Customs, Excise and Gold Tribunal - Delhi
Tata Robins Fraser Ltd. vs Collector Of Central Excise on 20 October, 1989
Equivalent citations: 1990(25)ECC251, 1990ECR70(TRI.-DELHI), 1990(46)ELT562(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. The appellants M/s. Tata Robins Fraser Ltd. manufacture machinery items falling under Tariff Item 68 in their factory at Jamshedpur. They undertake construction of projects on contract basis. These contracts include civil and structural work, supply of machinery and equipment, their erection and installation etc. Machinery and equipment required for the execution of their works are partly manufactured in their own factory at Jamshedpur and partly procured in the market. They also get certain items manufactured in other factories as per specifications raw material supplied by them.
2. The appellants had undertaken 52 contract works between 1-3-1975 to 31-12-1981 of the total value of Rs. 17,43,00,149/-. For the execution of these contracts they had cleared machinery items from their factory at Jamshedpur on payment of duty. Total amount of duty paid on those items was Rs. 33,44,00,880/-. It was alleged in a show cause notice dated 16-1-1982 against the appellants as follows:-
"M/s. TRF Ltd., Jamshedpur knew that as per standing orders and instructions, the goods falling under T.I. 68 which are cleared in knocked down condition to be assembled at site and over a period of time against a particular contract, clearances are assessable to duty on the value of the articles in completely assembled condition.
...
Thus it is evident that M/s. TRF have not discharged their duty liability fully on the goods of T.I. 68 manufactured by them in completely assembled condition and in this way it appears that they have evaded payment of duty approximately of Rs. 1,05,94,116/-. The actual amount of duty evaded is, however, under investigation which will be intimated to them at the time of adjudication."
2.1. In their reply to the show cause notice the appellants contended that they had two types of activities, one as a manufacturer and the other as a specialised construction contractor. As a manufacturer they manufacture machinery and equipment such as idlers, pulleys, crushers, screens, feeders, wagons tipplers, stacker reclaimers, fabricated take-up frames etc. Their products are both for outright sale and for clearance on their own account for the execution of various contract works. The items manufactured by them are always cleared on payment of duty. Even if some bulky items are required to be cleared in pieces for the sake of convenience and economy in transportation duty is paid on the full value of the equipment. As construction contractors, the work at site is undertaken by them only by way of installation and erection of articles of machinery and other equipments and no new product is manufactured at site by assembling different articles. They also contended that even if it is admitted that assembly at site amounted to a manufacture of a new product, duty liability will arise at the place where the new article is manufactured and it was for the proper officer having jurisdiction over the site to see whether or not duty liability has been discharged. They also contended that a project as a whole is not an article or excisable goods falling under T.I. 68 or any other item of the Central Excise Tariff. It is not 'goods' at all. In this context they referred to Government of India's order-in-revision in the case of M/s. Otis Elevator (India) Ltd. [1981 (8) E.L.T. 720].
2.2. They had also contended that they got some of their goods fabricated through independent contractors on job work basis. Those independent contractors were manufacturers of goods in their own right and the goods produced by such independent manufacturers/independent contractors were either exempt from duty or duty might have been paid by them when cleared from the factories of such goods got manufactured by them through others.
2.3. They also contended that even if any duty was payable, which they denied, the demand for a period exceeding six months prior to the receipt of the show cause notice by them was time-barred as they did not conceal any fact or make any mis-statement with a view to evading duty.
3. The adjudicating authority, namely CCE, Patna has given the following findings on the 4 issues examined by him:-
1st Issue -
(1) Whether or not M/s. Tata Robins Fraser Ltd. are liable to pay duty on the full value of the contract order for the execution of which certain items of machinery/equipments were cleared from their works at Jamshedpur, certain items were purchased from the market and other items got fabricated from other parties.
Collector's Findings. - In the instant cases machinery items appears to have been manufactured at site out of the components partially obtained from the assessees works at Jamshedpur which were finally assessed to duty and partially bought from the market. Thus durability of the goods manufactured at site in such cases would have to be determined independent of the duty already paid on the components, whether the same was brought from the manufacturers works or from the market. If some goods have actually been manufactured at site their duty liability would have to be fixed independently on its value irrespective of the duty already paid on the inputs. Of course, whatever set-off of duty on inputs is permissible while paying duty on finished goods, that aspect will also have to be taken into consideration.
3.1. Dealing with the appellant's plea to the effect that turn-key projects are not goods for the purpose of levy under Tariff Item 68 and the reliance placed by them on 1981 (8) E.L.T. 720 mentioned supra, the adjudicating authority observed as follows:-
"This aspect has already been considered and as mentioned above the project as a whole is not being subjected to duty. What is proposed to be taxed is the machinery items assembled at site out of the components brought from TRF's works at Jamshedpur and those got manufactured from others. It has also been mentioned above, that the value of civil works transportation, erection and commissioning charges are to be excluded from the total value of the contracts to arrive at the correct assessable value of the machinery manufactured for the project."
