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TMI Blog1994 (2) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... item No. 29A of the erstwhile First Schedule to the Central Excises & Salt Act, 1944 (the old Tariff). Some items manufactured were falling under item No. 68 of the old Tariff. The goods manufactured by them along with the goods manufactured by other manufacturers, and the goods procured from the market, were used by them in the execution of their works contracts. 3.1 In the show cause notice dated 27-6-1986 the following allegations were levelled against the appellants :- (1) The assessee charged higher prices from their customers than the prices declared to the Central Excise Department in respect of package type air-conditioners, evaporators, condensers, cooling coils etc. (2) They, without obtaining Central Excise licence and without observing prescribed central excise formalities, produced complete compact units (such as `Utility' brand package chillers, water chilling machines, air handling units, fan coil units, package type air-conditioners, `Utility' brand condensing units etc.), at sites, and cleared the same for sale prior to their installation. They were raising invoices for such units as a whole, while paid central excise duty only on some of the parts pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich have been pointed out to him with regard to the show cause notice issued to them, but he has merely stated that the same were not accepted. It was submitted that when the discrepancies were specifically pointed out, it was the duty of the Collector to examine the discrepancies and to redetermine the exact amount of duty payable (ground-VII under Para 13 of the Appeal Memo). 7. The matter was posted for hearing on 5-1-1994 and 6-1-1994, when Shri M. Chandrasekharan, Sr. Advocate with Shri J.S. Agarwal, Advocate, appeared for the appellants. Shri Siddarth Kak, Joint CDR and Shri B.K. Singh, SDR represented the respondent. 8. Shri M. Chandrasekharan, the learned Sr. Advocate explained the activities of the appellants as manufacturer of excisable goods and as contractors for works contracts, for designing, erection, installation and assembling of air-conditioning plants. The various appliances, equipment and other items necessary for completion of the jobs were partly manufactured by them in their own factories and partly were got manufactured from other manufacturers. Some items were purchased from the open market. Depending on the nature of the job, the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in permanent structure, the learned JCDR referred to the contracts with M/s. Ritu Pharma Needs (P) Ltd. at page 106 of the paper book wherein it has been mentioned that the masonary work was to be done by the owner. He submitted that the goods such as condensing units, water cooling condensor etc. have been identified by the brand name of the manufacturer `Utility'. On the question of limitation it was submitted that it was the date of the RT-12 returns that was relevant for the show cause notice. Referring to the Tribunal's decision in the case of Aruna Industries v. CCE - 1986 (25) E.L.T. 580 (Tribunal), relied upon by the appellants, the learned JCDR referred that the Tribunal in that case were dealing with a situation wherein the agreements were for construction, that is supply of fabrication and erection of structural steels and clading works. The contracts comprised of the construction and the completion of the works. There was nothing in the contracts to hold that there was a sale of raw-materials by one party to the other. He submitted that the facts in that case before the Tribunal were different. 10. The matter could not be concluded on 6-1-1994, and was taken up on 7-1- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sale in the market as assembled units. Reference was also made to the Tribunal decision in the case of M/s. J.K. Export Industries v. CCE - 1983 (14) E.L.T. 2390 (Tri.) wherein it has been held that the plant and machinery erected at site and attached to earth were not dutiable as `goods'. Further the Tribunal decision in the case of Gujarat Machinery Manufacturers Pvt. Ltd. v. CCE - 1983 (13) E.L.T. 825 (Tri.) to the effect that `plant' is not `goods' and thus not liable to duty under item No. 68 of the Central Excise Tariff has been affirmed by the Hon. Supreme Court, vide report at page A58 in 1989 (44) E.L.T. Relying upon the Tribunal's decision in the case of Chowgule & Co. (Hind) Pvt. Ltd. v. CCE, 1985 (21) E.L.T. 110 (Tri.), and Madras High Court decision in the case of U.O.I. v. T.S.R. Co. - 1985 (22) E.L.T. 701 (Madras), it was mentioned that advertisement/publicity/label etc. were not determinative for classification of goods or for the purposes of exemption notification. On the question of limitation it was submitted that once their classification lists and price lists have been approved then the charge of wilful mis-declaration could not be sustained, as held by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor by filing appropriate affidavits from persons in the trade. Unfortunately since no such doubt was raised by the Collector, there was no necessity of the appellant filing affidavits before him. In view of the finding of the Collector which has taken the appellant by surprise, it has become necessary for the appellant to annex herewith affidavits from persons in the trade to show how the work of assembling, erecting and installing central air-conditioning and refrigerating plant is carried out, which are marked as annexure-H (colly.). As such the order is perverse and deserves to be quashed and ought to be set-aside." 