Custom, Excise & Service Tax Tribunal
M/S. Shapoorji Pallonji & Co. Ltd vs Cce, Bangalore on 29 October, 2009
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 29/10/2009
Date of decision:29/10/2009
Appeal No.E/59 & 643/06
(Arising out of Order-in-Appeal No.110/2005-CE dt. 28/10/2005 & No.33/2006-CE dt. 27/4/2006 passed by Commissioner(Appeals), Bangalore)
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
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 their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Shapoorji Pallonji & Co. Ltd.
..Appellant(s)
Vs.
CCE, Bangalore
..Respondent(s)
Appearance Mr. B.Venugopal and Mr.B.V.Kumar, Advocates for the appellant.
Mr. U. Raja Ram, JDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2010 Per P.Karthikeyan Appeals No.E/59/06 and E/643/06 deal with the same dispute, hence they are being disposed off by a common order.
2. M/s. Shapoorji Pallonji & Co. Ltd. (SPCL for short), the appellants herein, were issued with a show cause notice alleging that they had engaged themselves in the manufacture of Modular Workstations/modular furniture at the premises of M/s. Smithkline Beecham Pharmaceuticals Ltd., Bangalore (SKB for short) during the period 1999-2000 without following statutory formalities prescribed under Central Excise law including payment of Central Excise duty, proposing to demand a total duty of Rs.26,14,155/- along with applicable interest and to penalize the assessee for various offences committed by it. After due process of law, the Addl. Commissioner of Central Excise dropped the proposals finding that the impugned goods were not excisable. In passing the said order, he followed an order of the Commissioner of Central Excise, Mumbai passed after considering relevant case laws and circular issued by the Board on the exigibility of similar activity. The Commissioner of Central Excise, Mumbai had held that the Modular Workstations could not be brought to the market for sale. The Addl. Commissioner also observed that even if Modular Workstations were held to be excisable and dutiable, demand had to be raised on M/s. Oriental Decorators Pvt. Ltd., Mumbai (ODPL for short), who had undertaken the impugned activity under sub-contract with SPCL. In order-in-appeal No.110/2005-CE dt. 28/10/2005, allowing the appeal filed by the Department, the Commissioner(Appeals) held as follows:-
The plea of the respondent that they are not manufacturers and the job worker is the actual manufacturer is not acceptable because the contract for undertaking the whole interior work was between the respondent and their clients and the job worker was not at all in picture. Therefore, the respondent is the actual manufacturer. In view of above discussions, I hold that duty is payable on loose furniture and storage units while no duty is required to be paid on other items. Duty may be worked out and appropriate order may be passed by the lower authority imposing appropriate penalty. The appeal is disposed of accordingly.
3. Appeal No.E/59/2006 seeks to vacate the Order-in-Appeal No.110/2005-CE mainly on the ground that the impugned activity was actually carried out by ODPL against work order placed on them by SPCL. SPCL had received contract from its client SKB. ODPL had deployed their own work force and had procured materials required for execution of the contract with the appellant. They substantiated their submission that the actual manufacturer in the instant case was ODPL with the following facts:-
i. M/s. ODPL, Mumbai is a private limited company incorporated under the Companies Act, 1956.
ii. M/s. ODPL and are engaged in the business of undertaking interior decorating work, having their own office and work force for executing various interior decorating projects undertaken by the company.
iii. In the instance case, ODPL have been assigned to execute the interior work of SKB by the appellants on a sub-contracting basis, which is inclusive of material and labour.
iv. Based on the above assignment, ODPL using their materials and labour, except structures of Modular Workstations which are supplied by SKB, completed the erection of Modular Workstations and also other furniture and accordingly raised a bill on appellants, for the entire work, which includes supply of materials also.
In support of the claim that ODPL was the actual manufacturer, they relied on the decision of the Tribunal in the case of Smithkline Beecham Asia Ltd. Vs. CCE [2004(168) ELT 40 (Tri. Bang.)] since confirmed by the Apex Court. The Tribunal had held that appellant therein owned plant and machinery, functioned independently with profit & loss being to their own account and were not under supervision and control of another party for day-to-day work. Hence, appellant was not hired labour of such party, but a job worker. The appellant SPCL did not have any manufacturing premises at any place for manufacturing Modular Workstations / loose furniture. Modular Workstations and other loose furniture were erected in situ by ODPL. The instant case was similar to the case considered in the decision of the Tribunal in Kerala State Electricity Board Vs. CCE [1990(47) ELT 62(T)] confirmed by the Apex Court as reported at 1990(47) ELT A161. SPCL awarded the sub-contract under its letter dt. 22/12/1998 to ODPL. ODPL confirmed the acceptance of the said order vide its letter dt. 24/12/1998. These letters are on record.
