excise on 11 December, 2002
Equivalent citations: 2003(85)ECC625
JUDGMENT V.K. Agrawal, Member (T)
1. The issue involved in this Appeal, filed by M/s. Mahavir Aluminium Ltd., is whether they have manufactured aluminium doors and windows at the basement of the site.
2. Shri V.P. Goyal, learned Advocate, submitted that the Appellants manufacture aluminium bars, rods, profiles, pipes and tubes, frames for door, windows, thresholds for doors and structures, etc. In their factory at Bhiwadi, Rajasthan; that their Architectural Aluminium Products Division (AAP Division), New Delhi is engaged in execution of work of supply and fixing of aluminium doors and windows in various States; that AAP Division, after finalization of the contract with the Building Owners, prepares design/sizes of the aluminium sections for doors and windows which are supplied by their Bhiwadi factory on payment of duty and are received at AAP's Godown at Gurgaon/storage space provided by the building owner at site; that sub-contractors are engaged for the execution of the work; that the contractors first install window/door frames by embedding them in the walls and thereafter on alignment window/door leaves, these are attached to the frames and Lock, handles screws. Glass sheets, procured from market are fixed to the windows/doors.
2.2 He, further, mentioned that the Commissioner under the impugned Order, has confirmed the demand of duty and Imposed penalty on the ground that the processes carried out in the basement of the site by the Appellants amounts to manufacture and the extended period of limitation for demanding Central Excise duty is invocable as the fact of manufacture was suppressed from the Department with a view to evade payment of duty.
3. The learned Advocate submitted that they enter into contracts for design, supply and erection and installation of openable as well as sliding type aluminium doors and windows; that doors and windows are designed for each building by the architect to Impart a distinctive look to the building; that based on the sizes of doors and windows, Civil Contractor make openings in the walls of building; that the aluminium sections are cut and joined together using aluminium angle cleats and screws at the corner; that other frames and shutters panels also known as door/window leaves are made in Bhiwadi Factory and are despatched against payment of excise duty to the premises of the Customers; that invoices (e.g. at Page 291 of the Paper book) clearly describes the goods cleared from the factory as window/door frames; that other accessories such as screws, rawl plugs, hinges, locks, handles, tower bolts, gaskets, aluminium beading, add on Sections Silicone Sealant, door stopper and glass are purchased from the market and despatched to the site; that outer frames, shutter panels and accessories are taken to each floor in the building; that first the outer frame is placed in the opening and is checked and corrected for proper location, plumb (vertically) and level (horizontally) which is known as process of alignment of the frame, that thereafter holes are drilled in the frame which go into the jambs (vertical sides), Gill (bottom side), Intel (top side) of the opening; that the frames are fixed using rawl plugs and wooden screws; that thereafter shutter panels are placed in position in the frames followed by fixing of panels to the outer frames using hinges; that then the glass is cut according to size of shutter panel and is held in position using cut to size aluminium beading and gasket; that then other accessories are fixed as required and finally silicon sealant is applied from inside and outside of door/window unit to make unit water tight. The learned Advocate contended that these are neither "goods" not "marketable" as held by the Supreme Court in the case of Municial Corporation of Greater Bombay v. Indian Oil Corporation, AIR 1991 SC 686 wherein the Apex Court has laid down the test of permanently as under:
"The chattel whether is moveable to another place of use in the same position or liable to be dismantled and received at the later place? If the answer is yes to the former it must be a moveable property and thereby it must be held that it is not attached to the earth, if the answer is yes to the latter it is attached to the earth."
3.2 He, further, mentioned that following I.O.C, judgment, the Supreme Court in Triveni Engineering & Industries Ltd. v. CCE, 2000 (71) ECC 225 (SC): 2000 (120) ELT 273 (SC) has held that "The marketability test requires that the goods as such should be in a position to be taken to the market and sold."; that the Supreme Court in this case found that installation or erection of Turbo Alternator on the concrete base cannot be treated as a common base and it would be immovable property and cannot be excisable goods. He thus submitted that in the present matter where the products come into existence as doors, windows and Curtain Wall only on erection/installation on the walls, these are immovable property and as such are not excisable goods. Reliance has also been placed on the following decisions.