4. Learned Advocate for the appellants has urged that the adjudicating authority's approach to treat the completion of the project as an assembly of machinery and therefore, liable to duty under T.I. 68 is basically wrong because no new product by way of completion of the project comes into existence. The project is completed by the process of installation and erection of machinery received from the appellants works at Jamshedpur, through various bought out items purchased from the market or from the various independent contractors to whom some fabrication work was given by the appellants on supply of raw material like steel sheets etc. The appellants also showed during the course of hearing the various photographs of the projects completed by them. These photographs clearly show a good deal of civil work undertaken by the appellants. In particular, they submit that they have undertaken construction of bulk material handling systems. When it is erected at customers site it becomes a fixed immovable property. They cannot be called 'goods' and as such cannot be charged to excise duty. They rely for this proposition on the following authorities:-
1. Otis Elevators - 1981 (8) E.L.T. 720 (GOI)
2. Chemical Vessels Fabricators Ltd. - 1982 (10) E.L.T. 92, (para 9) (Collector C. Ex., Delhi)
3. Gujarat Machinery Ltd. v. Collector of C. Ex. - 1983 (12) E.L.T. 825 (CEGAT)
4. J.K. Exports v. Collector of Central Excise - 1983 (14) E.L.T. 2390 (paras 3 and 4) (CEGAT)
5. Hyderabad Race Club v. Collector of Central Excise - 1986 (23) E.L.T. 274 (paras 7 to 9) (CEGAT)
6. Braithwaite Co. v. Collector of Central Excise - 1987 (29) E.L.T. 251 (paras 5 and 6) (CEGAT).
4.1. Contending against the aforesaid proposition of the learned Advocate for the appellants Shri G.V. Naik, learned JCDR relied upon Patna High Court's judgment reported in 1988 (33) E.L.T. 297 (Patna) (TISCO v. U.O.I.). It was pointed out that the Patna H. C. did not accept the judgment of Government of India in the case of Otis Elevators mentioned supra. The learned JCDR also relied upon Supreme Court's judgment in the case reported in 1988 (38) E.L.T. 566 (Name Tulaman Mfg. Co. v. C.C.E.).
4.2. Distinguishing the aforesaid two authorities relied upon by the learned JCDR, the learned Advocate for the appellants has submitted that in the case before the Patna High Court TISCO had manufacture a complete crane at their factory, gave inspection and trial run at their factory and it was in these circumstances that the High Court came to the conclusion that the excisable goods namely cranes came into existence at TISCO's factory and thereafter the said crane was removed in CKD condition. There is no such completion of the bulk material handling system in the TRF's works at Jamshedpur, and it could not be so in view of the large amount of civil and construction work required to be undertaken at site. The learned Advocate has, therefore, submitted that the facts of TISCO's case before Patna High Court are distinguishable from the facts of this case and hence ratio of the decision of Patna High Court cannot be applied. On the other hand, the learned Advocate draws particular attention to authority at S. No. 6 mentioned earlier by him.
43. Regarding Supreme Court's decision in 1988 (38) E.L.T. 566, the learned Advocate has submitted that the question whether the weighbridge assembled by the petitioners namely Name Tulaman Manufacturers Co. at site was an immovable property never came up before the Supreme Court. The only question that came up and upheld by the Hon'ble Supreme Court was that the petitioners by assembling the three components of the weighbridge brought into being complete weighbridge which have a distinct name, character or use. He, therefore, submits that the completion of the project work undertaken at site by the appellants did not bring into existence any goods. What came into existence was immovable property permanently fixed to the earth and therefore, was not liable to excise duty.
5. We have carefully considered the pleas advanced on both sides on this issue. It is a well-settled proposition of law that excise duty is chargeable on goods produced or manufactured within the country (entry 84 of List I, Schedule VII to the Constitution). Definition of goods given in Article 366(12) of the Constitution is an inclusive definition under which all materials, commodities and articles are considered as included in the term 'goods'. This definition is held to cover within its ambit all goods as defined under the Sale of Goods Act, 1930. The definition under Section 2(7) of the said Sale of Goods Act defines the goods to mean "every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale ". This has been held so by the Supreme Court in AIR 1958 S.C. 560 (State of Madras v. M/s. Cannon Dunkerley Ltd., Madras) and AIR 1958 S.C. 909 (Banarsi Dass v. State of Madhya Pradesh) and AIR 1971 S.C. 908 (State of Maharashtra v. Champalal K. Mohota). An immovable property cannot, therefore, be charged to excise duty.
