TMI Blog2001 (2) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... age of Bhandara district. The project was contemplated in two phases. The first phase comprises installation of sophisticated high technology electrical arc furnace with ladle refining facility, continuous caster and continuous rolling mill. The second phase comprises making of sponge iron, which is the main raw material used in the Steel Industry. The petitioner has entered into technical collaboration with the famous West German Company M/s. Krupps Industrietechnik. In order to construct a facility for carrying out its production activities, the petitioner awarded a site development and factory construction contract to M/s. Bridge Roof Company, a Public Sector Undertaking. M/s. Bridge Roof Company has undertaken the work of fabrication and erection of the complete shed of the factory including roofing and cladding. The contract between the parties requires the petitioner to provide duty paid iron and steel items like angles, channels, plates, joists, beams, etc.. M/s. Bridge Roof Company fabricate certain material out of such duty paid angles, channels, plates, joists, beams, etc. supplied to them and the fabrication is done on the site where the construction of the shed is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction of a commercially saleable product and, therefore, did not attract the levy of excise duty were cited. Notable amongst such judgments was the judgment of the CEGAT in the case of Aruna Industries Vishakhapatnam others v. Collector of Central Excise, Guntur and others, reported in 1986 (25) E.L.T. 580. The reply, in terms, states that the structurals of different shapes fabricated within the premises of the petitioner's factory were not capable of being sold like sheets, rods and/or angles, which were commercially known commodities in the market place, as no one had heard about a column, beam, truss or purlin as an item of trade. The petitioner substantially adopted this reply by its reply dated 8-5-1987 and also contended that, for the same reasons, it was not liable to pay excise duty. Thereafter the show cause notice was heard and adjudicated by the Additional Collector. Detailed notes of arguments were filed before the Additional Collector reiterating the submissions of the petitioner and M/s. Bridge Roof Company citing large number of authorities including the decision of CEGAT in the case of M/s. Aruna Industries (supra). By the impugned order, dated 9-11-1987, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Schedule. The petitioner was, therefore, called upon to show cause as to why the classification sought by the petitioner should not be modified as suggested in the show cause notice. The petitioner by its reply dated November 2, 1987 raised three issues : (i) that the fabrication activity was not "manufacture"; (ii) that in any event the fabricated material was not "goods", which was sold as a distinct commercial product in the market or saleable as such and (iii) that the matter was clearly covered by the decision of the CEGAT in the case of Aruna Industries Vishakhapatnam and others v. Collector, Central Excise, Guntur and others, reported in 1986 (25) E.L.T. 580. The petitioner, therefore, contended that there was no question of its being called upon to pay excise duty thereon and requested that the proceedings be dropped. A personal hearing was given to the petitioner during the course of which, a detailed note of its contentions was filed. On 28-12-1987, the Assistant Collector of(d) Central Excise made an order rejecting the contentions urged by the petitioner holding that the fabrication of columns, trusses, Gantry Girders, Purlins, etc., from duty paid raw material supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and appropriate duty would be leviable. The trade notice says that the above guidelines will apply in similar cases. He also referred to a Circular No.1/88 (Annexure-J to W.P.No. 517/88) issued by the Under Secretary, CBEC to all Excise Authorities. In this Circular, the same view is reiterated and a direction was issued that the above guidelines should apply in all similar cases. Mr. Thakur complains that, in view of these guidelines of the CBEC read with trade notice, the Excise authorities are inclined to blindly follow the guidelines even at the cost of ignoring the judgments of the CEGAT taking a contrary view. Considering the total absence of reference to judgment of the CEGAT in the case of M/s. Aruna Industries, (supra) which is pat on the point (as we shall presently see), we are inclined to agree with the learned Counsel for the petitioners. Though not articulated in words, in substance and spirit both the impugned orders appear to follow the CBEC guidelines by ignoring the binding judgment of the CEGAT. Mr. Thakur complains that this is not a solitary case and requested us to make some observations on the binding nature of CEGAT judgments. 