(i) Tata Engg. & Locomotive Co. Ltd. v. Union of India, 1997 (89) ELT 463 (Bom)
(ii) Tate Robins Eraser Ltd. v. CCE, 1990 (25) ECC 251 (T): 1990 (46) ELT 562 (T)
(iii) Vindhya Paper Mills Ltd. v. Commissioner of Central Excise, Aurangabad, 1998 (97) ELT 298
(iv) CCE, Nagpur v. Wainganga Sahkari S. Karkhana Ltd., 2002 (82) ECC 457 (SC): 2002 (142) ELT 12 (SC) wherein it has been held by the Supreme Court that where the assessee is erecting the structures at the construction site and fabricating materials on the spot, it cannot be considered to be fabrication in a factory.
3.3 The learned Advocate also referred to the Board's Circular No. 58/1/2002 dated 15.1.2002 wherein the Board has clarified in consultation with the Solicitor General of India that "where change of identity takes place in the course of construction or erection of a structure which is an immovable property, then there would be no manufacture of "goods" involved and no levy of excise duty."
3.4 He also mentioned that the Adjudicating Authority wrongly relied upon Board's Circular No. 25/89 dated 19.4.1989 which in fact supports the Appellants' case where piece by piece erection of parts resulted in creation of an immovable property by way of doors, windows and curtain wall as part of building walls of high rise building; that the decision in the case of Name Tulaman Manufacturers P. Ltd. v. CCE, 7988 (78) ECC 765 (SC) : 7988 (38) ELT 566 (SC) is not applicable as in the present matter no new product known to the market comes into existence; that moreover mere specifications in the dictionary & Excise Tariff is of no consequences as held in Moti Laminates Pvt. Ltd. v. CCE, 1995 (50) ECC 57 (SC): 1995 (76) ELT 241 (SC) that segregation of various parts for use on respective building floors, repairs of window/door frames damaged during transit carried out at the basement site does not amount to manufacture since no hew commodity commercially known as distinct and separate commodity having its own character, use or name comes into existence.
4. The Learned Counsel, further, contended that the Adjudicating Authority has not considered their submissions that the sub-contractor, who actually carried out the work of installation and erection, were only liable to follow the provisions of the Act if it is held that there was manufacture of goods liable to Central Excise duty. He relied upon the judgment in the case of Ujagar Prints v. Union of India, 1988 (18) ECC 435 (SC): 1988 (38) ELT 535 (SC); CCE, Baroda v. KM Khambathwala, 1997 (57) ECC 22 (SC): 7996 (84) ELT 161 (SC) and Basant Industries v. CCE, 1995 (49) ECC 42 (SC): 1995 (75) ELT 21 (SC). He also referred to one contract at page 561 awarded to M/s. Alloy (India) Engineers, New Delhi for cutting fabricating, assembly and fixing of doors, windows, partitions at 10th floor.
4.2 He also mentioned that the value mentioned in the show cause notice should be taken as "cum-duty value" as held by the Larger Bench in Srichakra Tyres v. CCE, 2002 (80) ECC 588 (LB): 1999 (108) ELT 367; that the value has to be re-worked after deducting the installations charges, profit and permissible deductions under Section 4 of the Central Excise Act; that they would be entitled to avail of Modvat Credit in case the products are held to be liable to excise duty.
4.3 The Learned Advocate mentioned that the Adjudicating Authority erred in relying on the statement dated 20.2.2001 of Shri S.C. Marwah by distorting the facts and not reading the statement as a whole; that the affidavit given by Shri Marwah has clarified that the actual work of assembly/erection of doors, windows and curtain walls came into existence on the walls of the respective floors; that even in his statement Shri Marwah had clearly deposed that the aluminium extrusions/sections/channels were cut to size and assembled to make frames at Bhiwadi factory and cleared on payment of duty; that affidavit given by him cannot be ignored; that the Adjudicating Authority has also rejected the affidavits of Shri D.N. Pandey and Shri Sandeep Upadhyay, Project Managers. He relied upon the decision in the case of Kulbhushan Jain v. Commissioner of Customs, Delhi, 7999 (111) ELT 906 (T).
