Customs, Excise and Gold Tribunal - Tamil Nadu
Elecon Engineering Co. Ltd. vs Collector Of Central Excise on 20 May, 1992
Equivalent citations: 1992(43)ECR553(TRI.-CHENNAI)
ORDER
S. Kalyanam, Member
1. This is an application for waiver of pre-deposit of a duty of Rs. 23,20,258.74 and a penalty of Rs. 1,00,000/- levied on the petitioner under the impugned order of the Collector of Central Excise, Madras, dated 16.9.1991.
2. Shri Dave, the learned Counsel for the petitioner submitted that duty has been levied on the fabricated structurals by the petitioner at the site before erection of the factory shed, for the period April, 1988 to March, 1990 by issue of show cause notice dated 27.2.1991 by invoking the longer period of limitation in terms of Section 11A of the Central Excises & Salt Act, 1944 by alleging suppression against the petitioner. It was urged that the columns, beams, purlins, portals etc were erected on concrete pedestals at the site by the petitioner and they would become part of immovable property not coming within the mischief of "goods" for excise purposes. The learned Counsel further referred to a number of rulings and contended that no manufacturing activity is involved and therefore prima facie the petitioner would be entitled to waiver of pre-deposit of duty and penalty.
3. Shri R. Subramanian, the learned D.R. for the Department adopted the reasoning of the adjudicating authority in the impugned order.
4. We have considered the submissions made before us. The question that arises prima facie for our consideration for the limited purpose of considering the plea in regard to grant of waiver of pre-deposit of duty and penalty is as to whether the fabricated structurals erected by the petitioner at the site are "goods" within the meaning of the Act or these could be considered as immovable property not rendering the same chargeable to duty. The Special Bench of the Tribunal has dealt with this issue and observed as under: Case 1990 (48) ELT 539 : 1990 (27) ECR 364 (Cegat SB-B1).
We have carefully considered the pleas advanced by both the sides. We observe that this case is squarely covered by the Tribunal's Order in the case of Mis. Aruna Industries 1986 (8) ECR 166 : 1986 (25) ELT 580 (Tri) and of Mis. Steel Authority of India1988 (36) ELT 316.
6. We are of the opinion that erection or construction on site does not amount to manufacture of goods even if it involves fabrication of some material and creation of structural shapes or structures.
7. In the instant case all that has happened is that some sheds have been constructed or erected. And for this purpose various items 'of iron and steel have been used and different structurals have been fabricated on the spot.
8. The process is akin to construction a house from bricks, stones and other material including articles of woods, glass or steel. No one says or was likely to say that a house was thus 'manufactured' from bricks or articles of iron and steel, glass or wood. Everyone naturally says in common parlance that a house has been erected or constructed or built with these materials. The position remains the same irrespective of whether it is simple erection/construction process or a complicated one and whether it involves fabrication of some structures and/or some carpentry or smithy work at site. Undoubtedly, technical skill is required for construction of house and one may have to employ mistries, architects, engineers and skilled labourers and in case of some ultra modern buildings, sophisticated and complicated processes/techniques may be employed. But all that does not alter the basic fact that what is involved is creation of immovable property and not goods. As already noted in the instant case all that has happened is that with the help of various articles of iron and steel, sheds have been erected on site. Hence irrespective of the fact whether it involved a process of fabrication of structurals or not the basic activity remains an activity of construction and erection and the result of all that effort, labour and skill has been creation or coming into existence of immovable property and not goods or products. In this view of the matter we are of the opinion that no process of manufacture was involved, and no goods were manufactured. Hence there was no cause for issue of the show cause notice; and the Learned Collector has erred in holding the appellants guilty of violation of central excise law and demanding duty and imposing penalty.
When a similar issue came up for consideration before the Special Bench in a batch of cases in Order Nos. E/182 to 184/1991.B1 dated 30.9.1991, in regard to same activity the question was whether the activity carried out by the appellants amounted to manufacture of goods rendering them excisable, the following rulings were considered by the Special Bench :
(1) Ajit India Ltd. v. CCE .
(2) Unique Springs (India) Faridabad v. CCE .
(3) Aruna Industries, Visakapatnam v. CCE .
(4) CCE v. 1987 (23) ELT 552.
(5) SALE (sic) v. CCE .
(6) SAE (India) Ltd. v. CCE 1988 (36) ELT 613 : 1988 (17) ECR 511 (Cegat SB-B).
(7) Standard Industrial Engineering Co. v. CCE .
(8) RS. Steelworks, Ghaziabad v. CCE (Decided by Order No. 395/86-B1 dt. 1.7.1986) 1989 (24) ECR 746 (Cegat SB-B1).
and the Special Bench in para 5 of the said ruling observed as under:
The point at issue is whether the activity of processing duty-paid MS Angles, shapes and Sections by processes like cutting, drilling and galvanising amounts to manufacture. This issue is well covered and considered in the decisions cited by the appellants' Counsel particularly in the decisions in the case of Standard Industrial Engineering Co. v. CCE 1988-38-ELT-196 and in the case of RS Steel Works, Ghaziabad v. CCE as per order No. 395/86-B1 dated 1.7.1986. Following the aforesaid decisions we hold that the activity as undertaken by the party cannot constitute manufacture. Accordingly, the party succeeds on the first issue.
