1997 (5) TMI 249 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of value of bought-out items in the assessable value.
2. Dutiability of the equipment or plant as excisable goods.
3. Applicability of Section 11A of the Central Excise Act, 1944.
4. Determination of assessable value excluding charges for erection and commissioning.
5. Marketability and movability of the equipment or plant.

Detailed Analysis:

1. Inclusion of Value of Bought-Out Items in the Assessable Value:
The appellant contended that bought-out items were sent directly to the buyer's premises and no manufacturing operation was done on them. The Collector, however, held that the value of bought-out items necessary for the completion of the equipment contracted by the appellant had a direct nexus to the commissioning of the equipment and should be included in the assessable value. The Collector also indicated that the equipment or plant in an unassembled condition is considered excisable goods.

2. Dutiability of the Equipment or Plant as Excisable Goods:
The show cause notice issued by the Range Superintendent proposed that the plant or equipment which came into existence at the buyer's premises was excisable goods and the assessable value should be based on the entire contract consideration. The Collector concluded that the plant or equipment, when assembled at the site, emerged as excisable goods in CKD (completely knocked down) condition. However, the appellant argued that the plant or equipment became immovable property upon completion of erection and thus was not excisable, movable, or marketable.

3. Applicability of Section 11A of the Central Excise Act, 1944:
The show cause notice stated that the duty amount was recoverable under Section 11A of the Central Excise Act, 1944, without any averments necessary under the proviso to Section 11A(1) of the Act. The Collector found that there was wilful suppression and mis-statement of facts, attracting the proviso to Section 11A, thereby making the notice not barred by time.

4. Determination of Assessable Value Excluding Charges for Erection and Commissioning:
The Collector excluded charges for erection and commissioning from the assessable value, recognizing them as post-clearance operations that make the goods immovable. The appellant supported this exclusion, arguing that erection and commissioning constituted post-manufacturing activity and the plant or equipment, upon completion of erection, became immovable property.

5. Marketability and Movability of the Equipment or Plant:
The appellant argued that the plant or equipment, once erected, became an integral part of immovable property and could not be removed without damage to the land. The Collector, however, suggested that the equipment or plant, in its unassembled condition, was movable and marketable. The appellant cited several Supreme Court decisions, including Mittal Engineering Works (P) Ltd. and Quality Steel Tubes (P) Ltd., to support the position that the erected plant or equipment was not marketable or excisable goods.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, concluding that the duty is not payable on bought-out items or on the value of the entire contract less charges for erection and commissioning. The Tribunal recognized that the plant or equipment, upon erection, became immovable property and not marketable goods. The decision emphasized that the re-assembly of items at the site cannot be regarded as an excisable activity, and the Collector's findings on the inclusion of bought-out items in the assessable value were not tenable.