4.4 The learned Advocate also submitted that the extended period of limitation for demanding duty cannot be invoked as there was no clarity about the excisability of the products erected piece by piece; that this is evident from the fact that the Board has to issue Circulars to remove the confusion; that the Appellants hold the bona fide belief about non-excisability of the impugned goods based on various decisions. Reliance has been placed on the decision in the case of Newton Engg. And Const. Co. P. Ltd. v. Commissioner of Central Excise, Vadodara 1989 (74) ECR 262 New Polymer Industries v. Commissioner of Central Excise, Baroda 1990 (30) ECR 77 Pushpham Pharmaceuticals Co. v. Commissioner of Central Excise, Bombay 2002 (80) ECC 6 (SC): 1995 (78) ELT 401 (SC).
4.5 Finally he submitted that no penalty is imposable on the Appellants as they had acted under bona fide belief; that there was no mens rea and there was no intention to evade payment of duty. He relies upon the decision in Tamil Nadu Housing Board v. Commissioner of Central Excise, Madras, 2002 (32) ECC 462 (SC): 1994 (74) ELT 9 (SC); that for the period prior to 28.9.96, penalty under Section 11 AC of the Central Excise Act cannot be imposed.
5. Countering the arguments, Mrs. Neeta Lal Butalla, Learned Senior Departmental Representative, submitted that the activities undertaken by the Appellants result in the emergence of doors and windows and as such the activities undertaken by them amounts to manufacture; that a perusal of the agreement entered into between M/s. DLF Universal Ltd. and the Appellants reveals that the contract is for supply and fixing of aluminium doors and windows; that Shri K. Sudhakaran, Vice-President, in his statement dated 8.6.2000, has confirmed that manufacture is done at site by themselves; that he has mentioned that they did not get the fixing work done by the hired labour/sub-contractors; that Shri Panachanan Saboo, Store Assistant of AAP, has stated in his statement dated 9.6.2000 that the manufacturing activity is carried out at the site only; that Shri S.C. Marwah, General Manager (Project), has stated in his statement dated 20.2.2001 that in the basement of the project, they have machines, tools, equipments and they have a team of their own employees consisting of skilled/unskilled labours, supervisors, engineers to carry out the work of assembly of frames with shutters, thresholds with doors/window frames and aligning them, cut glass sheets into required size of the shutters, cut aluminium channels to make beading for fixing of glass; that slots are cut, hinges are fixed and the two frames are assembled; that alignment/adjustment of frame with shutters is done in the basement. The learned Senior Departmental Representative contended that it is thus apparent from the statement of Shri Marwah that the basement at the site area was not only a storage place but also used for carrying out the activity which amounts to manufacture. The learned Senior Departmental Representative also referred to their letter dated 14.2.2000 addressed to the Superintendent, Central Excise, Bhiwadi wherein the Appellants have themselves mentioned that "the doors, windows and partition of structures come into existence at the site while it is permanently attached to the constructed building." She also referred to one of the contract (at page 141 of the paper book) wherein it is stipulated that the Contractor, that is the Appellants, shall not sub-let the whole of the work; that on the other hand their contract with job worker at Page 561 of the Paper Book awarding the work of fabrication, assembly and fixing of doors etc. Is a sample contract; that it is not known as to whether the same was at all executed. She also mentioned that the decision in Wainganga case is not applicable inasmuch as commodities involved are entirely difficult; that the goods Involved therein were trusses, columns and purling; that extended period of limitation is invocable since the fact of manufacture of doors and windows was never disclosed to the Department; that there was never doubt or confusion about the excisability of doors and windows and about their liability to Excise duty; that in Commissioner of Central Excise, Jaipur v. Man Structures Ltd., 2001 (75) ECC 712 (SC): 2001 (130) ELT 401 (SC) the Supreme Court has held that the goods are exigible to Excise duty provided they are new identifiable goods resulted due to manufacture and they are marketable; that as the fact of manufacture and removal was suppressed by the Appellants from the Department and no excise duty was paid by them, penalty is imposable on them.