6.The Circular issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or losing of court proceedings." In the case of Collector of Central Excise, Bombay v. Jayant Dalal Pvt. Ltd. [1996 (88) E.L.T. 638 (S.C.) = 1997 (10) SCC 402], the Supreme Court took a view that it is not open to the Revenue to advance an argument or even file an appeal against the correctness of the binding nature of the Circulars issued by the Board. Similar is the view taken in the case of Collector of Central Excise, Bombay v. Kores (India) Ltd. [1997 (89) E.L.T. 441 (S.C.) = 1997 (10) SCC 338]. 8.It is true that in all these decisions the Apex Court has pointed out the binding nature of the Departmental Circulars. A perusal of these cases suggests that in all these cases the assessee was entitled to some benefit under the Circulars/Orders issued by the Board and the Revenue was contending that the Circulars/Orders were illegal and, therefore, such benefit could not be made available to the assessee. In such situation the Supreme Court pointed out that once the CBEC has taken a policy decision with a view to maintain uniformity in the matter of classification or collection of excise duty it was not open to any officers of the Revenue to contend to the contrary and that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State of Uttar Pradesh and another, 1977 STC Vol. 39, 424, the Allahabad High Court had taken the same view. Though these judgments were with respect to decisions of the High Court and their binding nature, the principle is the same, namely, enforcement of judicial discipline and prevention of chaos. 11.Thus a conspectus of these judgments leaves no doubt in our minds that the judgments and orders rendered by the CEGAT are binding on all Excise Officers unless they are set aside by this Court or by the Supreme Court in appeal. 12.By its judicial hierarchy, the judgment of the CEGAT binds the Revenue Officers. By virtue of Section 37B of the Act, administratively issued Circulars/Orders and trade notices equally bind the Revenue Officers. In such a situation, assuming there is a conflict between a Circular, order or trade notice issued under Section 37B of the Act and a binding judgment of the CEGAT, we have no hesitation in holding that it would be the judgment of the CEGAT which ought to be followed by the Revenue Officers. The Supreme Court in a recent judgment in Government of Andhra Pradesh Others v. A.P. Jaiswal Ors. - 2001 AIR SCW 101 had occasion to consider the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite obvious. The Circulars/orders or trade notices are not binding on the assessees at all and their efficacy and legality is always open for challenge at the instance of them. As far as the judgments rendered by the CEGAT are concerned, they are equally binding on the assessees as well as the Department. In a contest, therefore, the Circular's/guidelines/orders or trade notices issued under Section 37B must necessarily yield. Thus, we hold that all officers functioning under the Act are bound by the judgments rendered by the CEGAT as long as such judgments are not stayed or reversed by a superior forum i.e. the High Court or the Supreme Court. We also hold that if at all there is a situation of conflict between a Circular/guideline/order or trade notice issued under Section 37B of the Act and a binding judgment of the CEGAT, it is the binding judgment of the CEGAT which has to be followed by the authorities under the Act. The observations of the Division Bench of this Court in the case of Yashwant Sahakari Sakhar Karkhane Ltd. v. Union of India and others, reported in 1986 (26) E.L.T. 904 (Bom.) fully support the view which we are inclined to take. It is an elementary proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it clear that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold." Finally, in para 18, the Supreme Court says : "These considerations of the meaning of the word "goods" provides strong support for the view that "manufacture" which is liable to excise duty under the Central Excise and Salt Act, 1944 must be the "bringing into existence of a new substance known to the market"." 17.In the case of Union Carbide India Ltd. v. Union of India and others, reported in 1986 (24) E.L.T. 169 (S.C.), the Supreme Court referred to Entry 84 of List I of Schedule VII to the Constitution, which speaks of "duties of excise on tobacco and other goods manufactured or produced in India" and highlighted that the expression "goods manufactured or produced" must refer to articles which are capable of being sold to a consumer and that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold." The Supreme Court reiterated its views in the case of South Bihar Sugar Mills Ltd. v. Union of India Others, reported in 1978 (2) E.L.T. J336 (S.C.). 