TMI Blog1997 (3) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... takes turnkey projects on contract basis all over the country. The petitioner's customers are mostly the Public Works Department of the State Governments, State Electricity Boards and occasionally some Public Sector Undertakings. 2.The petitioner claims that it has been fabricating its products mentioned above not in their full forms, but only in parts which are then taken to the different sites for being assembled into whole by process of welding and fixing with bolts and nuts. The parts so fabricated would all be to the specifications stipulated by the customers to suit their projects or jobs. In other words, according to the petitioner, the parts fabricated for a particular project/job will not be useful for any other project or job. These parts will all thus be utilised in the project or job, for which they have been specifically fabricated and at no point of time, they are offered for sale in the market. 3.Before 1-3-1980, the parts, which were fabricated, were all classified and also assessed to duty provisionally under the erstwhile Tariff Item No. 68. In 1980 the petitioner filed a writ petition before this Court in Writ Petition No. 23434 of 1980 contending that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been considered by the Division Bench or not. 5.Factually, another important factor to be noted is that during the pendency of the writ petition before the Bench, there was an amendment to the definition of goods by Act 5 of 1986 where the words "Schedule to the Central Excise Tariff Act, 1985" have been introduced. We are giving below the old Section 2(d) as well as new Section : Old Section 2(d) "excisable goods" means goods specified in the First Schedule as being subject to a duty of excise and includes salt". New Section 2(d) "excisable goods" means goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt". While old Section 2(d) reads that `goods' means those which are specified in the First Schedule to the Central Excises and Salt Act, 1944, the new definition would say that `goods' are those which are specified in the Schedule to the Central Excise Tariff Act, 1985. Earlier the goods were assessed to Central Excise duty under Item No. 68 of Schedule I to the Central Excises and Salt Act, 1944. Now, after amendment, the classification that has been made applicable is Head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity Boards etc., is hereby stayed subject to petitioners furnishing Bank guarantee for the duty demanded in a lump sum of Rs. 30/- lakhs." The stay was in operation till the disposal of the writ petitions by the Bench on 30-11-1988. 7.However as already discussed supra, Section 2(d) is to the effect that `excisable goods' means goods specified in the First Schedule as being subject to a duty of excise and includes salt, as found in the Central Excises and Salt Act, 1944 (Act No. 1 of 1944). But, the Central Excise Tariff Act, 1985 (Act No. 5 of 1986), which came into force on 28-2-1986, has made the Section in the following lines : "2. Duties specified in the Schedule to be levied. - The rates at which duties of excise shall be levied under the Central Excises and Salt Act, 1944 (1 of 1944) are specified in the Schedule." This amendment was introduced during the pendency of the writ petitions before the Division Bench. Therefore, notwithstanding the order of stay granted in the manner mentioned above, the Superintendent of Central Excise has chosen to issue a fresh notice, which is Annexure C to the writ petition. The said notice runs as follows : "Rule 2(a) of the New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Schedule brought into effect from 28-2-1986, as under : "The main products that we fabricate are hydraulic gates of different types, gantry cranes, hoists, penstocks and airvent pipes, rubber seals, transmission line towers, building structures, electric overhead cranes etc., out of duty-paid steel materials either purchased by us or supplied by our customers. Prior to the introduction of the revised tariff, our products mentioned above were classified under the old Tariff Item No. 68. In this connection we wish to state that we are fabricating and clearing only parts of components of our main products in piece-meal and not the main products as such. The local Central Excise Officers are aware of this. We have been repeatedly maintaining that the parts of components fabricated and cleared by us are not standard products, but they are fabricated according to the individual requirement of each project work and consequently has no commercial identity of their own. They are also incapable of being brought to the market for sale or purchase. Even if offered for sale they will fetch only scrap value. Even our customers are also not interested in them but only in the completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited from 1-3-1986 to 13-1-1987, it is seen that none of them can be classified under sub-heading 73.01 to 73.07. As such, they are correctly classifiable under sub-heading 73.08 only. However, sub-heading 73.08 also classifies certain articles by name from 7308.10 to 7308.80 where also, the goods manufactured by M/s. Tungabhadra Steel Products during the said period do not find place and hence they are covered under 7308.90, which is for other articles of iron and steel not covered from 7308.10 to 7308.80". It is necessary to place on record the fact that the amendment to Section 2 does not in any way affect the stand taken by the petitioner. The Department is again not able to show to us what exactly is the difference. In fact, we are able to see that both before and after the amendment, the products of the petitioner have been brought only