2001 (2) TMI 147 - HC - Central Excise

Summary

Issues Involved:
1. Preliminary Objection on Alternate Remedy.
2. Whether Fabrication Activity Constitutes "Manufacture" u/s 2(f) of the Central Excises & Salt Act, 1944.
3. Whether Fabricated Structurals are "Goods" and Exigible to Excise Duty.

Summary:

Preliminary Objection:
The Revenue raised a preliminary objection, arguing that the orders challenged are appealable u/s 35 of the Act and thus, the High Court should not exercise its writ jurisdiction. The petitioners contended that the appellate remedy is not equally efficacious, as the authorities often ignore binding judgments of the CEGAT in favor of departmental circulars. The court agreed with the petitioners, noting the absence of reference to the binding CEGAT judgment in Aruna Industries and decided to entertain the writ petitions.

Fabrication Activity Constitutes "Manufacture":
The court examined whether the petitioners' fabrication activities amounted to "manufacture" u/s 2(f) of the Act. The petitioners argued that their activities did not constitute manufacture as they merely involved cutting, drilling, welding, and assembling duty-paid materials on-site, which did not result in new goods. The court referred to the CEGAT judgment in Aruna Industries, which held that similar activities did not amount to manufacture. The court concluded that the activities did not constitute manufacture as they did not bring into existence a new substance.

Fabricated Structurals as "Goods":
The court also examined whether the fabricated structurals could be considered "goods" and thus exigible to excise duty. The petitioners argued that the fabricated items were not commercially saleable and were embedded in construction, thus becoming immovable. The court agreed, citing several judgments including Quality Steel Tubes and Mittal Engineering Works, which held that immovable structures and items not capable of being brought to the market are not "goods" under the Act. The court concluded that the fabricated structurals were not "goods" and hence, not exigible to excise duty.

Conclusion:
The court held that the fabrication of structurals at the site using duty-paid raw materials did not amount to manufacture, nor were the fabricated items "goods" capable of being sold in the market. Consequently, the orders demanding excise duty were set aside.

Result:
Both writ petitions were allowed, and the impugned orders were quashed. The court also directed that the amount deposited and the bank guarantees provided by the petitioners be kept intact for two months to facilitate an appeal to the Supreme Court. Rules were made absolute with no order as to costs.