2017 (10) TMI 10 - AT - Central Excise

Manufacture of Steel Girder Bridge, bridge parts and span suspension bridge parts falling under First Schedule to the Central Excise Tariff Act, 1985 under Chapter sub-heading No.7308.10 - excisability/movability - case of appellant is that process involved does not amount to manufacture as they are engaged in erection, fabrication of the structures at site permanently embedded to earth - Held that - the matter is covered by the Larger Bench decision of the Tribunal in the case of Mahindra & Mahindra Ltd. Vs. CCE, Aurangabad, Chandigarh, Kanpur & Chennai 2005 (11) TMI 103 - CESTAT, NEW DELHI whereunder inter alia it has been held that steel structures and parts of steel structures mentioned in the parenthesis of Heading 73.08 of Central Excise Tariff illustrating parts of structures viz. bridges and bridges sections, lock gates, towers, lattice masts, roofs, roofing frameworks, towers, doors, windows and their frames and thresholds for doors, and the like articles in their movable state will be subject to excise duty under Heading 7308, notwithstanding their getting permanently fixed in the structures. Further it also held that the plates rods, angles, shapes, sections, tubes and the like prepared for use in structures of the types covered under the Heading 7308 will also be excisable goods subject to duty in their pre-assembled or disassembled state - there is no doubt that the subject process and the items in question are covered under the process of manufacturing under Section 2(f) of the Central Excise Act, 1944 and the liability of duty of Central Excise on the subject items has to be sustained. Penalty - Held that - as there was lack of clarity on the subject of liability of duty for the subject items during the relevant period and when there were interpretational issues involved, following the ratio of the Hon ble Punjab & Haryana High Court s decision in CCE Vs. Jain Ganesh Processors 2011 (3) TMI 134 - PUNJAB AND HARYANA HIGH COURT , no penalties are liable to be imposed on the appellants. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Whether the process involved amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944.
2. The applicability of duty on parts of structures under Heading 73.08 of the Central Excise Tariff.
3. The imposition of penalties under erstwhile Rules 173Q read with Section 35A and Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Whether the process involved amounts to "manufacture" under Section 2(f) of the Central Excise Act, 1944:

The appellants, Hillway Engg. Co. and M/s O.P. Builders, are engaged in the manufacture of steel girder bridges and related parts. The process involves purchasing raw materials like steel plates, channels, iron rods, and angles, followed by measuring, cutting, drilling, welding, riveting, and assembling these pieces to form bridge sections. These activities were found to constitute the process of "manufacture" as per Section 2(f) of the Central Excise Act, 1944, since the bridge sections acquire a separate identity and distinct classification under Central Excise Tariff Heading 7308.10.

2. The applicability of duty on parts of structures under Heading 73.08 of the Central Excise Tariff:

The Tribunal referenced the Larger Bench decision in Mahindra & Mahindra Ltd. Vs. CCE, which held that steel structures and parts of steel structures mentioned under Heading 73.08 are subject to excise duty in their movable state, notwithstanding their permanent fixation in structures. The decision clarified that parts of structures like bridges, bridge sections, doors, windows, and their frames, among others, are excisable goods. The Tribunal found that the subject items manufactured by the appellants fall under this category and thus are liable for excise duty.

3. The imposition of penalties under erstwhile Rules 173Q read with Section 35A and Section 11AC of the Central Excise Act, 1944:

The appellants argued that their activities were part of a works contract for erection of bridges and not subject to excise duty, citing judgments from the Hon'ble Supreme Court. However, the Tribunal noted that there was a lack of clarity and interpretational issues regarding the liability of duty on the subject items during the relevant period. Following the ratio of the Hon'ble Supreme Court decision in Hindustan Steel Ltd. Vs. State of Orissa and the Hon'ble Punjab & Haryana High Court’s decision in CCE Vs. Jain Ganesh Processors, the Tribunal concluded that no penalties should be imposed on the appellants due to the interpretational nature of the issue.

Conclusion:

The Tribunal sustained the confirmation of the liability of duty along with interest against the appellants but set aside the imposition of penalties. The appeals of O.P. Builders and M/s Hillway Engg. Co. were partly allowed, and the appeal of Shri Mohan Lal Sharma was allowed in full. The judgment was pronounced in Court on 17.8.2017.