2019 (4) TMI 744 - AT - Central Excise

SSI Exemption - crossing over of threshold limit - payment of service tax on the installation charges - nature of activity in confusion - case of Revenue is that the payment of service tax on the installation charges does not mean that no excise duty is payable on goods manufactured and that no evidence about payment of service tax has been produced on record - Manufacture taking place or not? Whether excise duty can be imposed upon the impugned electronic interlocking signalling, railway signalling system for the purpose Section 3 of Central Excise Act, which is the charging provision for the authorities to levy and collection of duties of excise on all excisable goods which are produced or manufactured in India at the rates mentioned in the Schedule to the Tariff Act? Manufacture taking place or not? - Held that - The several components which have respective marketability were purchased by the appellant against appropriate Sales Tax and then taken to the railway s site to be so assembled, installed or commissioned they remain interconnected and simultaneously remain fastened to the racks embedded in the floor. Thus, it becomes clear that except assembling the modules required for the purpose along with other requisites as that of wires and switches and transporting them to the railways site and finally installing by interconnecting all the goods purchased on the payment of excise duty, there is no such process done by the appellant which may be called as manufacture - Definition of manufacture under Section 2(d) of CEA is sufficient to distinguish the activity/service of assembling from the activity of manufacture. Whether there is the emergence of new marketable commodity with a distinctive name? - Held that - All the articles used while assembling the electronic signalling system were initially purchased from the various suppliers and were finally installed into the shape of EIS in the premises of railways. To our opinion nothing more than the service of installation and commissioning that has been rendered by the appellant as above. Above all, there has been a Board s Circular No. 58/1/2002-CX dated 15.1.2002 regarding the excisability of plant and machinery assembled at the site after considering the several decisions of Hon ble Apex Court, as quoted in the said circular - from the department circular also, it stands clear that the EIS herein do not qualify any of the criteria i.e. either of manufacture or marketability to the leviable to excise. Time limitation - Held that - There remains no question of any evasion of duty, question of mala fide intent to evade the same does not at all arises. Hence, proviso to Section 73(3) of the Finance Act, 1994 could not have been invoked by the department nor there is any reason for the imposition of penalty upon the appellant. The show cause notice is therefore definitely barred by time. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the electronic interlocking signalling systems (EIS) are excisable goods.
2. Whether the process undertaken by the appellant constitutes manufacture.
3. Whether the EIS is marketable.
4. Whether the demand for excise duty is barred by limitation.
5. Whether penalties and interest are imposable.

Detailed Analysis:

1. Excisability of EIS:
The appellant argued that the EIS is not excisable as it is neither movable nor marketable. According to Section 3 and Section 2(d) of the Central Excise Act, 1944, for goods to be excisable, they must be manufactured and marketable. The EIS emerges at the customer's site and becomes immovable after installation, failing the test of marketability. The Tribunal agreed, noting that the EIS is permanently affixed to the earth and interconnected by various wires and cables, thus not qualifying as movable goods.

2. Manufacture Process:
The appellant contended that no manufacturing activity is undertaken as the EIS comprises pre-purchased components like PCBs, connectors, racks, etc., which are merely assembled and installed at the site. The Tribunal observed that the components are duty-paid and the final stage involves assembling and installing these components at the railway site. The Tribunal concluded that the appellant's activity does not constitute manufacture, as defined under Section 2(d) of the Central Excise Act, distinguishing it from mere assembly.

3. Marketability of EIS:
The Tribunal noted that the EIS is tailor-made for specific railway stations and is not generally available in the market, thus failing the marketability test. The goods must be capable of being sold in the market ordinarily and as such. The Tribunal cited the Hon'ble Apex Court's decision in Board of Trustees Vs. CCE, AP -2007 (216) ELT 513, which held that the burden of proof for marketability lies on the department. The Tribunal found no evidence that the EIS is bought and sold in the market, thus ruling out its excisability.

4. Limitation and Show Cause Notice:
The appellant argued that the demand is barred by limitation as the Show Cause Notice was issued beyond the normal period. The Tribunal observed that the appellant had paid sales tax/VAT on the components and service tax on the installation, believing the activity to be a service. There was no evidence of duty evasion or mala fide intent. Hence, the extended period for issuing the Show Cause Notice under Section 73(3) of the Finance Act, 1994, was not applicable, making the notice time-barred.

5. Penalties and Interest:
Given that the activity was not considered manufacture and the Show Cause Notice was time-barred, the Tribunal ruled that penalties and interest were not imposable. The appellant had discharged the service tax liability in time, negating any grounds for penalty or interest recovery.

Conclusion:
The Tribunal set aside the order under challenge, ruling that the EIS is neither excisable nor manufactured goods and is not marketable. The demand for excise duty was barred by limitation, and no penalties or interest were imposable. The appeal was allowed.

← Previous Next →