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TMI Blog2008 (6) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... r Fencing System by use of solar power manufactured by the appellants. The Original Authority in the impugned order classified the item under 8543.90 of the Central Excise Tariff and demanded appropriate duty invoking the larger period under Section 11A. Penalties were also imposed. The appellants approached this Tribunal which passed the Final Order No. 1312-1313/2005 dated 8-8-2005 [2005 (190) E.L.T. 343 (Tri.)] upholding the impugned order. However, the penalty on the Managing Director was reduced to Rs. 50,000/- from Rs. 5,00,000/-. It was also decided that the benefit of modvat credit should be extended. The appellant approached the Hon'ble Apex Court against the above mentioned Final Order. The Apex Court remanded the matter for fresh decision. 4. The learned advocate has urged two essential points. The first one is regarding the classification of the impugned item and the second point is that the impugned item is an immovable property fixed to earth, hence, it would not be excisable at all. He relied on the Board's Circular dated 15-1-2002. 4.1 The Adjudicating Authority has classified the solar power electric fence system under Chapter Sub-Heading 8543.90. This is serious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this Chapter, its function should have been covered by any one of the headings in Chapter 84 or Chapter 85. As far as the impugned item is concerned, its function can be taken as "deterring intrusion". The note requires that the clearly defined function should be one that is covered by one of the headings in Chapter 84 and Chapter 85 and only if such a function is so specifically covered, the entire ma chine consisting of individual components that are interconnected would be classified under the Heading appropriate to that function. In this case, Chapter heading 8543.90 does not refer to "deterring intrusion" as function at all. Once such a function is not mentioned, then the classification of the machine with the components under Heading 8543.90 is ruled out. In view of the above submissions, the learned advocate argued that the solar electric fence system would never fall under Chapter Heading 8543.90. Since there is no specific Sub-Heading under which the impugned goods can be classified, they cannot be considered as excisable goods. 4.5 On the question of excisability, the following submissions were made. The Apex Court in the case of Triveni Engineering and Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as specifically stated that it is not possible to take out the power fence system once installed. Shri Vishnu Narayan, Managing Director in his letter dated 8-7-2003 has stated that the parts are indeed firmly grouted to the soil with cement concrete at site. Shri Harish Bhimaiah of M/s. Powertech India, a dealer of the company in his statement dated 30-9-2003 has stated that if the fence that is installed is removed, minor modifications are required requiring extra material that is to be utilized. From the above it comes out that there is indeed an erection of power fence system at site and it is not possible to remove the fence from the site and reinstall it since it is permanently grouted in the ground. Even in the case of reinstallation, there would be loss of materials. 4.7 The department has not made any verifications or enquiries to show whether the fence can be removed from one place to another without dismantling it into various components and whether dismantling into components after assembly of the fence is merely for the purpose of transportation. No evidence has been lead in by the revenue in this regard. 4.8 Placing reliance on the product catalogue without verifyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Permanent fence Energiser (mains powered) Energiser (battery powered) Battery charging system (wind solar) Battery charging from mains Non-rechargeable battery Straining post -wood Contour post -wood Turning post -wood Strut-wood Stake-wood, plastic, metal or fiberglass Insulators integral with sake Porcelain insulators Plastic insulators Tube insulators Off-set insulators 1.6 mm and 2.00 mm medium-tensile steel and aluminium wire 2.5 mm high tensile, 2.65 spring-steel and 3.15 mm mild steel wire Multi-strand steel cable Polythene and stainless steel wire Tolywire' and 'Polytape' Polywire electric mesh netting Barbed wire/mesh XX XX Copper coated steel earth rod Zinc coated steel earth rod a Temporary fences are considered to be those required for less than 3 years Occasional use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power fence would appropriately be classifiable under Heading 85.43. (xiii) In the context of CBEC circular dated 15-1-2002, provisions of clause (e) of Para 4 describes when goods would not be considered as movable. Power fence which is capable of being dismantled without damaging the components and can be reassembled answers the description of movable goods. Thus, testing with the criteria laid down in Para 4 of the circular, it can be said that power fence qualifies to be called as goods being movable, marketable and arising out of manufacture. Power fence is therefore, clearly excisable. Power fence has an individual function satisfying the description of heading 85.43 of Central Excise Tariff. (xiv) It was further argued that the following case laws relied on by the appellant are distinguishable. (a) Triveni Engineering & Indus. Ltd. v. CCE - 2000 (120) E.L.T. 273 (S.C.) (b) T.T.G. Industries Ltd. v. CCE, Raipur - 2004 (167) E.L.T. 501 (S.C.) (c) Sunrise Structurals and Engg. Pvt. Ltd. v. CCE, Nagpur - 2000 (120) E.L.T. 482 (T) (d) Thyssenkrupp Industries India Pvt. Ltd. v. CCE, Visakhapatnam - 2005 (190) E.L.T. 337 (T) (xv) In sum, taking into account all the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2001 (130) E.L.T. 401 (S.C.)] 4. The plethora of such judgments appear to have created some confusion with the assessing officers. The matter