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TMI Blog1995 (12) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... lai vide various consignment Notes of Express Road Carrier Pvt. Ltd., Madras. Thereafter the appellants carried out the manufacture and assembly of the Top Hole drilling machine and Mudgun allegedly at about 100 metres away from the place of erection and removed the same for commissioning at Blast Furnace Nos. 4 and 6 without payment of central excise duty. The appellants raised bills to M/s. SAIL, B.S.R, Bhilai towards the cost of equipment amounting to ₹ 8,38,19,640.00 towards the supply of spares ₹ 40,70,275.00 and for the supervision charges ₹ 8,38,320.00 totalling ₹ 8,87,28,235/-. After deduction of ₹ 33,80,380.00 towards sales tax from the invoice value as shown above the total assessable value of the goods came to ₹ 8,53,47,855.00 on which central excise duty liability @ 10% adv. worked out to BED ₹ 85,34,786.00 as per Notification No. 69/90-C.E. and 5% SED thereof ₹ 4,26,739 totalling ₹ 89,61,525.00 and was recoverable from the assessees. The assessees had suppressed the fact of such manufacture and removal of excisable goods from the department of Central Excise. They had failed to take Central Excise Licence, maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pre-determined condition and therefore are immovable property and hence not excisable. They have also pleaded that no movable goods came into being before being fixed in an immovable manner and no duty can be levied based on case laws. The noticee have also argued that though the Supreme Court in the case of Name Tulaman Manufacturers (P) Ltd. - 1988 (38) E.L.T. 566 have held that assembly of various duty paid components into weigh bridge amounts to manufacture, the aspect whether such goods are movable or not was not decided by the Supreme Court, based on case law in 1990 (46) E.L.T. 562 (T). The aforesaid plea of the noticee is not tenable. The ratio of the decision of the Supreme Court in the said case 1988 (38) E.L.T. 566 (SC) as also the facts thereof are squarely applicable to the present case. Assembly of weigh bridge and the two equipments in the present case are akin to each other. Further, the Tribunal in a latest case of 1991 (53) E.L.T. 461, on X-ray equipment have held that by nature if the property is movable and for its beneficial use or enjoyment it is necessary to fix it to earth though permanently i.e. when it is in use, it is not immovable property. By fixi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace at various levels to melt the raw materials. The blast furnace is lined with refractory brick of 1 metre thickness from inside to protect the shell against heat. When each cycle of manufacture of pig iron is completed a bore is made inside the wall of the blast furnace to allow the molten portion to flow out. This function is accomplished by the drilling machine erected by us which drills 1 metre on the wall of the furnace. As the temperature in the blast furnace is more than 1200 C, the drilling machine is mounted at a distance of about 6 metres away from the blast furnace. After the molten pig iron is taken out of the blast furnace, the pre-determined hole in the wall of the furnace has to be closed by spraying special clay. This function is being achieved by mudgun which is erected by us. Since the temperature in the blast furnace is more than 1200 C, as mentioned above, the whole structure coming into contact with the moiten steel in the blast furnace may melt and hence mudgun and drilling machine are mounted on a base frame, and only drill hammers have access to the blast furnace wall. This will give us an idea of the gigantic size of the furnace and the equally huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is mounted and erected. A practical visit to the steel plants and seeing the situation will make one clearly understand that there is nothing assembling of some components 100 metres away as alleged and bringing them to the platform for mounting.... We have stated that all these components are lifted by a crane on the cast floor house which itself is 25' above. From there each component is moved by a trolley and mounted to the base plate piece by piece and thus, mudgun and drilling machine emerge. We have taken pains to explain all these only to state that the version that some identifiable unit was manufactured cannot be sustained. We are enclosing a drawing to show placement of the mudgun and drilling machine in relation to the furnace, about 25' above ground level. Various components that go into the erection of d filing machine and mudgun are also indicated clearly. This drawing will unfailingly show that each component, by itself is huge and there is nothing like combine a few components and then lifting it above. Even so, we would like to mention that there is nothing like identifiable unit in the mudgun or drilling machine excepting the very components each com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is purpose is 10 KN to go through resistance of anhydrous clay. To counter the reaction force the drill is located in its position by is own weight and through the locking arrangements. Once the tapping is completed, the drilling machine is taken out and time is allowed for the entire hot metal to flow out and fill up the laddies. After that mudgun is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up mud into the furnace. The mud which is under question is