5.1. The adjudicating authority has not pointed out as to which items have been specifically assembled at site out of the components brought by the appellants at site either from their own works or from the independent fabricators or purchased from the market. The adjudicating authority has apparently taken the completion of the project as the assembly of the machinery at site. The project by 'itself being an immovable property cannot be charged to duty. This is apparent from his findings when he states while dealing with the appellants' reliance on Government of India's order in the case of Otis Elevators (India) Ltd. that the immovable property has not been charged to duty because the appellants have been given the benefit of deduction of erection, installation and commissioning charges charged by them. It has been stated by the appellants that they manufacture various items at their Jamshedpur factory for outright sales or for clearance on their own account to fulfil their construction contracts. There is not even an allegation that clearances of items manufactured by them are undervalued as compared to clearances for outright sales. Collector could not, in law, adopt an indirect approach in the absence of any allegation, leave apart a finding based on some cogent evidence, that the valuation of goods under Section 4 of the Act is not possible to determine.
5.2. We do not also find much merit in learned JCDR's plea that under Heading 84.28 HSN of the Customs Tariff read with Explanatory Notes at pages 1197 and 1198 Vol. III pertaining thereto Conveyor Belting System are considered as goods liable to Customs duty. With reference to the Customs Tariff the basic concept is different as against the concept of excisability under the Central Excises Act and the Tariff. It is wellsettled by the Supreme Court that excise duty is a tax on the event of production/manufacture of goods. Merely collecting the various component parts at site, partly by manufacture from one's own factory, partly getting them manufactured from other factories and partly buying some components from the market will not mean manufacture of the entire Conveyor Belt System in C.K.D. condition. We, therefore, hold that the completion of the projects by the appellants in the six turn-key projects (Works Order Nos. 0131, 0132, 0139, 0187, 0189 and 0192) are not liable to be charged to duty.
6. 2nd issue considered by the Collector is as follows:-
"Whether in respect of goods which were got fabricated on job basis through other units, duty liability rests on M/s. Tata Robins Fraser Ltd. or the fabricators, i.e. which of them could be considered to be manufacturer for the Central Excise purposes."
Findings. - On this issue Collector's finding is that there does not appear to be any doubt that the appellants are the real manufacturers of fabricated structural and other articles which were got fabricated by them from others or which were got manufactured for them by their sub-contractors by supplying steel and specifications. In coming to this finding the adjudicating authority has relied upon Gujarat High Court's judgment in the case of Jamnadas Chottelal Desai and Others v. C.L. Nangia and Others [AIR 1965 Gujarat 215].
7. Learned JCDR reiterating the Collector's finding has further relied upon Supreme Court's judgment in the case of (i) Bajrang Gopilal Gajabi v. M.N. Balkundri & Others [1986 (25) E.L.T. 609] and (ii) Shree Agency v. S.K. Bhattacharjee & Others [1977 E.L.T. J 168-Para 10]. As against this advocate for the appellants relies on a long list of authorities as follows:-
(1) Andhra Rerolling v. Union of India - 1979 (4) E.L.T. 600 (A.P.) (2) Gangadhar v. Collector of Central Excise, Allahabad - 1979 (4) E.L.T. 597 (Para 4) (Allahabad) (3) (4) Metal Box v. Collector of Central Excise - 1986 (23) E.L.T. 187 (CEGAT) (5) Kalsi Tyres v. Collector of Central Excise - 1986 (26) E.L.T. 631 (CEGAT) (6) Prasad Engineering v. Collector of Central Excise - 1987 (31) E.L.T. 247 (7) R.K.H. Industries v. Union of India - 1984 (16) E.L.T. 40, para 4 (Bombay) (8) Lucas Limited v. Collector of C. Ex. - 1984 (16) E.L.T. 415 (CEGAT) (9) Collector of Central Excise v. Modo Plast - 1985 (21) E.L.T. 1987 (CEGAT) (10) Standard Motors v. Collector of C. Ex. - 1985 E.C.R. 1807 (CEGAT) - 1986 (24) E.L.T. 155 (Tri.) (11) Jay Engineering v. Collector of Central Excise - 1985 (21) E.L.T. 299 (CEGAT) (12) P.M. Abdul Latif v. Assistant Collector - 1985 (22) E.L.T. 758 (Madras) (13) TELCO v. Union of India - 1988 (35) E.L.T. (Patna).
