1995 (12) TMI 410 - AT - Central Excise

Summary

Issues Involved:
1. Whether the activities undertaken by the assessees amount to manufacture.
2. If manufacture has taken place, whether the resultant products are 'goods' within the connotation of the word.
3. Whether the goods by virtue of their orientation could be treated as immovable property with regard to the case laws.
4. If identifiable goods have emerged out of the activities undertaken, the aspect of their dutiability based on the issues of marketability.

Summary:

Issue 1: Whether the activities undertaken by the assessees amount to manufacture
The adjudicating authority concluded that the appellants had manufactured hydraulic mudguns and tap hole drilling machines through the process of assembling various component parts/spares. These components could not have been defined as the mudgun or the drilling machine which have come into being out of the processes undertaken by the noticees. Thus, distinct equipment having their own name, character, and use emerged out of the components.

Issue 2: If manufacture has taken place, whether the resultant products are 'goods' within the connotation of the word
The adjudicating authority held that manufacture had taken place and the two resultant distinct and identifiable equipment being specifically included in the Central Excise Tariff are excisable goods and have to discharge duty liability.

Issue 3: Whether the goods by virtue of their orientation could be treated as immovable property with regard to the case laws
The adjudicating authority found that the equipment came into being through the process of piece-by-piece erection of the components in a fixed and pre-determined condition and therefore are immovable property and hence not excisable. However, the Tribunal in a latest case of 1991 (53) E.L.T. 461, on X-ray equipment held that "by nature if the property is movable and for its beneficial use or enjoyment it is necessary to fix it to earth though permanently i.e. when it is in use, it is not immovable property."

Issue 4: If identifiable goods have emerged out of the activities undertaken, the aspect of their dutiability based on the issues of marketability
The adjudicating authority confirmed the demand of duty of Rs. 89,61,525/- and imposed a penalty of Rs. 8,00,000/-. The appellants contended that the erection of mudguns and tap hole drilling machines at the site of the Bhilai Steel Plant resulted in the erection of immovable property and not goods, and therefore, no excise duty is leviable thereon. They also argued that the demand of duty was barred by limitation and no penalty could be imposed.

Majority Opinion:
The majority opinion held that the erection of the mudguns and tap hole drilling machines at the site of the Bhilai Steel Plant resulted in the manufacture of excisable goods. The demand of duty was not barred by limitation as the appellants had suppressed material facts in order to evade Central Excise duty. The impugned order was upheld both on the issue of excisability of the goods in question, as well as on limitation, and the appeal was rejected.