otherwise known as clay which hardens in 25-60 seconds. (Though it becomes dry in a few minutes the gun will be held against Mass for 15 minutes against furnace pressure on clay). Hence, the force required to push out steel like clay would be 240 tons. To resist the retrograde action, the mudgun is designed to be sturdy and heavy. It is also locked in its position by a locking mechanism. ... Base frame which is a rigid welded steel construction with an inclined slewing pivot is first erected which supports main slewing arm (jib arm). The gun is then fixed to their slewing arm at its end. The other components erected piece by piece are : (i) Slewing cylinder - dia 250/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling machines results in erection of immovable property and not goods, let us examine the relevant case law on the subject. (i) In the case of Gujarat Machinery Manufacturers Ltd. v. CCE reported in 1983 (12) E.L.T. 825 (T), the Tribunal held that the chemical plant affixed to the ground is in the nature of immovable property and cannot go to the market for being bought and sold as such. [This decision was confirmed by the Supreme Court as reported in 1989 (44) E.L.T. A58]. (ii) In the case of Tata Robins Fraser Ltd. v. CCE reported in 1990 (46) E.L.T. 562 (T), it was held by the Tribunal that erection of structural work, supply of machinery and equipment, their erection and installation (partly manufactured at the appellant's works at Jamshedpur and partly procured from outside) does not result in the emergence of a movable property chargeable to excise duty. In paragraph 5 of the order the Tribunal held that: 5. We have carefully considered the pleas advanced on both sides on this issue. It is a well-settled proposition of law that excise duty is chargeable on goods produced or manufactured within the country (entry 84 of List I, Schedule VII to the Constitution). D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and for its beneficial use or enjoyment it is necessary to fix it on earth though permanently i.e. when it is in use, it is not immovable property. In the instant case, the components/parts both essential and non-essential are fixed to the earth for beneficial enjoyment and by fixing it to the earth it has not become part of the earth and, therefore, it is not immovable property. It is also not disputed that the X-ray equipment can be dismantled and shifted....Therefore, we are of the view that the X-ray equipment is not immovable property. The learned DR, therefore, pleaded that by the same analogy, the items in dispute in the present appeal should also be considered as movable property and hence liable to duty. We find that the decision of the Tribunal in the IGE case is based upon the judgments of Madras High Court in the case of K.N. Subramaniam Chettiar v. M. Chidambaram (AIR 1940 Madras 527) and Peruman Naicar v. Ramaswamy Kone (AIR 1969, Madras 346). In the first mentioned decision the High Court, while construing the definition of immovable property, observed that if a thing is embedded in the earth or attached to what is so embedded for the permanent beneficial enjoym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anent structure . The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and drill tap hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above. Accordingly applying the test laid down by the Supreme Court, we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon. 12. On the limitation aspect which is strongly pressed before us attention has been focussed on the appellant's letter dated 8-6-1990 addressed to the Assistant Collector having jurisdiction over their Madras factory (page 56 of the paper book) setting out in detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e marketable product before installation in an immovable manner. Mere bringing together of parts and components would not be excisable. (iii) however, at site, if the piece by piece erection or installation of parts orcomponents results into an immovable property, then no duty would be required to be levied on such property. Therefore, the appellants cannot be held guilty of any suppression and the contention of the learned DR that the suppression is attributable in the face of the nonintimation of erection to the Indore Collectorate, being the Collectorate having jurisdiction over the Bhilai Steel Plant, has no force. Accordingly, the entire demand is barred by limitation, as the show cause notice for recovery of duty for the period from 25-6-1990 to 22-1-1991 (Annexure A to the show cause notice) was issued on 3-4-1992/8-4-1992. For the same reasons, the penalty imposed is not sustainable. 