9911796707
TMI Blog1999 (10) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... ally contractors who undertook supply and erection of humidification plants; that they procure orders for supply of components of humidification plants and erection thereof; that they buy materials like impellers, casings, motors, grills, ducts, diffusers from various parties, take them to the site of their customer and erect/assemble them to make the humidification plant; that during the course of making such humidification plant, they assemble industrial fans out of the impellers, castings and motors procured by them at the site of their customers. After taking the statement of Mr. J. Andrews Vinu Mohan, Managing Director and others, it was alleged in the show cause notice that the appellants had manufactured Industrial fans at site and had not paid duty on such industrial fans manufactured and erected at site, hence demands were raised from the year 1990 on the allegation that appellants had not brought this fact to the notice of the department and had not followed any Central Excise procedure, had not paid any duty on such fans manufactured at site. Hence, they have suppressed the fact of manufacture of excisable goods with the intention to evade payment of duty and hence lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not involved in any of these operations. (f) They are not engaged in manufacturing activity in terms of Section 2(f) of Central Excise Act, 1944. (g) They contested the show cause notice on merits. A levy under Section 3 would arise only when there is production of goods; that it is a settled law that goods do not include Immovables . The casing is placed in the prescribed opening and is welded, with RCC wall is raised in stage and is provided with stator-vanes so as to provide an inlet angle for the air flow to the impeller and finally the impeller and motor are mounted. These processes take beyond two months; and that it is not a fan in the yard and when it emerges as a fan, it becomes an immovable property. In this case it is not possible to restore a casing after embedding; and if removed they have to be rendered as scrap only. (h) The duty has been demanded on the industrial fan which includes value addition, that the value addition had been taken from the balance sheet which includes expenses, overheads and profits; and that they would furnish a revised statement in line with the balance sheet during the personal hearing. 4. The Commissioner has rejected all their p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he erection operation were carried out by their own labours/engineering contractors, therefore it is evident that those certificates were given without proper application of mind. He has noted that in the certificates, the mills had not clearly mentioned that the work was completed by them or by the employed engineering contractors. He has held that there is little doubt that these certificates were given at the instance of the appellants and are clearly in the nature of an after-thought to escape from the clutches of law and that there is no corroborative evidence to support the contents of the certificate. The Commissioner has also rejected their plea against invocation of larger period on the ground that they were involved in the manufacture of industrial fans without taking any registration and had not paid duty on the excisable goods so manufactured. He has noted that they had not revealed to the department about their activities and had not furnished the particulars and hence it amounted to intentional evasion of duty in invoking larger period. On the same premise, he has also proceeded to impose mandatory penalty under Section 11AC of the Act. 5. We have heard Shri N. Venk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial fans were marketable as such and was being marketed having specific mention in the Central Excise Tariff under Heading No. 8414.00 and hence liable to excise duty. POINT : 3 - REQUIREMENT OF FACTORY : A factory, as defined under Section 2 (f), means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than Salt are manufactured or wherein or in any part of which any manufacturing process connected with the production of these goods is carried on or is ordinarily carried on. Since in the present case industrial fan is manufactured during the erection of humidification plant at the factory of the buyers the place in which such activity is carried on is the factory. The law does not require that the factory premises should be owned by the manufacturer. Even though the buyers did not lease out a portion of the factory to M/s. ABC Control Systems the fact remains that the buyers have allowed the appellants to carry out the operations of manufacturing processes in their factory and they have also made available some of their skilled and unskilled workers for the erection of the plant by the engineers of the appellants. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y erroneous and unsustainable in law. 8. Ld. Counsel also submitted that for the purpose of manufacture of excisable item, it is incumbent in terms of Section 2(f) of the Act to have a factory in existence. A factory has to be approved by the Commissionerate and only then the activity of manufacture can take place. In the present case, the activity of manufacture is being carried out within the precincts and premises of the factory of textile mills and it is unimaginable to think that the factory of the textile mills is the factory of appellants to bring into existence the item in question. He points out that the Commissionerate in their report on the aspect of manufacture is totally misleading in terms of the understanding the term factory as defined in Section 2(f) of the Act. He points out that the factory of the textile mills had been approved by the Commissionerate and the erection work was admittedly done by them and therefore their factory cannot be considered as a factory of the appellants. He points out that existence of factory is pre-requisite for the purpose of manufacture of the item in question, and the site should be registered as factory and the textile mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, it is clear that the work is not carried out by the appellants as manufacturers in a factory owned by them or hired by them, but the work is carried out in the respective Textile mills in their factory. The appellants are Design and Marketing Engineers and they have designed the complete Humidification Plant and the work is carried out by procuring the items directly from the market in the name of the respective textile mills and the work order shows that the entire civil work has to be carried out by the respective textile mills and the appellants give their technical supervision and assistance only. The Managing Director of the appellant company has filed a detailed affidavit in support of the contentions raised by the company giving out the details of how a complete humidification plant comes into existence piece by piece along with the civil/structural work carried out at the spot. The affidavit further states that their company comprises of technocrats involved in designing and supplying a portion of the system and that the company does not possess any infrastructure for civil construction activity and that they are not engaged in civil construction activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity which took place in our factory. The erection operations were carried out by us with our own labour or by Engineering contractors. We have made the financial dispersements for the erection activity ourselves. We certify M/s. Coimbatore Aero Based Control Systems (P) Ltd., have not involved themselves in the erection operations in any manner. We also state that the casing once grouted, cannot be removed for reassembly elsewhere. Any displacement or removal would result in scrap . The appellants had addressed letters to all the Textile mills asking them to give a certificate with a model draft and asking them to either alter the draft and give a certificate to show that the work was carried out by the Textile mills themselves. The individual textile mills have accepted the draft and also in some cases added certain sentences. The above extract is one such. These extracts clearly indicate that the erection operations were carried out by us with our own labour or Engineering contractors . This itself is sufficient to indicate that Textile mills were carrying out the work. The affidavit of Managing Director and Structural Engineers and terms of contract indicate very clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, to bring within the ambit of manufacture a person should not only employ hired labour in the production or manufacture of excisable goods, but also any person who engages in their production and manufacture on his own account. Here, the evidence discloses that the appellants are not engaged in the production of the excisable goods and they had not manufactured on their own account, but they were only suppliers of raw material and assisted the manufacturer namely the Textile mills in the erection by giving their technical advice. A Technical adviser cannot be held to be a manufacture when clear evidence on record establishes that the manufacturing activity is carried out by the Textile mills themselves in their own premises and therefore, we hold that the appellants are not the manufacturers and demands raised against them are not sustainable. 13. In view of the above two points being answered in favour of the appellants, the question of going into the aspect as to whether the activity carried out has resulted in the production of a movable item in the form of goods or such an activity has resulted in the erection of immovable property is not required to be answered. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
