2017 (7) TMI 520 - AT - Central Excise

Manufacture - structures emerging during the course of erection of such chimney - whether fabrications carried out by the appellant at site of M/s.NTPC in connection with execution of the work order for erection of Chimney will be liable to Central Excise duty? - Held that - The work order talks about erection of Chimney with the dimensions and designs as approved by M/s.NTPC. The design and drawing are all made specifically for such Chimney. There is no sale of such parts designed for fabrication. The marketability has to be established at least by existence of one customer or possibility of such market for the product. The execution of work order which is for the completely erect custom made Chimney by itself does not satisfy the question of marketability. Admittedly, the dimensions and designs for the said Chimney flue is specifically to the particular work and the impugned order did not justify the grounds of marketability before arriving at a finding - Tribunal in the case of J.K.Synthetics Ltd. v. Commissioner of Central Excise, Jaipur 1999 (5) TMI 366 - CEGAT, NEW DELHI dealt with a similar item and held that the evidence of marketability is lacking and as such duty liability cannot be fastened on such goods - appeal allowed - decided in favor of appellant.

Summary

Issues: Liability to pay Central Excise duty on structures emerging during chimney construction

Analysis:
1. The appellant contested the demand for Central Excise duty imposed by the Original Authority, amounting to &8377; 55,71,305, along with penalties under Section 11AC of the Central Excise Act, 1944, and Rule 209A. The dispute revolved around the liability of the appellant to pay duty on structures emerging during the erection of a chimney for M/s.National Thermal Power Corporation (NTPC) Ltd.

2. The appellant argued that they were engaged in a composite works contract for chimney erection, with iron and steel supplied by NTPC. They contended that no excisable product emerged during the process, and the demand was beyond the normal period, thus barred by limitation. The Revenue, however, classified the fabricated items under Central Excise Tariff Heading 7305.90, asserting marketability based on the contract with NTPC.

3. The Tribunal analyzed the nature of the fabricated structures, emphasizing that they were specifically designed for the chimney and not generic tubes or pipes. The Tribunal disagreed with the Revenue's view on marketability, noting that the work order did not prove marketability, as it was custom-made for the chimney without being sold as standalone products. The Tribunal also distinguished the case from precedent, highlighting the lack of evidence on marketability, similar to previous judgments like J.K.Synthetics Ltd. and Dodsal Pvt. Ltd.

4. Relying on legal precedents and considering the facts of the case, the Tribunal concluded that the impugned order was not legally sustainable. Consequently, the order demanding Central Excise duty and penalties was set aside, and the appeal by the appellant was allowed, emphasizing the absence of marketability and the specific nature of the fabricated structures for chimney construction.