2022 (11) TMI 43 - HC - Central Excise

Marketability - different iron and steel items such as plates, angles, channels, beams etc. - turnkey project - HELD THAT - In the instant case, what was being marketed therein are cement concrete poles, which have been manufactured, therefore, it was held thereon that the marketability of the article does not depend on the number of purchasers nor is a market confined to the territorial limits of the country. What the department would have to show is that the goods that are being manufactured by the petitioner are goods that are capable of being sold in the open market or to any purchaser. Only going by the theoretical reference that goods are marketable is not sufficient. The nature and extent of the goods requires to be defined in order to show that any one in the open market can purchase the same. In the instant case, there is no dispute that what the petitioner is fabricating or manufacturing are articles such as Spillway Raidal Gates, Spillway Stoplog Units, Intake Gates of Trash Racks, Sedimentation Chamber Gates, Flushing Conduit Gates. The same has also been extracted in the impugned order. They would clearly indicate that these are articles that have been fabricated or manufactured for the particular requirements of the particular Hydroelectric Project. That the Gates, RCC construction etc. have been made by the petitioner - it cannot be said, nor to be found from any material on record to indicate that all the goods that are being manufactured by the petitioners are goods which are said to be marketable. The order dated 15.12.2005 passed by respondent no.1 is quashed. The amount in deposit made by the petitioner with the respondents is directed to be adjusted towards any dues of the petitioner and if there are no dues, then to be refunded to him within a period of six months from today - petition allowed.

Issues Involved:
1. Liability of Central Excise duty on iron and steel items fabricated for hydroelectric projects.
2. Marketability and excisability of fabricated goods.
3. Applicability of previous judgments on similar issues.
4. Procedural propriety of the adjudication process.

Detailed Analysis:

1. Liability of Central Excise Duty on Iron and Steel Items Fabricated for Hydroelectric Projects:
The petitioner, a company engaged in hydro power generation, argued that the iron and steel items fabricated at their workshop for specific hydroelectric projects should not attract Central Excise duty. These items were duty-paid when purchased and were further processed (cutting, bending, welding, drilling) at the workshop before being used exclusively for the Vishnuprayag and Omkareshwar Hydroelectric Projects. The respondent, however, classified these activities as manufacturing under Section 2(f) of the Central Excise Act, 1944, making the goods excisable and liable for duty under Chapter Sub-heading 7308.9090 of the Central Excise Tariff Act, 1985.

2. Marketability and Excisability of Fabricated Goods:
The core of the dispute revolved around whether the fabricated goods were marketable. The petitioner cited the Division Bench judgment of the Karnataka High Court in Thungabhadra Steel Products Ltd. vs. Union of India, which held that goods assembled at the customer's site are not marketable and thus not excisable. The Supreme Court had affirmed this view, emphasizing that for goods to be excisable, they must be marketable, i.e., known and capable of being sold in the market. The petitioner argued that the fabricated items were custom-made for specific projects and not marketable as standalone products.

3. Applicability of Previous Judgments on Similar Issues:
The petitioner relied heavily on the Thungabhadra Steel Products Ltd. case, which was supported by various other judgments, including those from the CESTAT and the Supreme Court, such as Collector of Central Excise, Jaipur v. Man Structurals Ltd., and Orissa Bridge and Construction v. Commissioner of Central Excise, Kolkata. These cases consistently held that custom-fabricated items for specific projects do not meet the marketability criterion for excise duty. The respondents, however, contended that the Thungabhadra case was distinguishable and not applicable to the present case, arguing that the fabricated items in question were marketable.

4. Procedural Propriety of the Adjudication Process:
The petitioner challenged the procedural propriety of the adjudication, arguing that the impugned order was not an original order but a response to their representation, as directed by the court. Therefore, it could not be appealed under Section 35-B of the Central Excise Act, 1944. The court had earlier directed the respondent to finalize the adjudication process, considering the law laid down in the Thungabhadra case. The petitioner asserted that the adjudication was incomplete and lacked a detailed assessment of excise liability.

Judgment:
The court found merit in the petitioner's arguments, particularly the reliance on the Thungabhadra Steel Products Ltd. judgment, which was affirmed by the Supreme Court. It held that the fabricated items were custom-made for specific hydroelectric projects and not marketable as standalone products, thus not attracting Central Excise duty. The court quashed the impugned order dated 15.12.2005 and directed the respondents to adjust the deposited amount towards any dues of the petitioner or refund it within six months if there were no dues.

Conclusion:
The court concluded that the fabricated items for the hydroelectric projects were not marketable and thus not liable for Central Excise duty. The judgment emphasized the need for goods to be marketable to attract excise duty, aligning with the precedent set in the Thungabhadra Steel Products Ltd. case. The procedural propriety of the adjudication process was also upheld, ensuring the petitioner's right to a fair hearing.

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