9911796707
TMI Blog1990 (10) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... in the activity of designing, installing, erecting, testing and commissioning of central air-conditioning and refrigeration plants at the site of customers and such contracts entered into by the appellant are work contracts. Shri A.B. Dewan, the learned Sr. Advocate stated that each central air-conditioning refrigeration plant is tailor made to suit the requirements of clients and are not ready for sale items. The air-conditioning and refrigeration plants as such only come into existence at site at which certain component parts and materials are assembled and installed stage by stage and on installation and erection become a permanent fixture being affixed to the ground and, therefore, an accretion to the site where the plant is installed, losing all character as movables and, therefore, by its very nature cannot be termed as goods. The contracts are entire and indivisible and it is not possible to split up such contracts into its components or constituent parts singling out that which relates to supply of material, inasmuch as no separate or distinct agreement for supply of materials is involved. Shri Dewan, the learned Sr. Advocate pleaded that the disputed amount of duty is Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of limitation by the Collector was the alleged false declaration in the appellant s letter dated 2nd June, 1982. He also argued that the appellant had written the letter in respect of room air-conditioners manufactured by the appellant in reply to a specific query raised by the department and while approving the price list of such room air-conditioners. The room air-conditioners which were the subject of letter dated 2nd June, 1982 was not even the subject-matter of show cause notice adjudicated upon by the Collector and the Collector has not even cared to examine the undertaking which was given by the appellant. He has also referred to letter dated 2nd June, 1982 which appears on page 766 of the paper book. Shri A.B. Dewan, the learned Sr. Advocate pleaded that prima facie the applicant has got a good case on merits. 2. On the financial aspect, Shri Dewan pleaded that the applicant s unit is a sick unit. In support of his argument, he has referred to 10th Annual Report 1987-89 where the net loss of the year ending 31st March, 1989 was Rs. 5,68,37,520.00 and the applicant s unit is a sick unit. Shri Dewan, the learned Sr. Advocate pleaded that the amount involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial position is reasonably good. He has pleaded for the rejection of the stay application. 4. In reply, Shri A.B. Dewan, the learned Sr. Advocate again pleaded that there is non-application of mind by the Collector. He has pleaded that the liquidity position of the applicant is bad. In case the applicant is desired to deposit the huge amount of duty and penalty, the applicant s business will crumble down. He pleaded that the applicant s case is fully covered by the judgment of the Tribunal in the case of Tata Robins v. Collr. of C. Ex. reported in 1990 (46) E.L.T. 562. Shri Dewan also pointed out to the discrepancies in the show cause notice and has referred to a note to this effect which is a part of the record which appears on page 742 of the paper book. Shri Dewan, the learned Sr. Advocate again argued that there was no suppression of facts. Shri A.B. Dewan has also referred to the letter written by HMT Ltd. which appears on pages 67 to 76 of the paper book which deals with the design, supply and installation etc. for the watch factory of HMT at Rani Bagh, Nainital (UP). He has also referred to the show cause notice which starts from page 69 of the paper book and in partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l major components and parts which would make the Walk-in-Cooler in a running condition, are brought from the market directly to the site where the complicated erection and installation work is done and where for the first time, the assembled whole is put in a running condition. It was further held that what the petitioner company sold or offered for sale was not a ready assembled unit so as to attract duty under Item 29A(i) of the Central Excise Tariff, He also relied on the judgment in the case of Otis Elevator Company (India) Ltd., which is a Government of India decision reported in 1981 (8) E.L.T. 720 (GOI), where it was held that no further duty was chargeable on components which were assembled at site to erect or install in the building because at that stage they become a part of the immovable property, and hence were not liable to duty. 5. Shri M.S. Arora, the learned JDR, however, on the other side, laid heavy reliance on the judgment of the Gujarat High Court in the case of Anil Ice Factory and Another v. Union of India and Others reported in 1984 (15) E.L.T. 333 (Gujarat), where it was held that : If a company constructs a manufacturing unit for its own use by purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given a restricted meaning. Sub-items (1), (2) and (3) are independent of each other and naturally exclusive. The scope of sub-item (3) is neither restricted nor controlled by the provisions of sub-items (1) and (2). Supreme Court in the case of Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise reported in 1988 (38) E.L.T. 566 (S.C.) had held that : Assembling of duty paid components of the weighbridge amounts to manufacture when both parts and final product separately and specifically dutiable. Paras 3 and 4 from the said judgment are reproduced below :- 3. The appellant s contention before the Tribunal was that it was only preparing a part and that part is dutiable as a separate part. The appellant, however, did the work of assembling. As a result of the work of the appellant a new product known in the market and known under the excise item weighbridge" comes into being. The appellant will become a manufacturer of that product and as such liable to duty. That is precisely what the Tribunal found on the facts of the case. The appellant seems to have been obsessed by the idea that as a part of machine is liable to duty then the whole end products shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth Schedule to the Constitution is used in juxtaposition with the word manufactures and used in connection with the duties of Excise which contemplates some expenditure of human skill and labour in bringing the goods concerned into condition which would attract the duty. It is not required that the goods would be manufactured in the sense that raw material should be used to turn out something altogether different. It would still require that these should be produced in the sense that some human activity and energy should be subjected to some processes in order that these might be brought to the state in which they might become fit for consumption. Therefore, the transformation of a product to the extent that it becomes commercially different commodity is sufficient to attract levy of excise duty." 6. In the light of the above discussion, we are of the view that whether it amounts to manufacture or not is arguable. The other ground taken by the learned Senior Advocate was the non-application of mind and the limitation aspect. We have considered the overall legal position and are of the view that prima facie merits of the case are contentious and arguable. Since the matter is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany v. Union of India which was followed by the Tribunal in the case of Sonodyne Television Company v. Collector of Central Excise, Calcutta reported in 1985 (22) E.L.T. 582 had held that while disposing of the stay applications, liquidity position of the applicant has to be seen. Hon ble Supreme Court s judgment is reproduced below :- We are in agreement with the contention of the counsel for the petitioner that the expression undue hardship occurring in the proviso to Section 35F of the Central Excises and Salt Act, 1944, would include consideration, inter alia, of the aspect of liquidity possessed by the assessee. We are not inclined to take the view that the impugned order gives any indication that aspect has been completely ignored as was contended by the counsel. With these observations, the special leave petition is dismissed. 9. In view of the above observations and keeping in view the totality of the facts, circumstances and the liquidity position of the applicant, we are of the view that if the applicant is desired to deposit the full duty amount of Rs. 10,47,82,710.00 and penalty of rupees one crore, it will amount to undue hardship. We dispense with the pre-de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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