Document Fragment View

Matching Fragments

2. On behalf of the appellants we heard learned Advocate Shri H.S. Joshi. He stated that proto-type towers cannot be treated as 'goods' inasmuch as they cannot be bought and sold in the market. He added that the components sent for testing are assembled at the test bed by erecting them on earth for subjecting to them to pressure and other tests in accordance with the 'Indian Standard Code of Practice for Use of Structural Steel in overhead Transmission Line Towers'. He pointed out that the components sent from the factory for the erection of proto-type tower at the test bed site are non-galvanised and they do not enter the market since they become useless after the test. Shri Joshi reiterated his stand that such proto-type towers not being marketable cannot be deemed as 'goods' chargeable to duty. He contended that the Collector's finding that proto-type towers cleared in completely knocked-down condition to facilitate transportation constitute 'goods' chargeable to duty is erroneous since the items cleared are merely angles and the proto-type tower constructed at the site by assembling such angles is fixed to the earth. In regard to the Collector's finding that the test charges form a part of the assessable value of the transmission line tower, Shri Joshi contended that testing of the proto-type towers being a process totally unconnected with the actual manufacturing of the transmission towers covered by the contract the charges incurred on such testing cannot be treated as forming a part of the assessable value of the Transmission Towers fabricated by the appellants in terms of the contract. Shri Joshi further contended that the demands for the recovery of duty were time-barred since they were not issued within the period of 6 months stipulated in Rule 10 of the Central Excise Rules, 1944. He denied that there was any suppression of facts by the appellants. In this regard he pointed out that the goods in question were removed from the factory under despatch challans and the contracts as well as the bills mentioning these charges were available for scrutiny by Central Excise Officers and Audit parties which visited the factory from time to time. He claimed that the appellants had acted under the bonafide belief that the proto-type towers were not chargeable to duty, and not with the intent of evading any duty. In support of the points made, by him, he placed reliance on the following case law: -

(i) Hyderabad Race Club v. CCE, Hyderabad -1986 (23) ELT 274 (Tri.)
(ii) CCE, Baroda v. Dodsal Pvt. Ltd. - 1987 (28) ELT 352 (Tri.)
(iii) SAE (India) Ltd. v. CCE -1988 (36) ELT 613 (Tri. )

3. On behalf of the Department the learned JDR Shri M.S. Arora argued that there was no doubt about the durability of the Transmission Line Towers which are fabricated by the appellants in terms of the contracts entered into with various electricity boards, since they have been regularly paying duty on these products. In regard to the question of dutiability of the proto-type towers, Shri Arora referred to the Collector's finding that complete towers are dismantled for facilitating transport to the test site and such towers are similar to the towers which are manufactured for the execution of the contract. Shri Arora contended that even though at the time of clearance from the factory the proto-type towers are in completely knocked down condition and not galvanised, they have to be deemed as having acquired the essential characteristics of finished towers. He stated that the decision in the case of Collector of Central Excise, Baroda v. Dodsal Pvt. Ltd. does not help the appellants since in that case the goods cleared from the factory were only angles and not complete towers in knocked-down condition. Shri Arora also referred to the decision in the case of Richardson and Cruddas (1972) Ltd. v. Collector of Central Excise reported in 1988 (38) ELT 176, and argued that even proto-type towers cleared by the appellants for test have to be deemed as excisable goods. On the grounds that tests in terms of the relevant Indian Standard Code was an essential condition of such contracts, he argued that the testing activity could not be deemed as separate from the manufacture of the goods covered by the contract and as such test charges had to be deemed as part of the assessable value of towers cleared by the appellants from their factory. In this regard he placed reliance on the following case law :-

(ii) Whether the test charged recovered by the appellants from their customers form a part of the assessable value of the Power Line Transmission Towers which are fabricated after tests of the proto-type for erection in terms of the contracts.
(iii) Whether the demands issued in this case were barred by limitation.

5. It is seen that in this case there is no dispute as regards the dutiability of the Power Line Transmission Towers which are cleared in completely knocked down condition by the appellants for actual assembly and erection at various sites in terms of the contract entered into by the appellants with their customers. The dispute is only in regard to the dutiability of the proto-type towers cleared for tests at sites having facilities for conducting the tests which in terms of the contract between the appellants and their customers have necessarily to precede the fabrication of the transmission towers for actual installation. The appellants' case is that proto-type towers not being commercially marketable, cannot be deemed as 'goods' chargeable to Central Excise duty. They have contended that transactions involving fabrication and sale can be only in respect of towers which are manufactured after the approval of the design by the customers on the basis of successful load and stress tests of proto-types in accordance with the "Indian Standard Code" relating to use of structural steel overhead transmission line towers. According to the appellants the towers supplied to customers in terms of the contracts are invariably galvanised whereas the proto-types used for test are non-galvanised and after the completion of tests at the test bed site, the proto-types are rendered useless and have to be scrapped.