14.3 These affidavits were not before the adjudicating authority. The learned Sr. Advocate representing the appellants had agreed that these affidavits were not before the Collector. The learned Jt. CDR representing the Respondent had also remarked that these affidavits were filed after adjudication of the case. In the interest of justice we consider that the jurisdictional adjudicating Collector should have an opportunity to deal with these affidavits and to comment on the contents thereof. 14.4 The Para 13(VII) of the Grounds-of-Appeal the appellants have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t". We consider that it is not a case of refund, and the deductions permissible under law, if otherwise eligible, have to be considered. 15. As we have quoted above, this case involves a number of important issues of facts and law. Although for the reasons indicated above, we find ourselves handicapped in taking a categorical view in the matter, as the matter has been argued before us vehemently and in considerable detail by both the learned Sr. Advocate for the appellants, and the learned Jt. CDR for the respondent, we consider it desirable to briefly discuss the main issues. Our observations are however only tentative and simply to facilitate the decision to be arrived at by the adjudicating Collector in de novo proceedings as we are of the view that it is a fit case which requires to be remanded back for de novo adjudication. 16.1 The two main issues for consideration in this case are as under : (1) Whether the assembly/fabrication of specified units at site (before their installation in the `works'), out of different parts, partly manufactured by the assessee in their own factories, and partly procured from outside, can amount to the process of manufacture, and whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise licence these ready fully assembled compact packaged units at site and cleared such ready assembled units for sale prior to their installation without payment of central excise duty. It has been alleged that the assembly/fabrication work done at site amounted to the process of manufacture and the assessees were required to obtain L4 licence for each of the sites where the manufacturing activity was performed. 18. The appellants have contested that neither the `site' could be termed as a `factory', nor the `plant' could be construed as `goods'. They have denied that they manufacture ready assembled units. They have stated that no manufacturing process was being carried out on those sites. 19. Central Excise Duty is levied and collected on the excisable goods produced or manufactured, but neither all the goods are excisable nor each and every process is a process of manufacture for the purposes of Central Excise levy. There are a number of authoritative judicial pronouncements as what are the `goods' and as what are the process/processes which amount to the process of manufacture for the purposes of excise levy. We need not to deal with them in detail, presently in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Section 2(e) of the Central Excises & Salt Act, 1944, `factory' has been defined as any premises including the precincts thereof wherein or in any part of which excisable goods other than salt are manufactured or wherein or in any part of which any manufacturing process connected with the production of those goods is being carried on or is ordinarily carried on. While `land' itself could be a factory as is clear from the provisions of Sections 16 and 17 of the Act, it is necessary that excisable goods should have been manufactured thereon. In this case to our mind this important question has not been discussed fully by the adjudicating Collector. 23. The Collector of Central Excise has observed that the duty has not been demanded on the central air-conditioning plant, but on the goods manufactured at sites prior to their installation. For any activity of this nature, wherein the goods, material, structurals etc. had to be used for installation, construction, fixing etc., as we have indicated above, some preparatory steps are inevitable. Such preparatory steps may involve cutting, boring, assembling, welding etc. Whether such steps bring into existence a new and different articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with M/s. Thomson Press (I) Ltd., Faridabad, it is seen that the contract value for the execution of the work described in the agreement included design, fabrication, supply of materials, erection and commissioning. It was noticed that a much higher amount has been charged from their customers in respect of the various items manufactured/assembled/fabricated by them than the amount of which the central excise duty have been paid. 26. Prima facie we feel that in such a situation the correct assessable value of the goods manufactured could only be arrived at after deducting from the contract value, the expenses incurred by the manufacturer for providing labour and other services. Of course, freight charges for transporting goods from the place of manufacture to the site if incurred by the manufacturer and included in such receipts towards erection and commissioning charges, along with other permissible deductions, will be eligible for deduction. In this connection reference may be made to the Supreme Court decisions in the sales tax cases of : (1) Gannon Dunkerly & Co. v. State of Rajasthan, 1992 (3) SCALE 173 and (2) Builders Association of India v. State of Karnata ..... 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