We also note that the West Regional Bench, Bombay in the case of Mahindra & Mahindra Ltd. v. Collector of Central Excise & Customs Aurangabad reported in 1990 (26) ECR 502 dealt with similar issue and observed as under :
After hearing both sides, we find that the applicants have an arguable case in their favour. We take note of the fact that the applicant's activity allegedly attracting duty in this case relates to their building a shed. Whether such an activity results in production of goods in an arguable one. Hence we direct the applicants M/s Mahindra & Mahindra to give a personal bond for the duty amount involved and in furnishing such a bond there shall be stay and waiver of recovery of the duty and penalties imposed on both the applicants.
We would like to note that in the case of Pratap Steel Rolling Mills 1990 (48) ELT 539 : 1990 (27) ECR 346 (Cegat SB-B1) cited supra, the wordings of the tariff entry were different from the wordings of the present tariff entry with which we are concerned. Of course the other ruling covered by Special Bench Order Nos. E/182 to 184/1991 B. 1 cited supra, the period was 1.3.1975 to 31.12.1986 which not only covers the old tariff but also the new tariff as well. Ruling of the West Regional Bench, Bombay is also on the point.
5. Therefore, following the ratio of the above rulings, we hold that the petitioner need not make any pre-deposit in cash and it would suffice in the facts and circumstances of this case, if the petitioner executes bond for the amount involved and also offers a Bank guarantee for 50% of the duty amount to the satisfaction of the adjudicating authority by 31st July, 1992 and report compliance. The matter will be called on 31.7.1992 for reporting compliance.
Sd/- (S. Kalyanam) (Member)
6. Per Shri V.P. Gulati.--observe that duty has been demanded from the applicant for the reason that the applicant is manufacturing goods falling under chapter 7308.90. The said tariff heading for purpose of convenience is reproduced below:
73.08 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 in structures, of iron or steel.
7308.90 Others 15%.
The learned Counsel for the applicant pleaded that the applicant is engaged in erection of the sheds at the site and for that purpose the assessee manufactures out of duty paid iron and steel materials items of fitment for formation of the shed. He stated that these items are in the nature of beams, purlins, portals and columns etc. He pleaded that these items by themselves are not goods inasmuch as these are used as fitments to the sheds which are immovable properties. He pleaded that the scope of heading 7308 may be read in the overall context of the entry. As it is, he pleaded that though the entry stands elaborated namely by mention of items such as bridges, bridge-sections, lock-gates etc., etc. as examples but that does not mean that all types of bridges etc are included and only such of those items would be covered by the entry as can be considered as goods. The parts covered under this heading therefore by corollary would also be such as-would be used for items which can be considered as goods and can be brought to the market for sale etc. He pleaded that they were making sheds on site which are fixed structures and therefore not goods. The parts of the same manufactured by them, he pleaded therefore, could not be considered as goods for the purpose of levy of central excise duty. In this context he referred to the ruling of the Special Bench in the case of Pratap Steel Rolling Mills wherein the Tribunal has held that entry under 7308.90 is part materia with the earlier entry under tariff item No. 68 for the purpose of excise duty. This ruling, it was pointed out to him was in the context of the earlier tariff and would not be applicable now in view of the specific entry in tariff item 7308 regarding parts of structures. The learned Counsel also referred to other decision of the Special Bench Order No E/182 to 184/1991 B. 1 dated 30.9.1991 where the period covered is beyond 1.3.1986 when the new tariff entry came to be applicable, the Tribunal, he pleaded has held that the activity undertaken by the appellant in that case would not bring the item within the ambit of levy under item 7308. With respect we ob-serve that in this later decision recorded by the Tribunal the Tribunal has not taken note of the tariff entry as such and there is no discussion in regard to the scope of the tariff entry. It is seen that tariff entry 7308 in the new tariff specifically covers parts of structures of iron or steel plates rods, angles shapes, sections, tubes and the like prepared for use in the. structures of iron and steel. A prima facie reading of the tariff entry shows that. the types of items mentioned thereunder would cover the items manufactured by the applicant. However, we observe that since the Tribunal in the earlier decision cited supra has taken the view that such goods are not chargeable to duty and a view has been taken by the West Regional Bench, Bombay in the case of Mahendra & Mahendra v. CCE reported in 1990 (26) ECR 502 where similar goods were involved that whether such an activity results in production of goods is an arguable one, we grant dispensation of pre-deposit of duty to the petitioner subject to the petitioner' executing a bond for the full amount and Bank guarantee for 50% of the amount involved. The matter will be called on 31st July, 1992 for reporting compliance.
(Pronounced in the open Court).