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2005 (4) TMI 91 - HC - Central ExciseWrit petitions - Levy and/or attempt to levy excise duty on fabrication and construction of 'structurals' - Manufacture Or Not - HELD THAT - In the present cases at hand, the expansion activities resulted in the bringing into existence of civil structures of iron and steel which are permanently affixed to the earth as such they are immovable property not liable to excise duty. In this behalf, the petitioners rightly relied upon judgment of the Apex Court in the case of Mittal Engineering Works 1996 (11) TMI 66 - SUPREME COURT ; Thungabhadra Steel Products Ltd. 1997 (3) TMI 119 - HIGH COURT OF KARNATAKA AT BANGALORE and Triveni Engineering 2000 (8) TMI 86 - SUPREME COURT . It is no doubt true that in order to arrive at a decision as to whether an article to be classified is immovable property the test of permanency is paramount. However, if an article is merely affixed to the earth for its beneficial user or enjoyment it is not immovable property. As laid down by this Court, in the case of Sunflag Iron and Steel Co. Ltd. 2001 (2) TMI 147 - HIGH COURT OF JUDICATURE AT BOMBAY , the assessee carried out activity which was in pari materia with that of the activity of the present petitioners. In the said case also, the assessee had entered into an agreement for supply, fabrication and erection of structural steels and cladding works of Rolling Mills and steel melting shop (a shed) in the project area. Petitioners have made out a case that activities which were carried out by them were exactly in pari materia with the activities carried out by the petitioners in Sunflag Iron and Steel Co. Ltd. and consequently, their cases can be conveniently taken as covered by the law laid down by this Court in the case of Sunflag Iron and Steel Co. Ltd. duly affirmed by the Apex Court. We, thus, hold that considering facts in the cases at hand activities of fabrication and erection of structurals carried out at site; out of duty paid material; did not amount to 'manufacture' nor did it give birth to the goods capable of being sold in the market. Consequently, impugned order in Writ Petition and impugned show cause notice issued in Writ Petition need to be quashed and set aside. In the result, we allow both the writ petitions and make the rule absolute in terms of prayer Clause (a) of the respective petition with no order as to costs. The Revenue is directed to return the bank guarantees with necessary endorsement to the petitioners so as to enable them to surrender them to the respective bankers within 8 weeks from today.
Issues Involved:
1. Levy of excise duty on fabrication and construction of 'structurals'. 2. Maintainability of writ petitions under Article 226 of the Constitution of India. 3. Whether the activities amount to "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944. 4. Marketability of fabricated items. 5. Constitutionality and validity of Rule 73 of the Central Excise Rules. Detailed Analysis: 1. Levy of Excise Duty on Fabrication and Construction of 'Structurals': The petitioners challenged the levy of excise duty on the fabrication and construction of 'structurals', arguing that such activities do not amount to "manufacture" as defined under Section 2(f) of the Central Excises and Salt Act, 1944. The court examined whether the process of cutting, drilling, and welding steel items at the construction site to form trusses, purlins, and columns, which are integral parts of immovable structures, constitutes manufacturing. The court concluded that these activities do not result in the creation of new, distinct, and marketable goods, and therefore, do not attract excise duty. 2. Maintainability of Writ Petitions under Article 226: The respondents raised preliminary objections regarding the maintainability of the writ petitions, suggesting that the petitioners should have pursued alternate appellate remedies. However, the court noted that the petitions had been pending for 14 years, and it would not serve the interest of justice to dismiss them at such a late stage. The court decided to hear the petitions on merits, citing the Supreme Court's judgment in Hirday Narayan v. I.T.O., Berily. 3. Whether the Activities Amount to "Manufacture": The court referenced several judgments, including Union Carbide India v. Union of India, Bhor Industries Ltd. v. Collector of Central Excise, and others, to determine whether the activities in question amounted to manufacture. The court reiterated that for an activity to be considered manufacturing, it must result in the production of new, distinct, and marketable goods. The court found that the fabrication of trusses, columns, and purlins at the site, which became part of immovable property, did not meet this criterion. 4. Marketability of Fabricated Items: The court emphasized that for goods to be subject to excise duty, they must be marketable in the condition in which they emerge. Citing cases like Moti Laminates Pvt. Ltd. v. Collector of Central Excise and Union of India v. Delhi Cloth & General Mills Co. Ltd., the court held that the fabricated items were not marketable as they were integral parts of immovable structures and not capable of being sold in the market. 5. Constitutionality and Validity of Rule 73: Given the court's decision on the primary issues, it found it unnecessary to rule on the constitutionality and validity of Rule 73 of the Central Excise Rules or the question of limitation for issuing the show cause notice. Conclusion: The court allowed both writ petitions, quashing the impugned order and the show cause notice. The petitioners' activities of fabrication and erection of structurals at the site did not amount to manufacture, nor did they produce goods capable of being sold in the market. Consequently, no excise duty was leviable. The court also directed the return of the petitioners' bank guarantees within eight weeks.
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