2007 (8) TMI 6 - HC - Central Excise

Assembling and erection and setting up of the transmission tower and apparatus thereto. Though a new product comes into existence, yet as it is not movable, saleable and marketable, it would not be subject to excise duty

Issues Involved:

1. Whether the activity carried on by the respondents amounts to manufacture under section 2(f) of the Central Excise Act, 1944.
2. Whether the tribunal was justified in holding that the respondents are only service providers, ignoring the definition of manufacturer under section 2(f) of the Central Excise Act, 1944.
3. Whether the tribunal was justified in holding that none of the requirements of section 3 of the Act are fulfilled.
4. Whether the tribunal was justified in holding that the goods in question do not satisfy the test of marketability.
5. Whether the tribunal was justified in considering the question of marketability despite the goods being covered by CHS No.8525 of the Central Excise Tariff 1985.

Detailed Analysis:

Issue 1: Definition of Manufacture under Section 2(f) of the Central Excise Act, 1944

The revenue argued that the transmission towers set up by the respondents amount to manufacture because they create a new product with a distinct name, characteristics, and use, separate from the components used in their assembly. The respondents contended that the goods are not excisable as they are immovable property, being fastened to the earth, and not marketable. The court noted that for excise duty to apply, the goods must be usable, movable, saleable, or marketable, and must be a distinct commodity known in common parlance or to the commercial community for buying and selling.

Issue 2: Tribunal's Justification in Treating Respondents as Service Providers

The tribunal held that the respondents are not manufacturers but service providers, engaged in providing cellular mobile services under a license granted by the Government of India. The court did not find it necessary to address this issue in detail, proceeding instead on the assumption that the assembled and installed product is a new commodity with a distinct name from its components, focusing on its marketability.

Issue 3: Fulfillment of Requirements under Section 3 of the Act

The tribunal concluded that the requirements of section 3 of the Act, which pertains to the levy of excise duty on the production or manufacture of goods, were not fulfilled because the goods in question were not marketable. The court agreed with this conclusion, emphasizing that the goods must be movable and marketable to attract excise duty.

Issue 4: Test of Marketability

The tribunal relied on the Supreme Court judgments in Triveni Engineering & India Ltd. and Moti Laminates Pvt. Ltd. to determine that the goods must be marketable to attract excise duty. The tribunal found that the BTS/BSC sites erected by the respondents were not marketable as they could not be sold or shifted without substantial damage to their components and required a user-specific and site-specific license from the Department of Telecommunications. The court upheld this finding, noting that the goods were embedded in the earth or a building, and dismantling them would cause damage, rendering them non-marketable.

Issue 5: Consideration of Marketability Despite Coverage by CHS No.8525

The tribunal held that the goods in question did not satisfy the test of marketability, even though they were covered by CHS No.8525 of the Central Excise Tariff 1985. The court agreed, stating that the goods must be movable and marketable to be considered excisable, and the transmission apparatus in question did not meet these criteria.

Conclusion:

The court concluded that the transmission apparatus assembled and installed by the respondents did not satisfy the test of marketability and were therefore not subject to excise duty. The questions of law at D and E were answered in the affirmative and against the revenue, rendering the questions of law at A, B, and C moot. The appeal was dismissed with no order as to costs.

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