7.1. Rebutting the JCDR's reliance on Shree Agency and Bajrang Gopilal's cases, the learned Advocate has submitted that those cases are based on the peculiar facts available therein. The Courts found that the real manufacturer or fabricator of goods is merely a dummy unit or a clock for manufacture on behalf of the manufacturer who supplied the raw material. Those facts and circumstances are not available in the instant case. There is neither any allegation nor any finding to that effect in the show cause notice or in the impugned order respectively. He takes particular support from Tribunal's judgment in the case of Metal Box India Ltd., Calcutta v. C.C.E., Calcutta [1986 (23) E.L.T. 187 (Tri.)]. He laid emphasis on Madras High Court's judgment in the case of P.M. Abdul Latif v. Asstt. Collector mentioned supra which, according to the learned Advocate, is identical to the facts of this case inasmuch as the goods under consideration also fall under the same Tariff Item 68 by supplying the basic raw material for steel structurals and fabrication. The learned Advocate also pointed out that Patna High Court in the case of TELCO mentioned supra, has differed from the Gujarat High Court in the case of Jamna Das Chottelal Desai & Others v. C.L. Nangia & Others the judgment of Patna High Court and a long line judgments of the Tribunal relied upon by the appellants squarely apply to the facts of this case, submits the learned Advocate.
8. We have carefully considered the pleas advanced on both sides and we agree with the appellants' learned Counsel. There is a catena of judgments as relied upon by the appellants' learned Counsel which support him. There is neither an allegation nor any finding that the persons who manufactured the goods on job works basis after getting the raw materials from the appellants were actually the agents of the appellants or they were working as their dummy units or that these various fabricators were mere facade for the appellants. On the other hand, it was the assertion of the appellants, as well as before the adjudicating authority and it is so in the appeal memo that these fabricators were doing their independent work not only for the appellants but also for others. The mere fact that some of them have wound up their business would not lead to an inference, as appears to have been hinted at in the impugned order that such fabricators were agents of the appellants. It is for the department to prove by cogent and acceptable evidence that the fabricators were actually puppets in the hands of the appellants. Leave apart from production of any cogent evidence there is absolutely no evidence on record to even hint at in that direction. The adjudicating authority has merely relied upon the legal interpretation given by him to the definition of 'manufacturer' under Section 2(f) of the Central Excises and Salt Act. In view of the series of judgments on this issue we disagree with the interpretation of the Collector.
9. The 3rd issue discussed by the Collector, namely the following need not be dealt with by us because this issue has been decided by the Collector in favour of the appellants. It is for this reason that the Collector has held the appellants liable to differential duty in respect of 12 contracts alone out of 52 contracts executed by them during the relevant period:-
"Whether the proper officer to take action on the alleged evasion of duty on the goods said to have been manufactured at site located in other Collectorates is the officer in whose jurisdiction the assessee's works is located or the officer in whose jurisdiction the site of such manufacture is located."
10. The next issue is one of limitation. It is pleaded that the show cause notice was issued on 16-1-1982 and addendum to the show cause notice was again issued on 23-9-1982 for the period 1-3-1975 to 31-12-1981. According to them, nothing was concealed or suppressed from the department. R.T. 12 returns regularly submitted to the department have been finally assessed, no objection was raised by the deptt. Therefore, the normal limitation of six months should have been invoked for demand of duty, if any -
"Whether in view of the facts and circumstances of the case, demand of duty for a period beyond six months prior to the date of show cause notice under Section 11A of the Central Excises and Salt Act, 1944, is legal in order or not."
10.1. The Collector has held as follows:-
"(1) They had been executing contracts which involved manufacture of goods at work site;
(2) They were getting fabrication work of steel done through other agencies on their behalf;
(3) They had supplied portable conveyors to M/s. Tata Iron and Steel Co. against work order No. 0198 which by any stretch of imagination cannot be considered to be part of immovable property, without paying duty on the full value as mentioned in the purchase order -
Suppression of above facts was solely motivated to evade duty on the aforesaid goods."
11. In order to appreciate the controversy on limitation, the Bench had directed the appellants to file classification lists and R.T. 12 returns. From a perusal of the classifications lists, we find that the following goods were mentioned in the said lists which the appellants intended to manufacture and clear from their works:-
(1) Idlers (2) Vibrating Screens (3) Sherwan Feeders (4) Conveyor Pulley (5) Wire Screen Cloth Panels (6) Misc. Conveyor Mechanicals (7) Wagon Tippler (8) Crushers (9) Stacker/Reclaimer (10) Ore. Coal, Preparation Equipment.
Classification lists do not indicate, nor do the R.T. 12 returns for that matter, that the appellants were supplying raw materials to the various manufacturers and getting some goods manufactured from the latter on job basis. Similarly, the R.T. 12 returns and the accompanying gate passes also do not give the above information. The plea of limitation, therefore fails.
12. However, in view of our findings on the two issues involved on merits of the appeal no liability of duty arises at all against the appellants. The goods which they have manufactured in their works alone are liable to duty and this duty has already been paid admittedly. Accordingly, the appeal is allowed with consequential relief to the appellants.