4. During the hearing, ld. Counsel for the appellants submitted that the loose furniture held to be dutiable comprised storage cabinets, huge conference table, MDs discussion table etc. which were erected at the site. These could not be removed without cannibalizing. These were not excisable as held by the Apex Court in Craft Interiors Pvt. Ltd. Vs. CCE, Bangalore [2006(203) ELT 529(SC)]. It is submitted that the above judgment dealt with the issue whether storage cabinets, kitchen counters, running counters, large reception/conference tables were excisable as furniture. The Apex Court had held that items which were ordinarily immovable or which ordinarily could not be removed without cannibalizing e.g. storage units, running counters, overhead units, rear and side unit, wall unit, kitchen unit and other items which are ordinarily immovable or could not be removed without cannibalizing are not furniture.
5. We have also heard ld. JDR for the Revenue, who reiterated the finding of the Commissioner(Appeals).
6. We have carefully perused the case records and the submissions made by both sides. SPCL was alleged to have manufactured Modular furniture known as Modular Work Stations(MWS) at the premises of SKB. The original authority found that the impugned activity comprised the following steps:
The Aluminium Extrusions (Sections) which were cut and designed as per the specifications and requirements and were in ready to use form, were imported by SKB and given to SPCL. These Aluminium extrusions were joined together to form skeleton structure of the partitions of a particular modular workstation. The medium density fibre board (MDF Board) or pre-laminated particle boards were cut into the required size; that foam was placed on one of its sides ( or both the sides), draped with the fabric and stapled; that with this process an article called MDF tile or Fabric Tile came into existence; that the above aid aluminium frames were fitted with these tiles; that at this stage cubicle or partition was ready which was placed on the ground on the support of leveling screws. Brackets are rested in the grooves of the partitions on the Alen Nuts. Work surface is fixed on the brackets with the help of screws. The data cables and power cables were drawn through the holes/grooves of the aluminium extrusions which run through the entire cubicle. The pedestal and key board trays were placed at the respective places; that with this the manufacturing activity is completed and a new commodity called Modular Workstations or Modular Furniture comes into existence. The original authority found that in the instant case MWS was erected at SKB site. He found that MWS had to be dismantled in order to shift it. Without MWS being dismantled into component/parts like table tops, key board, fabric tiles etc., MWS could not be taken to the market. MWS had to be fixed to the wall or earth for its effective functioning. MWS was not marketable and therefore was not exigible. The MWS comprised loose furniture, partitions, storages, modular partition, doors etc.
7. The impugned order held that appellants are the manufacturers of loose furniture and remanded the matter to the original authority to quantify the liability of the appellant including penalty. We find that the appellants had engaged ODPL to carry out the work it had undertaken under a contract with SKB. From the work order dt. 22/12/1998 issued by SPCL to ODPL and the letter of acceptance dt. 24/12/1998 issued by ODPL, it is obvious that the work involved had been entrusted with ODPL. The job worker ODPL was provided the material required for the work sourced by SKB. There is no evidence whatsoever to suggest that ODPL are hired labour and not an independent manufacturer. We note that ODPL is a private limited company undertaking interior decoration with its own work force. The bill of quantities of ODPL describing items of work and rates clearly shows that it had executed the impugned work on turn-key basis on a principal-to-principal basis and are a manufacturer in its own right. We find that the case law 2004(168) ELT 40(Tri. Bang.) cited by the appellants squarely covers the dispute in favour of the appellants. KSEB case (supra) cited by the appellants also had dealt with a similar dispute. In the KSEB case, the contractor who fabricated the RCC poles with materials supplied by KSEB were held to be manufacturers of RCC poles. The contractors therein were the job workers of KSEB. In the circumstances, we hold that ODPL as a job worker had carried out the impugned activity; if at all such activity is held to be exigible, demand has to be raised on them and not on SPCL. In the circumstances, the issue whether loose furniture such as reception table, conference table, MDs discussion table etc. similar to items held to be not excisable as furniture by the Apex Court in its judgment in Craft Interiors Pvt. Ltd. case (supra) are excisable or not becomes academic. Accordingly, we allow the appeal No.E/59/06 filed by SPCL.
Appeal No.E/643/06
8. Vide the order No.33/2006-CE dt. 27/4/2006 impugned in this appeal, the Commissioner(Appeals) sustained the order of the original authority confirming excise duty of Rs.5,76,672/- on loose furniture against SPCL along with applicable interest and imposing equal amount of penalty as well as another penalty of Rs.50,000/- imposed on the assessee under Rule 173Q of Central Excise Rules, 1944 / Rule 25 of Central Excise Rules, 2002. In sustaining the order of the original authority, the Commissioner(Appeals) did not give any reasons except that the said order had been passed following his own remand order No.110/2005 dt. 28/10/2005 and that operation of the said order impugned in a appeal before the Tribunal had not been stayed by the Tribunal. In view of our order in appeal against the order of the first appellate authority No.110/2005 dt. 28/10/2005, we find that the order impugned in this appeal does not survive. In the result appeal No.E/643/06 is also allowed.
8. In the result, both the appeals filed by the appellant are allowed.
(Operative portion of this order pronounced on conclusion of the hearing) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 8