Customs, Excise and Gold Tribunal - Mumbai
Voltas Ltd. vs Cce on 20 September, 2005
ORDER S.S. Sekhon, Member (T)
Page 107 1.1 The issue in these appeals, is whether "ducting" which is fabricated as an essential feature, of a Central Air Conditioning System for Plants/Buildings etc. and comes into being only and as a specific fixture to a site/Building Plan, during the course of setting up of a Central Air Conditioning System, on job work, is excisable under Central Excise Act, 1944 and if excisable, who would be the person liable to discharge the duty.
1.2 The appellants are manufacturers of various air-conditioning machinery at their factories and clear the same on duty payment. They also undertake erection and commissioning of Air Condition Plants Systems on the basis of indivisible work-contracts which is got executed through others.
1.3 The `ducting' in a system is a requirement for distributing air either in an air-conditioning Plant or a ventilation system. The treated/filtered essential air is carried by the ducting to desired designated space/premises. The ducts, as they emerge, eventually take shape, are not known or/and bought and sold in the market as a marketable commodity. They cannot be brought and installed and used as such & thereafter moved without dismantling the same. They have to be created at site and fitted, where after insulation treatment they become a part of the civil structure of the building/plant connected with various other machines as per the size and shape of the premises ducted as being an essential requisite and parcel of system. These facts are not in dispute.
Page 108 1.4 It is found -
a) the issue of excisability on ducts fabricated at site of an Air-conditioning System of a building/plant etc has been engaging the attention of the department in the past. Attempts had been made by Revenue to levy duty on such systems in addition to the A.C. Compressors used in such Air Conditioning System. The tariff item in the erstwhile Central Excise Tariff annexed as Schedule to the Central Excise Sales Act 1944 had a definition of A.C and refrigeration Machines with limited area of coverage. Decisions arrived by various authorities did not permit encompassing such ducts and accessories thereof used in an Central A.C. Plant System and refrigeration System, cold storage etc. Board has issued an instruction vide Telex No. F.No. 154/26/99-CX.4 dated 15th Jan, 2002 to the effect.
"Integrated Plants/Machines, as a whole, may or may not be `goods'. For example, Plants for transportation of material (such as handling plants) are actually a system or a network of machines. The system comes into being upon assembly of its component. In such a situation there is no manufacture of "goods" as it is only a case of assembling of manufactured goods into a system. This cannot be compared to a fabrication where a group of machines themselves may be combined to constitute a new machine which has its own identity/marketability and is dutiable (eg a paper making machine assembled at site and fixed to the earth only for the purpose of ensuring vibration free movement."
This would indicate that the levy under the Central Excise Act was understood to be restricted. The same cannot be extended to ducts, which come into existence by fabrication and take the shape and size unique to the building/plant to be covered under an A.C system. These ducts normally made from G.I sheets are insulated for preserving the temperature of the air to which is to be circulated at this duct. At the opening grills are placed. Following the telex instructions, ducts would be part of the civil structure and not excisable.
b) The appellants, in the prayer made in grounds of appeal taken the following:
i) The fact that an item if mentioned in the Tariff does not ipso facto make it marketable. The S.C has considered that even if a product is mentioned in the Tariff, it is only excisable if it is goods, it is manufactured and capable of being brought to the market for sale. The "ducting" as a product is not mentioned anywhere in Tariff. The appellants submits that the finding of Respondent that ducting comes into being before it is attached to the ceiling of the wall is incorrect and untenable. The ducting comes into being only after it is erected at the site when it becomes immoveable property.
ii) The respondent had failed to appreciate that the ducting cannot be dismantled and used again.
iii) The invoice raised by the appellants one for the total cost of CAP which include the cost of ducting. Work done under a project or works contract cannot be interpreted to mean that ducting is manufactured.
Page 109
iv) There is no material on record to exhibit the ducts can be dismantled without damaging the ducts and the building are transported/erected at an other side.
c) We find force in these submissions to conclude that there is no levy of Central Excise Duties such ducts considering the instruction issued by the Central Excise Board vide no. 37B Order no. 58/1/2002-CX. Dated 15.1.2002 which considered various Supreme Court decision on excisability of plant and machinery erected at site and thereafter stipulate in para 4(vi) the followings:
a) "Integrated Plants/Machines, as a whole, may or may not be `goods'. For example, Plants for transportation of material (such as handling plants) are actually a system or a network of machines. The system comes into being upon assembly of its component. In such a situation there is no manufacture of "goods" as it is only a case of assembling of manufactured goods into a system. This cannot be compared to a fabrication where a group of machines themselves may be combined to constitute a new machine which has its own identity/marketability and is dutiable (eg a paper making machine assembled at site and fixed to the earth only for the purpose of ensuring vibration free movement."
b) Refrigeration/A.C, these are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They are in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable the refrigeration/A.C system as a whole cannot be considered to be excisable goods. A.C units however, would continue to remain dutiable as per Central Excise Tariff.
Following the same, we find force and reason to call for no excisability on the ducts in question. On considering the fact that as they arise, as fabricated at site on installation. There is no material on record to indicate that such ducts, if any, were ever fabricated in the appellant factory, premises and there after moved to site for installation. The duty demand on the appellant is therefore not called for.
d) It is appellants case and facts on record that the ducts are fabricated on job work at site. The duty demand in the case of job work, if such job work, results in excisability, is on the job worker. This position is well settled. Therefore duty demand on the appellant can't be made.
e) It is found even Commissioner Bangalore and Commissioner, Mumbai have arrived at different classification for the same entity. This itself, would indicate, that Revenue is not clear on the classification of the subject. At the hearing before us, it could not be explained us why the Board in exercise of the power under Section 35E of Central Excise has not considered, one of these classifications arrived, to be not to be legal and proper. Surely, there can't be two separate classifications for the same entity and both being proper. Therefore the present appeal has to be allowed setting aside the order since the classification has to be uniformly same.
Page 110
2. When we find that the duty demand cannot be made the duct, they being non excisable and classifications as arrived at cannot be upheld, we find no reason to arrive at any penalty and any other liability under the Central Excise Act on the appellants. The orders cannot be upheld.
3. In view of this orders are required to be set aside and appeals allowed.