2005 (10) TMI 118 - AT - Central Excise

Fabrication at site - Excisability - Marketability - Manufacture - Dutiability - Demand - Limitation

Issues Involved:
1. Liability of excise duty on 'specials' fabricated for a pipeline project.
2. Classification and marketability of fabricated items.
3. Responsibility for duty payment on items manufactured by job workers.
4. Allegations of clandestine clearance and suppression of facts.
5. Validity of duty demands and penalties imposed.

Detailed Analysis:

1. Liability of Excise Duty on 'Specials':

The primary issue was whether the appellants were liable to pay excise duty on certain transmission pipeline appurtenances described as 'specials' (e.g., Miter Bends, Ring Girders, Cones/Reducers, Elbows Joints) used in the execution of the pipe-laying project. The appellants contended that these 'specials' were fabricated exclusively as per the designs and specifications provided in the contract with BWSSB and were not marketable as they were not sold in the market but used solely for the project. The Tribunal held that these 'specials' could not be subjected to excise duty as they were not marketable in the sense of being capable of being bought and sold.

2. Classification and Marketability of Fabricated Items:

The adjudicating authority had classified various items under sub-heading No. 7305.90 of the Schedule to CETA 1985 and held them to be marketable without evidence. The Tribunal found that the items fabricated at the project site were not marketable and therefore not excisable. The decision emphasized that items like Ring Girders, which were specifically designed for the project, could not be bought and sold for any general use and thus were not marketable. The Tribunal applied the tests prescribed by the Apex Court, particularly from the case of Moti Laminates Pvt. Ltd. v. CCE, to conclude that marketability must be established for excise duty to be applicable.

3. Responsibility for Duty Payment on Items Manufactured by Job Workers:

The appellants argued that items such as flanges and threaded rods, manufactured by job workers out of raw materials supplied by the appellants, should not be liable for excise duty by the appellants. The Tribunal agreed, citing the decision of the Constitution Bench in the case of Ujagar Prints, which held that goods fabricated at the premises of a job worker would be chargeable to duty by the job worker, not the appellants.

4. Allegations of Clandestine Clearance and Suppression of Facts:

The Commissioner had issued show cause notices alleging clandestine clearance and suppression of facts, invoking the extended period under the proviso to Section 11A(1) of the C.Ex. Act, 1944. The Tribunal found no evidence of fraud, wilful misstatement, or suppression of facts with intent to evade duty. The Tribunal noted that the supply was to a government undertaking (BWSSB), and the conversion of duty-paid pipes into pipe fittings did not amount to manufacture. Therefore, the demands were barred by limitation except for a part of the period in July 2002.

5. Validity of Duty Demands and Penalties Imposed:

The Tribunal found that the duty demands were not sustainable as the items were not excisable. Additionally, since no duty demands were confirmed, penalties under Section 11AC and interest under Section 11AB could not be upheld. The penalties imposed on the General Manager, Manager Executive, and Project Manager under Rule 26 of the C.Ex. Rules, 2002, were also set aside.

Conclusion:

The Tribunal set aside the order of the Commissioner and allowed the appeals. The findings emphasized that the 'specials' fabricated for the pipeline project were not marketable and therefore not excisable. The responsibility for duty payment on items manufactured by job workers did not lie with the appellants. The allegations of clandestine clearance and suppression of facts were not substantiated, and the demands were barred by limitation. Consequently, no duty demands or penalties were upheld against the appellants.

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