18.Thus, armed with twin concepts of "manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but merely indicate the function a structural member has to carry out. They are not hawked the way goods like sheets, angles can be hawked and sold. That sheets and angles are well known commodities in the market place, but no one has heard of a truss on a purlin as an item of trade, is the reasoning of the tribunal. Aruna Industries' judgment was followed in several cases, which were cited by the learned Counsel for the petitioners. Instead of multiplying authorities, we would prefer to go to the last in the series, Elecon Engineering Co. Ltd. v. Collector of Central Excise, Chandigarh, reported in 1999 (107) E.L.T. 337. In this judgment too, the CEGAT had a similar situation, and after considering the thrust of the previous judgments, the CEGAT came to the conclusion that there is no authority in law for levying duty on immovable structures like factory building, power plant, etc.; that erection of sheds at site with the help of various duties paid articles of iron and steel is only a fabrication activity which does not amount to manufacture as no new or distinct commercial article comes into existence; fabrication of steel structurals by cutting to size, drilling holes and weldi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, this judgment is squarely applicable to the cases before us. 22.In the case of Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut - 1996 (88) E.L.T. 622 (S.C.), Mono Vertical Crystallisers had to be assembled and erected at the customers factory. Such assembly and erection was done either by the appellants or by the Customer. The appellants before the Supreme Court used to collect fabrication material for fabricating them into Mono Vertical Crystallisers which were erected and attached by foundations to the earth. The Supreme Court took a view that these Mono Vertical Crystallisers were not "goods" within the meaning of the Act and, therefore, not exigible to excise duty. The test applied was that the goods which were attached to the earth became immovable and did not satisfy the test of being goods within the meaning of the Act, nor could they be said to be capable of being brought to the market for being sold. The Supreme Court reiterated the view taken in its earlier judgment in the case of Quality Steel Tubes (P.) Ltd. (supra) that the erection and installation of a plant cannot be held to result in excisable goods. If such wide meaning is assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of highly intricate, specialised and technical nature. After the processes were done by the appellants, the raw material consisting of beams, angles, etc. get such shape and character that they could be readily fitted into structures. The tribunal drew an analogy with pre-fabricated houses, or a walking stick, or a toy made from wood and held that the identity of such articles must be held to be different from raw materials which have gone into their making; such activities would certainly be called manufacturing activities. In fact, this judgment was considered carefully by the CEGAT in the case of Aruna Industries (supra) and, in our view, rightly distinguished. 25.It was rightly pointed out in Aruna Industries (supra) that the CEGAT had considered the terms of contract in Bokaro (supra) and based its decision on the nature of work to be carried out. The terms of contract in Bokaro showed that raw materials were only cut to size, welded, fixed and fabricated according to drawings and thereafter assembled structures were delivered at the site. These facts do distinguish the judgment in Bokaro (supra). In our judgment, considering the peculiar nature of the terms of contract befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in both the cases, fabrication of structurals at the site of the principal by using raw materials supplied by the principal did not amount to "manufacture", nor was it done at "factory", nor were the goods saleable or capable of being brought to the market for being bought or sold. We further notice that in both the cases the fabrication was with the immediate purpose of using in the factory shed or steel cold rolling mill which were being constructed and there was never an intention to sell it in the market. These facts, in our judgment, make it amply clear that the materials fabricated at the site by the contractors in both the cases were not exigible to excise duty under Section 3 of the Act. Hence, the orders in both the cases need to be set aside in exercise of writ jurisdiction. 29.In the result, we allow both the writ petitions. The orders impugned in both the writ petitions are quashed and set aside. 30.At the request of Shri Mishra, learned Counsel for the Respondents, in order to facilitate the Department to carry out the matter in appeal to the Supreme Court, the amount deposited in this court in W.P. No. 2420/87 shall not be refunded to the petitioner for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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