1997 (7) TMI 294 - AT - Central Excise

Summary

Issues Involved:
1. Excisability and dutiability of Horton Spheres.
2. Classification of Horton Spheres under Central Excise Tariff.
3. Imposition of penalties on M/s. ICB and M/s. Indian Sugar.
4. Determination of whether the activities at the site amounted to manufacturing.

Detailed Analysis:

1. Excisability and Dutiability of Horton Spheres:

The matter relates to the excisability and dutiability of two Horton Spheres fabricated, installed, and erected for LPG vessels/tanks at the ONGC site near Ankleshwar, Gujarat. The Collector of Central Excise, Baroda, considered M/s. ICB as the manufacturer of the Horton Spheres within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944, and demanded Central Excise duty of Rs. 16.50 lakhs along with a penalty of Rs. 10,000/- on M/s. ICB. No duty was demanded from M/s. Indian Sugar, but a penalty of Rs. 10,000/- was imposed.

2. Classification of Horton Spheres under Central Excise Tariff:

The adjudicating authority classified the Horton Spheres under Heading No. 8485.90 of the Central Excise Tariff Act, 1985. However, M/s. ICB contended that the Horton Spheres, once installed, became part of an immovable structure and ceased to be goods, thereby not attracting Central Excise duty. They argued that the Horton Spheres were specific to the project and permanently embedded to the earth, thus becoming immovable property. The Tribunal found that the Horton Spheres, as erected and installed, could not be considered as machinery parts, apparatus, appliance, or equipment under the Tariff.

3. Imposition of Penalties on M/s. ICB and M/s. Indian Sugar:

M/s. ICB argued that they were not the manufacturers of the Horton Spheres and that the sub-contract with M/s. Indian Sugar was at arm's length. They claimed that M/s. Indian Sugar was not a dummy unit or hired labor. M/s. Indian Sugar contended that they had not engaged in any manufacturing activity at the site and were not required to take out a Central Excise license for their activities there. The Tribunal found no basis for imposing penalties on either party, as the Horton Spheres, once installed, became part of an immovable structure.

4. Determination of Whether the Activities at the Site Amounted to Manufacturing:

The Tribunal examined whether the activities at the site resulted in the manufacture of distinctly identifiable goods. M/s. ICB had awarded a sub-contract to M/s. Indian Sugar for the design, fabrication, and supply of pre-fabricated components for the Horton Spheres, which were then transported to the site and assembled. The Tribunal concluded that the activities at the site did not result in the manufacture of goods for the purpose of levy and collection of excise duty, as the Horton Spheres, once erected, became part of an immovable structure.

Conclusion:

The Tribunal allowed both appeals, concluding that the Horton Spheres, once erected, were part of an immovable structure and did not attract Central Excise duty. The penalties imposed on M/s. ICB and M/s. Indian Sugar were also set aside. The Tribunal disagreed with the view taken by the Collector of Central Excise, Baroda, in the Order-in-Original dated 28-12-1987.