6. In reply the learned Advocate mentioned that the statement of Shri K. Sudhakaran has been wrongly made basis by ignoring the facts stated therein; that in fact he has stated that the various activities were done at the building site and actual implementation was done at respective floors; that in any case Sudhakaran was not looking after day to day work; that Shri D.K. Pandey, in his affidavit, has affirmed that no manufacturing activity of whatsoever nature was carried out by them and the frames were distributed to various floors where the same were embedded in the wall; that extra sections/profiles/rods were used to rectify and facilitate the erection of frames and doors windows and site opening; that Shri Upadhyay has affirmed the same in his affidavit also; that the site referred to in the statement of Shri Marwah means respective floors of the building and not basement alone; that reference to team of employers means engineers of the Appellants as well as the employers of the sub-contractors.
7. We have considered to submissions of both the sides. To attract duty under Section 3 of the Central Excise Act, an article must satisfy the twin attributes of excisable goods mobility and marketability. It has been held as early as in the case of Union of India v. Delhi Cloth & General Mills, 1997 (1) ELT (J 199) (SC) that "to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold." in the present matter the Revenue has demanded Central Excise duty on Aluminium doors and windows on the ground that the same are assembled at the basement of site provided by their customers. The Revenue has reached this finding on the basis of statements of various employees of the Appellants, including statement of Shri Marwah, General Manager (Project). On the other hand, the Appellants have contended that basement is used for storing of various materials procured from market on payment of duty and frames of door and windows and other materials received from their factory at Bhiwadi on payment of duty. According to the Appellants first the frames of doors and windows are embedded it no the openings made in the wall and thereafter door/window leaves are attached to these frames and thereafter lock, handle, screws, glass sheets, etc. are fixed to the windows are doors. The Appellants have contended that as such complete door/window comes into existence only as part of the building and these cannot be removed as such for being brought to market for the purpose of being bought and sold. We observe that Shri Marwah has stated in his statement that "at the site frames of thresholds are assembled with the frames of doors/windows and the same are aligned. At this stage glass sheets are also cut to size of the shutters. Thus we have procured all parts of the doors/windows to make complete Door/Windows at the basement of the site and assembled frames with the thresholds and aligned them. The glass and hardware are fitted to the Doors/Windows after their proper sizing and Alignment/Adjustment at site."
8. A reading of the statement of Shri Marwah does not lead to the conclusion that the entire assembly of doors and windows are done at the basement of the site and thereafter these are fitted into the openings in wall. Shri Marwah has explained his statement in his Affidavit dated 16.8.2001 by affirming that the basement sites were allotted to them by the owners of the buildings for the purpose of storage as would be evident from Clause 11 of the Contract dated 10.9.77 annexed with the show cause notice; reference to sites means respective floors of the buildings and not basement site; from assembly at site he meant segregation of same sizes of frames required for respective floors and those damaged in transit and fixing of other parts like shutters, glass, hardware was done at the respective floors as the same job cannot be done at the basement due to practical difficulties and also fixation of those is required on the walls of the building. We incline to agree with the Appellants that the entire door/window is not assembled at basement as generally the frames are first fitted into the walls and other parts such as leaves, glasses, handles and locks, etc. are being fitted subsequently. As observed earlier, the statement of Shri Marwah mentions specifically that the entire assembly work was done at the basement and the explanation offered by him in his Affidavit seems to be plausible. Moreover, the Revenue has not been able to rebut the same either by adducing any other material or evidence or by cross examining Shri Marwah. We also observe that no statement of any worker or engineer doing the fabrication/assembly work had recorded in this regard. As such the Revenue has not succeeded in establishing the charge of assembly of entire doors/window at the basement. Once it is held that doors/windows were not assembled at the basement, Central Excise duty cannot be levied as the doors/windows come into existence after the frames have been embedded into wall and they do not satisfy the twin attributes of "mobility" and "marketability"; Thus following the ratio of the judgments in the cases of Indian Oil Corporation and Triveni Engineering and Industries Ltd., we allow the Appeal filed by the Appellants without going into the question of manufacturer and invocability of extended period of limitation for demanding duty.