13. In the result we hold as under : (a) The erection of the mudguns and tap hole drilling machines at the site ofthe Bhilai Steel Plant results in erection of immovable property and not in the manufacture of goods, and, therefore, no excise duty is leviable thereon. (b) The dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rilling machine have to be mounted piece by piece on a metal frame which is welded to be base plate and thus mudgun and drilling machine come into existence as identifiable units after assembly on the metal frame and once assembled and identified as mudgun and drilling machine they no longer remain goods within the meaning of Central Excise Law since they are grouted to the concrete platform 25' above the ground level. It has, therefore, been contended that assembly of mudgun and tap hole drilling machine elsewhere for being transporting and mounting them at a height of 25' on the cast house floor of a blast furnace being a physical and engineering impossibility, the assembly of these machines has to be deemed as resulting in the creation of immovable property and not goods liable to Central Excise duty. 15. It is seen that the Member Judicial has arrived at the finding that the appellants case merits acceptance since the machines in question because of their immense size and weight cannot be assembled and moved to the cast floor of the blast furnace and have necessarily to be installed piece by piece making them immovable property distinct from 'goods' and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the development of unit equipment. Its reputation has again been confirmed by the design of high performance tap-hole machinery. Due to our long experience in hydraulics, we moved away from conventional electro-mechanical to fully hydraulic operation with simple cylinder-operated movements. The growing number of world-wide sold machines and the satisfaction of our customers reflect the reliability of the equipment. We would like to familiarize you hereafter with our tap-hole guns and drills as well as with our concepts of the tap-hole zone arrangement. On simple request, we will be pleased to make a preliminary free of charge-out of our machines, adapted to your specific needs. Our concept - the answer to your problem - tap-hole clay gun and drill located on the same side of the troughwhich thus becomes fully accessible from the opposite side (patents and patents pending) - large-sized, flat tuyere platform allowing easy handling of all blowing stocks and tuyeres by means of a lift-truck - compact, low concept machines which fit below the tuyere platform - individual machines with separate frames, fixed on the casthousefloor, adaptable to the most difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellants 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 endproduct should not be dutiable as separate excise goods. That is mistake, a part may be goods as known in the excise laws and may be dutiable. The appellants in this case claims to have manufactured only the indicator system. If the indicator system is a separate part and a duty had been paid on it and if the rules so provide then the appellant may be entitled to abatement under the rules. But if the end product is a separate product which comes into being as a result of the endeavour and activity of the appellant then the appellant must be held to have manufactured the said item. When parts and the end product are separately dutiable - both are taxable. The Learned Counsel for the appellants has argued that the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the Municipal Corporation of Greater Bombay and Ors. v. The Indian Oil Corporation Ltd. reported in JT 1990 (4) SC 533, on which heavy reliance has been placed by the Learned Counsel for the appellants, cannot be of any assistance to the appellants. I, therefore, hold that the Collector's finding that the appellants had manufactured the machines and evaded Central Excise duty thereon, as alleged in the show cause notice, is sustainable. 17. As regards the finding of the Learned Member Judicial that the demand is barred by limitation, I find that the appellants had filed Classification List before the Central Excise authority having jurisdiction over their factory in Tamilnadu in which the machines in question were declared as classifiable under Headings 8465.00 and 8424.00 attracting duty at 10% ADV and 5%. The appellants had therefore, reason to believe that the manufacture of the machines in question by assembling them out of imported and indigenous parts amounted to 'manufacture' within the provisions of Section 2(f) of the Central Excises and Salt Act and attracted duty. However, on deciding to undertake the assembling and manufacture of the machine in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form at a height above the ground level. The place where they were erected was known as cast house floor. It was admitted that in the central excise documents filed at Madras, it had been described that completed machines were manufactured but it was submitted that it was done as desired by the local central excise officers. In the Madras factory, they were producing only components for these machines. The ld. Advocate contended that the tender documents will not show whether the goods were immovable property. It was accepted that there was a process of manufacture at Bhilai and the goods in question were marketed but it was pleaded that the process adopted by them resulted in the manufacture of immovable property. They had disclosed their activities at Madras where they had a factory. As at Bhilai they were engaged in the manufacture of immovable property they did not disclose their activities to the central excise officers having jurisdiction at Bhilai. The ld. Advocate referred to the various decisions and pleaded that the order proposed by the ld. Member may be agreed to. 22. Shri K.K. Jha, ld. SDR referred to the admission of the appellants that they were engaged in the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as manufacturers. The scope of supply was described as under : design, supply, supervision of erection and commissioning of 4 sets of Hydraulic Mudguns and drilling machines required for BF4 and BF6 complete with