TMI Blog1997 (5) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... the contracts, appellant furnishes break-up of consideration for (a) items manufactured by appellant, (b) duty paid bought-out items and (c) erection and commissioning for the purpose of invoicing and payments. Price lists in Part II are filed declaring only the prices of items manufactured by appellant. The items manufactured by appellant are cleared from the factory on payment of duty calculated on the assessable value of such items manufactured by appellant and the same are removed to the premises of the buyers. Bought-out items are invariably transported directly to the premises of the buyers. Thereafter the Equipments or Plants are erected and commissioned at the premises of the buyers. Appellant did not pay Central Excise duty on the bought-out items or on the Equipments or Plants as such. 3. This case relates to purchase order dated 25-8-1983 placed by M/s. Kedia Vanaspati Ltd. for supply, installation and commissioning of Neutralisation-Washing-cum-Degumming Equipment for their Vanaspati Plant. The consideration for the contract was Rs. 20,61,000.00. The Range Superintendent issued show cause notice dated 24-12-1984 proposing demand of differential duty of Rs. 83,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty as they were permanently attached to earth and the activity did not bring into existence any marketable, movable or excisable goods. Demand for period more than six months prior to the date of the notice was barred by time. The erection and commissioning was of items manufactured by appellant as well as of duty paid bought-out items. The additional contentions in the second reply to the notice can be summarised as follows :- Installation and commissioning require special technical expertise skill and experience. There is a department to undertake and provide various technical services. There is also R D department to undertake product development and process development. Technical know-how has to be purchased and also imported. There is a wide distribution network spread all over India. Appellant s products are sold in open market as independent products apart from being used in Project Jobs and there is no appreciable price difference. The purchase order shows the break-up of the contract value as Rs. 9,60,000/- for items manufactured by appellant, Rs. 7,56,000/- for price of bought-out items and Rs. 1,50,000/- as charges for installation and commissioning charges. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture and supply. Hence duty is leviable on the value of bought-out items which are integral part of the contracted Plant or Equipment. They are movable, marketable and excisable goods. He indicated as follows :- Therefore, W.C. equipment transportation in knocked down condition emerges as excisable article" or goods and also it is liable for Central Excise duty." At page 18 of the order, he held as follows :- As this is a post-clearance activity carried out after the plant had been assembled at site and attached to the earth, I consider that charges on commissioning and also erecting are not includible in the assessable value of W.C.D. equipment as also required by the concept of excise as being a duty on goods" as understood in commercial parlance." The following observations at page 20 of the order have relevance :- It is not as if goods supplied in this case were a complete plant" like Bhilai Steel Plant but only erection equipment performing a particular operation, i.e. neutralising/degumming etc. which is a marketable commodity as seen from the purchase order." But which is being charged is the equipment/plant in unassembled condition as understood in comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessable value the value of bought-out items. The value of bought-out items (not brought to the factory and taken directly to the site) can be included only if movable, marketable and excisable goods come into existence at the site using the manufactured items and bought-out items. Whatever has come into existence at the site came into existence as a result of erection which involved substantial civil work, Erection cannot be made without such civil work and with the completion of erection, it has become immovable property. Hence, it is contended, no excisable, movable or excisable goods come into existence at the site before or after erection and hence no duty is leviable on bought-out items. The contract was not for supply of movable and marketable goods. Learned Counsel also referred to a number of decisions. Shri K. Srivastava, SDR, rebutted the above contentions and supported the reasoning and conclusions in the impugned order. 10. The department seeks to rely on the decision in Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise - 1988 (38) E.L.T. 566 (S.C.) in which it was held that weighbridge assembled at the site putting together platform made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. (J 199) (S.C.), Collector of Central Excise v. Ambalal Sarabhai Enterprises, 1989 (43) E.L.T. 214 (S.C.), Union Carbide India Ltd. v. Union of India, 1986 (24) E.L.T. 169 (S.C.) and Indian Cable Co. Ltd. v. Collector of Central Excise, 1994 (74) E.L.T. 22 (S.C.) and observed :- The basic test, therefore, of levying duty under the Act is two fold. One, that any article must be a goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immovable do not satisfy the test of being goods within the meaning of the Act nor can it be said to be capable of being brought to the market for being bought and sold. ( Emphasis supplied] It was held that the tube mill having been erected and installed in the premises and embedded to earth, they ceased to be goods and hence not exigible to duty. It was also held that though goods capable of being brought to the market would attract levy, erection and installation of a plant cannot be held to be excisable goods. 12. In Mittal Engineering Works (P) Ltd. case, 1996 (88) E.L.T. 622 (S.C.) the Supreme Court followed the earlier decision in UOI v. Delhi Cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th bolts on platform which was embedded in earth. The basis of the decision is that the turbine and alternator are not embedded in earth but are fixed to foundation by bolts to reduce vibration and disturbance to the coupling arrangement and could be removed by pulling or dismantling the same. Obviously this decision will not be applicable to any situation where the machines are embedded to earth and, therefore, become immovable property or where the Plant or equipment is erected piecemeal at the site embedding in or fixing parts of the same to earth or to civil construction made in earth. 16. As we have indicated in Paragraph 4 supra, the show cause notice proceeded on the basis that the Plant or Equipment which came into existence at the site was excisable goods. It was in this light that the notice proposed demand of duty on the entire value of the contract (including charges for erection and commissioning) less duty already paid on items manufactured in and cleared from the factory of appellant. However, the conclusion in the impugned order is materially different. The Collector held that the activity of erection made the goods immovable property and hence the charges for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary foundation, civil works and structurals. The order itself referred to the subject matter as Plant. 18. From the description furnished in the contract of the subject matter thereof, it is not possible to arrive at the conclusion that all of them are movable or capable of being marketed. This is so, particularly regarding Centrifugal Separators and Mixers. The appellant stated in the reply to the notice that machines and equipment manufactured in the factory were goods marketable at that time and place of removal (factory). The inference is that the bought-out items were used only to erect the various machines and equipment and to mutually connect the same so as to become a Plant or part of a Plant. This inference has to be accepted in the absence of any contra-material marshalled by the Collector. The machines and equipment which are parts of the Plant came into existence in the factory, duty had been paid on them at the time of clearance from the factory. Assuming that they had been removed in CKD condition and had been reassembled at the site before erection, their re-assembly at the site cannot be regarded as an excisable activity. As a result of the erection, the Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