under residuary category. While the word "residuary" is actually found in Item No. 68 in the old Act, the words "others alone" are found in the new Schedule. We also see that the Department itself is finding it difficult to bring it within the "residuary" category, as a reading of the above order would lead us to such conclusion. The order w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier, involves fabrication of some items and installation of power work, including electrical equipment, motors, wires etc., brought from open market or other manufacturers, on which excise duty will have already been paid on removal from the respective factories, including their own. The ultimate project also includes the components supplied by the customer in the form of cement and other material required for masonry jobs, which ultimately emerges and takes the shape of the project. 13. It is well-settled that to be called goods an article-tangible or intangible should be movable. Several parts manufactured elsewhere are brought on site where hydraulic gates, cranes, penstock pipes, transmission line towers etc., are to be erected and installed. Since at the moment they came into existence they are part of the immovable property in which they are erected and installed, hydraulic gates, cranes, hoists etc., are not `goods' and do not attract levy of duty under the Act. Viewed from any angle, such structures involving the above elements cannot be treated as goods since it will have been fixed to the ground to become an immovable property, which cannot in its nature be said to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich led to the confirmation of the order of the Division Bench of this Court, in Mittal Engineering Works Private Limited v. Collector of Central Excise, Meerut - 1996 (88) E.L.T. 622 (S.C.). The learned Counsel for the petitioner, apart from bringing to our notice the judgment relied upon by the Supreme Court in the above civil appeals, relied upon three more decisions as well. 10.The first decision relied upon by the learned Counsel for the peti- tioner is in Bhor Industries Limited v Collector of Central Excise - 1989 (40) E.L.T. 280 (S.C.) = AIR 1989 SC 1153 wherein the Supreme Court has held thus : "6. In support of this appeal, on behalf of the appellant, it was contended by Shri Harish Salve that it was only the `goods as specified in the Schedule' to the Central Excise Tariff that could be subject to the duty. It appears to us that under the Central Excise Act, as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufacture goods must come into existence. For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reiterate the basic8. fundamental principles of excise. The Judicial Committee of the Privy Council in Governor General in Council v Province of Madras - 1945 FCR 179 at 192: AIR 1945 PC 98 at 101 observed that excise duty was primarily a duty on the production or manufacture of goods produced or manufactured within the country. This Court again in re The Bill to Amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944 - (1964) SCR 787 at 822: AIR 1963 SC 1760 at 1776 referring to the aforesaid observations of the Judicial Committee reiterated that taxable event in the case of duties of excise in the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. Therefore, the essential ingredient is that there should be manufacture of goods. The goods being articles which are known to those who are dealing in the market having their identity as such. Section 3 of the Act enjoins that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or "manufactured" in India. "Excisable goods" under Section 2(d) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either under the specific or the residuary entry. The word `goods' has not been defined in the Act. But, it has to be understood in the sense it has been used in Entry 84 of the Schedule. That is why Section 3 levies duty on all excisable goods mentioned in the Schedule provided they are produced and manufactured. Therefore, where the goods are specified in the Schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the person on whom duty is proposed to be levied. The expression `produced or manufactured' has further been explained by this Court to mean that the goods so produced must satisfy the test of marketability. Consequently it is always open to an assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule but they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable of being marketed. The duty of excise being on production and manufacture which7. means bringing out a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the mono vertical crystalliser is assembled and erected at site. The process involves; welding and gas cutting. Where the assembly and erection is done by the appellants welding rods, gases and the like are procured from the stores of the customer and the customer sends to the appellants debit notes for their value. A sketch and photograph produced by the appellants before the authorities shows that the mono vertical crystalliser is a tall structure, rather like a tower with a platform at its summit". In the above case, it is seen that various intermediate parts are finally manufactured into a tall structure or a tower with a platform at its summit. Reiterating the earlier view that marketability was a decisive test for dutiability, the Supreme Court further held that "it meant that the goods were saleable or suitable for sale. They need not in fact be marketed. They should be capable of being sold to consumers in the market, as it is without anything more". The Supreme Court finally held that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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