has been examined by the Board in consultation with the Solicitor General of India and the matter is clarified as under :- (i) For goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from the inputs/components that have gone into its production. Further, such resultant goods should be specified in the Central Excise Tariff as excisable goods besides being marketable i.e. they can be taken to the market and sold (even if they are not actually sold). The goods should not be immovable. (ii) Where processing of inputs results in a new product with a distinct commercial name, identity and use (prior to such product being assimilated in a structure which would render them as a part of immovable property), excise duty would be chargeable on such goods immediately upon their change of identity and prior to their assimilation in the structure or other immovable property. (iii) Where change of identity takes place in the course of construction or erection of a structure which is an immovable prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to duty. (vii) When the final product is considered as immovable and hence hot excisable goods, the same product in CKD or unassembled form will also not be dutiable as a whole by applying Rule 2(a) of the Rules of Interpretation of the Central Excise Tariff. However, components, inputs and parts which are specified excisable products will remain dutiable as such identifiable goods at the time of their clearance from the factory or warehouse. (viii) The intention of the party is also a factor to be taken into consideration to ascertain whether the embedment of a machinery in the earth was to be temporary or permanent. This, in case of doubt, may help determine whether the goods are moveable or immovable. 5. Keeping the above factors in mind the position is clarified further in respect of specific instances which have been brought to the notice of the Board. (i) Turn key projects like Steel Plants, Cement plants, Power plants etc. involving supply of large number of components, machinery, equipments, pipes and tubes etc. for their assembly/installation/erection/integration/inter-connectivity on foundation/civil structure etc. at site, will not be considered as excisable goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the above clarifications pending cases may be disposed of. Past Instructions, Circulars and Orders of the Board on this issue may be considered as suitably modified. 7. Suitable Trade Notice may be issued for the information and guidance of the trade. 8. Receipt of this order may please be acknowledged. 9. Hindi version will follow. The above Board's instructions itself are based on seven decisions of the Apex Court which have been enumerated in Para 3 of the above Order. During the course of hearing, both sides extensively referred to the above decisions particularly those of Sirpur Paper Mills Ltd. and Triveni Engineering & Industries Ltd. In any case, the relevant instructions as far as the present appeal is concerned are given in Para 4. Keeping the above instructions in mind, let us examine the excisability of the impugned item. For a better understanding, we are giving a diagrammatic representation. 6.1 The impugned item basically is a fence. This fact should be kept in mind and should not to be ignored. What is a 'Fence'? According to Illustrated Oxford Dictionary, Revised Edition published in India in 2006, Fence is "a barrier or railing or other upright structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st sentence "if the goods are incapable of being sold, shifted and marketed without first being dismantled into component parts, the goods would be considered as immovable and therefore not excisable to duty". If an electric fence has to be shifted, then the entire thing cannot be just removed without being dismantled into component parts. This is obvious from the various components of the electric fence. We cannot say that only for ease of transportation, the components are removed. It is very clear that the corner posts are grouted to the earth. These posts are also part of the electric fence. Grout means a thin liquid mortar for filling gaps and in tiling. The verb grout means to provide or to fill with grout. When something is grouted, It is obviously that it is permanently fixed to earth. 6.2 A look at the diagram provided could convince us that the solar powered fence by no stretch of imagination can be called a machine falling under Chapter 85. Even while deciding the classification, the basic meaning of words cannot be lost sight of. A machine is actually a piece of equipment with moving parts that is designed to do a particular job. The power used to work a machine may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confirmed by Bombay High Court. Even though, the item involved is different, the ratio of the above decision is applicable. The individual components of the electric power fencing system are excisable but together when they form the fence system, they cease to be an excisable commodity in terms of the Central Excise Tariff. In other words, the electric power system is formed at the site when the various components are brought together and assembled. 6.5 In the case of CCE, Indore v. Virdi Brothers - 2007 (207) E.L.T. 321 (S.C.), the Apex Court upheld the decision of the Tribunal holding that refrigeration plant/cold storage plant/central air-conditioning plant/caustic soda plant fabricated at site out of duty paid bought out goods, are basically systems comprising of various components and hence, such systems as a whole cannot be considered to be excisable goods. In the said decision, the Apex Court referred to the Board's Circular dated 15-1-2002. 6.6 With regard to the excisability of boilers erected at site the Hon'ble Apex Court in the case of CCE, Indore v. Cethar Vessels Ltd. - 2007 (212) E.L.T. 454 (S.C.), remanded the matter to the Tribunal in the light of supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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