mechanical, electrical, hydraulic and pheumatic systems including interconnecting pipe lines and cables alongwith commission spares and operating spares as per list enclosed. In the schedule to the enquiry, the goods were referred as 'equipments'. In the terms of delivery the 'installation' was covered. It was referred that 'supervision of installation and commissioning shall be for 12 man weeks' in the back-up quarantee the responsibility of the principal was also referred to. In the acceptance of tender at page 20 of the paper book and the various annex. thereto, the equipment had been described specifically by name and nos. with definite accessories and commissioning/operational spares. In the terms and conditions at page 23 of the paper book it is provided that indigenous taxes and the duties including sales tax and excise duty have been included in the total price in entirety and if excise duty and sales tax on components not considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be, from the pre-fabricated piles which are bored into the earth by the Contractor or owners the case may be (refer para 19 of the judgment). The machines under consideration were fixed for the beneficial enjoyment of these machines themselves, and with a view to use these machines they had to be installed and the installation lasted only so long as these machines were usable. They could be dismantled as and when the need arose. From page 29 of the paper book it is seen that a contract for dis-mantling had been given to M/s. MECHAST Engineers, Durg. 27. In the US Steel Publication the making, shaping and treating of steel 9th Edition at page 445 the clay gun has been described as under : The closing of the hole at the finish of the cast is accomplished by means of the clay gun (figure 15-16). The gun is swung from an arm mounted on a pedestal in the cast house or on one of the furnace columns. It consists of a cylinder narrowed to a nozzle at the exit end and a capped opening on top into which soft clay is placed preliminary to casting time. The arm is normally parallel to the main trough but when placed in operation the arm is swung through 90 and the gun is tilte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact to be decided in the facts of each case. The fact that the goods are not actually marketed is of no relevance. It is also not necessary that the goods in question should be generally available in the market. It was added that the marketability does not depend upon the number of purchasers. In the case of IAEC Bokers Pvt. Ltd. v. Collector of Central Excise 1990 (48) E.L.T. 388 (Tribunal), it had been held that the duty on the boilers was payable on the price of boilers as removed from the factory. For proper use boiler is also fixed to the ground. In the case of IGE (India) Ltd. v. Collector of Central Excise 1991 (53) E.L.T. 461 (Tribunal.) the Tribunal after taking note of the various decisions of the Supreme Court, Madras High Court and of the Tribunal had held that the equipment which is fixed to the earth for its beneficial enjoyment but which can be dismantled and shifted when needed, can not be regarded as immovable property. 29. In the case of Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. 1995 (75) E.L.T. 17 (SC) the matter related to the plant and machinery -tube mill and welding head erected and installed out of duty paid raw materials. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analogous to a building, outhouse, shed, hut or a stable. Ship is like a floating building but it is not a structure. A crane gantry or a turnable is a structure but is not a building. Weighing bridge is a structure. Tilting furnaces mains are in the nature of structure. The British Act levies property tax on the tenant and each item by itself is exigible to separate rate ability. But under the Act the incidence of taxation is on the building or land. So the building or its accompaniments like house, out-house, garage, stable, shed, hut and such other structures must also be an entity by itself although not necessarily a building, erected on the land. The adverb 'such' must be construed in this perspective. Looking at the tank it would be apparent to be a structure, shorn of the feat of engineering mechanism put up to have the tank rested on the land. Mechanism or feat of engineering is not a conclusive test. 31 . K.N. Subramanian Chettiar v. M. Chidambaram Servai AIR 1940 Madras 527 is also not of much assistance to the respondent. Therein the question was whether machinery is a movable property or immovable property within the meaning of Section 3, Expl. 1 of the Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .H. Sinha v. Govindrao Bhiwaji - AIR 1953 Nagpur 224, the machinery belonged to (A) was erected on the land of (B). The Division Bench laid down two tests to determine whether it was attached to the land and thereby became immovable property, namely, the degree or mode of annexation and the object of annexation. Of the two test the latter is the more important, and it is a question of fact to be determined upon the particular facts and circumstances of each case. In that case it was held that the (A) did not intend to annex the machinery to the land as a permanent attachment. Therefore, it was held that it is not an immovable property. This ratio in these cases is also not of any assistance to the respondent. 32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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