2023 (3) TMI 171 - AT - Central Excise

Taxability - liable to central excise duty or taxable under the provisions of the service tax for providing works contract service - activities of the fabrication/manufacture including installation (at premises of customer) of Retail Visual Identity (RVI) under contract by the appellant - Suppression of facts or not - extended period of limitation - HELD THAT - After the goods are inspected by the Oil Companies or its nominated agencies, the appellant undertakes fabrication, wherein they do cutting, sizing, etc., as per measurements taken at the retail outlets. Partially fabricated frames in un-finished condition and other cut materials etc. are then transported to the site, where final adjustments are made at site by cutting, re-working, etc. Frames are finally fabricated and fixed (piece by piece) with the help of the angles and brackets fixed to the building facia, column, etc. Barring a few small signages, various elements of RVI upon final fabrication/erection at site like Canopy facia, building facia, monolith, etc are practically immovable. These cannot be removed without cannibalizing, only few smaller signages including Arches and spreaders (direction signs) are made in the factory. Revenue have failed to identify the state or form in which the goods are removed from the factory and whether these are in marketable stage. We further find that the statement of the officers of the Oil Companies is not reliable, as the same is contrary to the documentary evidence being work order, inspection reports, etc. on record, forming part of the relied upon documents. The schedule of rates forming part of the work order mentions fabrication with prescribed materials as per drawings and specifications, fixed securely to existing canopycolumns by welding, etc. at site. ACM panel fixing - to ensure the joint gaps are uniform. Thus, from the work order, partial fabrication at site including welding etc. is evident - Revenue failed to establish that the partially fabricated goods removed from the factory were in marketable state. The whole case is made out on the basis of assumptions and presumptions. No inspection has been made by the Revenue at the factory premises of the appellant/assessee. Admittedly the appellant have maintained proper books of accounts and had taken registration under the Service Tax Provisions for discharge of their tax liability and have accordingly discharged the service tax payable under the head Works Contract Service on the gross value under Compounding Scheme. Thus, Revenue had full knowledge of the activities of the appellant. Extended period of limitation - HELD THAT - On the activity of the appellant, central excise duty is not attracted, as the partially fabricated frames etc. removed from the works of the appellant are not in a marketable stage. It is also found that Revenue have failed to value the various elements of RVI or goods in the state, they are cleared from the factory and have grossly erred in charging the duty on the gross value of the work contract. It is also found that it has been clarified by the Oil Companies subsequently (after remand) that RVI elements are fabricated at site as per specific measurements and requirements. After installation, the RVI elements cannot be dismantled without cannibalizing and they become as integral part of the building facia, etc. The impugned order is also bad as it was not proposed in the show cause notice to classify under CTH 8310 of CETA. Under the facts and circumstances, the extended period of limitation is also not applicable - Appeal allowed.

Issues Involved:
1. Classification of activities under Central Excise Duty or Service Tax.
2. Determination of whether the activities constitute manufacturing or works contract service.
3. Applicability of extended period of limitation.
4. Marketability and movability of the fabricated goods.
5. Valuation of goods and applicability of excise duty.

Issue-wise Detailed Analysis:

1. Classification of Activities under Central Excise Duty or Service Tax:
The primary issue was whether the activities of fabrication/manufacture and installation of Retail Visual Identity (RVI) by the appellant are liable to central excise duty or taxable under service tax provisions for providing works contract service. The Tribunal analyzed the nature of the activities, which included partial fabrication at the appellant's premises and final installation at the customer's site. The Tribunal concluded that the activities undertaken by the appellant constituted a "Works Contract Service" rather than manufacturing excisable goods.

2. Determination of Whether the Activities Constitute Manufacturing or Works Contract Service:
The Tribunal examined the appellant's process, which involved procuring materials, partial fabrication, and final installation at the site. The Tribunal noted that the appellant was registered under the Service Tax Department and had been paying service tax under the "Works Contract Service" head since 1.6.2007. The Tribunal found that the activities did not result in the creation of marketable goods but were part of an indivisible works contract. The Tribunal emphasized that the final product, RVI, became an immovable property upon installation and thus was not subject to central excise duty.

3. Applicability of Extended Period of Limitation:
The Tribunal held that the extended period of limitation was not invokable. It was noted that the appellant had maintained proper books of accounts, registered under the Service Tax provisions, and had been discharging service tax liabilities. The Tribunal found that the Revenue had full knowledge of the appellant's activities, and there was no willful suppression of facts. The Tribunal relied on the rulings of the Supreme Court in Uniworth Textile Vs. CCE and Sarabhai M. Chemicals Vs. CCE to support this conclusion.

4. Marketability and Movability of the Fabricated Goods:
The Tribunal concluded that the various elements of RVI, once installed, became part of the immovable property and were not marketable goods. The Tribunal referred to CBEC Circular No.58/1/2002-EX, which clarified that goods incapable of being sold, shifted, and marketed without dismantling into component parts are considered immovable and not excisable. The Tribunal found that the RVI elements, upon final fabrication and installation, could not be removed without substantial damage, reinforcing their immovable nature.

5. Valuation of Goods and Applicability of Excise Duty:
The Tribunal found that the Revenue had failed to establish the marketable state of the partially fabricated goods removed from the appellant's premises. The Tribunal noted that the Adjudicating Authority had incorrectly charged duty on the gross value of the works contract without proper valuation of the goods in their removed state. The Tribunal held that the impugned order was erroneous as it classified the goods under CTH 8310 of CETA, which was not proposed in the show cause notice.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order. It held that the activities of the appellant did not attract central excise duty as they constituted a works contract service resulting in immovable property. The Tribunal also ruled that the extended period of limitation was not applicable and that the Revenue had failed to properly value the goods. The appellants were entitled to consequential benefits in accordance with the law.

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