TMI Blog1997 (7) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... ssels/tanks at the site premises of the Oil and Natural Gas Commission (ONGC), near Ankleshwar in the State of Gujarat. These Horton Spheres were part of the LPG Recovery Plant for whose construction the contract on turn key basis had been given by the ONGC to M/s. ICB. With regard to the Horton Spheres, M/s. ICB gave a sub-contract to M/s. Indian Sugar. Sections/components for the Horton Spheres were manufactured by M/S. Indian Sugar in their factory at Yamuna Nagar in the State of Haryana and such sections/components, etc., were cleared by M/s. Indian Sugar on payment of appropriate Central Excise duty under proper gate passes. The Collector of Central Excise, Baroda, who had adjudicated the matter, had considered M/s. ICB as the manufacturer of the two Horton Spheres in question within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act ). The Central Excise duty of Rs. 16.50 lakhs was demanded and penalty of Rs. 10,000/- was imposed on M/s. ICB. No duty was demanded from M/s. Indian Sugar; however, a penalty of Rs. 10,000/- was imposed on them. 3. The matter was heard on 20-3-1997 when Shri J.F. Pochkhanawala, Sr, Advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants had been dealt with in detail by the adjudicating authority and he reiterated the findings as recorded in the adjudicating order. 7. We have carefully considered the matter. M/s. ICB were awarded a contract by ONGC on 9-5-1983 for commissioning on turn key project basis, a LPG Recovery Plant at Ankleshwar in the State of Gujarat. On 13-9-1983, M/s. ICB placed a Purchase Order with M/s. Indian Sugar for designing, fabrication, and supply of pre-fabricated components for two LPG Horton Spheres. The Horton Spheres are Spherical Steel Storage facility for storing LPG. Each Horton Sphere was to have a diameter of 11.46 meters weighing 116 M.T. The pre-fabricated components were to be transported to site at Ankleshwar in the State of Gujarat, assembled, erected, welded, hydro-tested and painted. Various sections/components for the Horton Spheres were manufactured by M/s. Indian Sugar in their factory at Yamuna Nagar in the State of Haryana. These sections/components, etc., were cleared on payment of Central Excise duty as applicable to them, under proper gate passes. Sale invoices were also prepared. The copies of relevant gate passes and sale invoices were filed with the monthl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the earth with a shaped configuration on the top of the legs to receive spherical body. The items cleared from the factory of M/s. Indian Sugar at Yamuna Nagar (Haryana) on payment of Central Excise duty, were positioned, installed and erected piece by piece, and by the time Horton Spheres took their shape, they had been welded to the legs configuration. At that time, it could not be said that any goods had come into existence. It could not be said that such Horton Spheres had been manufactured as a distinct identifiable product, the product as known and understood for the purpose of levy and collection of Central Excise duty. 12. It had been alleged in the show cause notice and it had been held by the adjudication authority that the activities at the site amounted to the manufacturing activity and Horton Spheres were goods and were classifiable under Heading No. 8485.90 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the `Tariff ). In para-6 of the show cause notice, it was alleged as under :- 6. In the light of the facts as discussed in the foregoing paras, it appears that M/s. ICB Pvt. Ltd., Engineers Constructors, site office, Pilludr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the foundation was constructed at the site M/s. Indian Sugar erected Horton Spheres from the sections transported to the site. First, all the sections of the spheres were installed step by step and positioned properly. After putting the sections in position, the same were welded together. The safety valves and man holes were also provided while installing the Horton Spheres together with erection of ladder and platforms. They explained that the said Horton Spheres could not be understood as goods in any sense of that term. The Horton Spheres when installed were immovable property and were permanently attached to the earth. They also submitted that the said Horton Spheres could not come into the market to be bought and sold nor they were known as such in the market. 14. .In the case of K.N. Subramaniam Chettiar v. M. Chidambaram - AIR 1940 Madras 527, the Madras High Court while construing the definition of immovable property, observed that if a thing is embedded in the earth or attached to what is so embedded for the permanent beneficial, enjoyment of that to which it is attached, then it is part of the immovable property. If the attachment is merely for the beneficial en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Sr. Advocate had referred to the Tribunal s decision in the case of Tata Robins Fraser Ltd. v. CCE - 1990 (46) E.L.T. 562 (Tribunal). The Tribunal had held that merely collecting the various component parts at site partly by manufacturer 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 CKD condition, involved in that case. 15. Let us have a look at the Tariff sub-heading No. 8485.90 under which the Department had sought to classify the Horton Spheres as erected at the site in the State of Gujarat. Heading No. 84.85 covered the following :- Machinery parts, not containing electrical connectors, insulators, coils, contacts or other electrical features, not specified or included elsewhere in this Chapter. 8485.10 Ships propellers and blades therefor 8485.90 Other M/s. ICB in para-5 of their reply dated 13-1-1987 to the show cause notice had submitted as under :- 5. In these circumstances, the allegation in paragraph-4 of the said show cause notice that our clients had manufactured any goods chargeable to excise duty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical device consisting of a planned and an organised arrangement of various part, each part having definite functions, and in which energy is transmitted or modified from one point to another. The term `machinery when use in ordinary language, prima facie, means some mechanical contrivances which by themselves or in combination with one or more other mechanical contrivances, by the combined movement and inter-dependent operation of their respective parts, generate power or evoke, modify, apply or direct natural forces with the object in each case of affecting definite and specific result. According to the Gujarat High Court at Ahmedabad in the case of Ambica Wood Works v. State of Gujarat - 1979 (43) STC 338, in order to be a machinery, the following four factors must exist, namely :- (1) a complete and integrated collection of several objects or articles; (2) these objects or articles should interact in unison-upon or with each other; (3) this inter-action is prompted by application of force, which may be manual or motive power; and (4) the movement should be with a view to do some specific activity or to obtain specific or definite result." We do not consider that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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