2002 (3) TMI 98 - AT - Central Excise

Summary

Issues Involved:
1. Excisability of the belt conveyor system.
2. Demand of duty and imposition of penalties.
3. Availability of exemption under Notifications No. 61/90-C.E. and No. 41/94-C.E.
4. Deduction of duty element from the contracted price for assessable value.

Issue-wise Detailed Analysis:

1. Excisability of the Belt Conveyor System:
The principal issue was whether the belt conveyor system was excisable goods chargeable to duty under Chapter Heading 84.28. The Tribunal examined how the system came into existence, focusing on whether "manufacture" within the meaning of Section 2(f) of the Central Excise Act was involved and whether the item was marketable. The Tribunal noted that the conveyor system was built like a building and not manufactured like goods. It was erected bit by bit with various duty-paid materials, permanently embedded in the earth, and could not be removed without substantial damage. The Tribunal concluded that the conveyor system was not marketable and hence not excisable, rejecting the Commissioner's finding that the system could be dismantled and sold elsewhere.

2. Demand of Duty and Imposition of Penalties:
The Commissioner had confirmed a duty demand of Rs. 44,61,122/- against TRF under Rule 9(2) of the Central Excise Rules, 1944, read with the proviso to Section 11A(1) of the Central Excise Act, 1944, and imposed penalties under Section 11AC of the Act and Rule 173Q of the Rules. The Tribunal held that the demand of duty was illegal as the conveyor system was not excisable. Consequently, the penalties imposed on TRF were also set aside. The non-imposition of penalties on ACC and the sub-contractors was found to be in order.

3. Availability of Exemption under Notifications No. 61/90-C.E. and No. 41/94-C.E.:
The department's appeals contested the grant of exemption under these notifications. The Tribunal noted that there was no proposal in the show-cause notice to deny these benefits to TRF. Therefore, the Tribunal upheld the grant of exemptions by the Commissioner.

4. Deduction of Duty Element from the Contracted Price for Assessable Value:
The department also contested the benefit of Section 4(4)(d)(ii) of the Act, which allows the deduction of the duty element from the contracted price to arrive at the assessable value. The Tribunal upheld the Commissioner's decision to grant this benefit to TRF.

Conclusion:
The Tribunal concluded that the belt conveyor system was not excisable as it was an immovable property and not marketable. Consequently, the demand of duty and penalties imposed on TRF were set aside. The exemptions granted under Notifications No. 61/90-C.E. and No. 41/94-C.E., as well as the benefit of Section 4(4)(d)(ii) of the Act, were upheld. The non-imposition of penalties on ACC and the sub-contractors was also upheld. The appeal by TRF was allowed, and the department's appeals were dismissed.