Ibex Gallagher Pvt. Ltd. & Anr Vs. Commissioner of Central Excise, Bangalore  Insc 833 (17 August 2007)
Arijit Pasayat & D.K. Jain Dr. Arijit Pasayat, J.
These appeals have been directed against the judgment of the Customs, Excise
and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (in short
CESTAT). Challenge before the CESTAT was to the order in original
7/04 dated 14.7.2004 passed by a Commissioner of Central Excise, Bangalore
No.3. By the said order the Commissioner confirmed demands on bringing into
existence electric power fencing system by use of solar power. The
same was classified in sub-heading 8543.90 as other electrical machinery
and apparatus having individual functions. The Commissioner had invoked
larger period in terms of Section 11A of the Central Excise Act, 1944 (in short
the Act). He confirmed the duty demand and also imposed like sum as
penalty under Section 11AC of the Act. Penalty of rupees five lakhs was also
levied on the Managing Director. According to the Revenue for the purpose of
manufacture and clearance of the said item, namely, solar power electric power
fencing system, the appellant brings various items which are also duty paid
such as insulator, insulation test tool kit, battery charger and also procure
various items from outside stores. They get GI wire, springs, battery, solar
panel and Voltage Stabilizer etc. as bought out items and procured items such
as Kiwitha Post, posts and pipes etc. on job work basis and imported certain
items as such six channel controller and key pad etc. These are all erected as
a fence at various sites. The Commissioner after examining Section 2(b) of the
Act held that process of erection of the fence at the site will bring into
existence this item as a new product distinct from all the products used.
to the assessee, the item is fixed on the walls and separately also on poles
and they are not classifiable as electrical machines and apparatus having
individual function under heading 8543.90. The Tribunal repealed the contention
of the assessee and held as follows:
a careful consideration and examining the impugned order, and the record, we
are satisfied that the item which has come into existence is an electrical appliances
having individual functions. All the items are put together to bring into
existence this item, Electric Power Fencing system and the same is also powered
by using solar power.
catalogue as well as the statement of the MD is relied by Revenue to say that
the item can be relocated and item can be saved and it does not get destroyed
and dismantled merely because the evidence has to be reused if at all for use
in other places does not mean that the item has got destroyed while refixing
item has not become immovable property on erection piece by piece. The poles
are fixed and the wires are fenced with all the other parts. The fence gives
electric shock to animals when they want to cross the same it acts not only as
an electrical barrier but also as a psychological barrier as no human or
domestic animal having felt the shock once will attempt to go anywhere near the
power fence systems of various components which are brought out and some are
manufactured and some are imported.
are all assembled to bring into existence solar power fence as a system. There
is no civil work for erection and the item does not become part and parcel of
immoveable property as contended. Therefore, the item satisfies the tariff
description. We are of the considered opinion that it is goods and liable for
duty in the Chapter heading already noted supra. However, the prayer of the
appellant for modvat credit and cum duty benefit is required to be extended in
terms of the ratio of the judgment cited (supra). The submission that the
demands are partly time barred as the department was aware of all the details
collected by them for 1998 and the show cause notice issued in 2003 makes the
demands time barred is a well considered plea and require to be accepted in the
light of the following judgments cited by them.
Cosmic Dye Chemical v. CCE Bombay (1995
(75) ELT 721 (SC)
v. Chemphar Drugs & Linements (1989 (40) ELT 276 (SC)
Products v. CCE (1989 (43) 195 (SC)
Pharmaceuticals Company v. CCE Bombay (1995
(78) ELT 401 (SC)
penalty of Rs.5 lakhs on the Managing Director is excess. Hence it is reduced
to Rs.50,000/-. The matter is remanded to Commissioner for re-working out after
granting benefit of modvat and treating clearance as cum duty as pleaded by the
appellants in the light of large bench judgment rendered in the case of Shre Chakra
Tyres. Appeals are allowed by remand only for recomputation of duty. Order
However, the penalty was reduced to Rs.50,000/- in the case of the Managing
support of the appeal leaned counsel for the appellant submitted that the excisability
on plant and machinery assembled at site has been considered by this Court and
placed strong reliance on decision of this Court in Commissioner of Central
Excise, Indore v. Virdi Brothers [2007 (207) ELT 321 (SC)].
Learned counsel for the Revenue, on the other hand, submitted that though in
some cases this Court remanded the matter to the CESTAT to decide on the
factual aspects, in this case categorical findings have been recorded on the
aspects for which remand has been made and, therefore, the assessees
appeal is without merit.
Apart from Virdi Brothers case (supra) this Court in Commissioner of Central
Excise, Indore, v. Cethar Vessels Ltd. [2007 (212)
ELT 454 (SC)] also dealt with the similar question.
According to learned counsel for the appellant, the view taken by the CEGAT is
untenable. The adjudicating authority was not justified in holding that
fabrication of the plants in question out of duty paid bought out items amounts
to manufacture of a new marketable commodity and therefore dutiable.
issue relating to excisability of plants and machinery assembled at site has
been determined by this Court in several cases, e.g. Quality Steel Tubes Pvt.
Ltd. v. CCE (1995 (75) E.L.T. 17 (SC); Mittal Engineering Works Pvt. Ltd. v
CCE, Meerut (1996 (88) E.L.T. 622 (SC); Sirpur
Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (SC); Silica
Metallurgical Ltd. v. CCE, Cochin (1999
(106) E.L.T. 439 (Tribunal); Duncan Industries Ltd. v. CCE, Mumbai (2000 (88)
ECR 19 (SC); Triveni Engineering & Industries Ltd. v. CCE (2000 (120)
E.L.T. 273 (SC) and CCE, Jaipur v. Man Structurals Ltd. (2001 (130) E.L.T. 401
a matter of fact taking into account these decisions Circular No.58/1/2002-CX
dated 15th January,
2002 has been issued
by the Government of India, Ministry of Finance (Department of Revenue),
Central Board of Excise & Customs, New Delhi. The Circular indicates that it was intended to clarify the question of
excisability of plant and machinery assembled at site. The relevant portion of
the Circular reads as follows:
of India Ministry of Finance (Department of Revenue) Central Board of Excise
& Customs, New Delhi Sub: Excisability of plant and machinery assembled at
site-Regarding In exercise of the power conferred under Section 37B of the
Central Excise Act, 1944, the Central Board of Excise and Custom considers it
necessary, for the purpose of uniformity in connection with classification of
goods erected and installed at site, to issue the following instructions.
Attention is invited to Section 37B Order No.53/2/98-CX, dated 2.4.98
(F.No.154/4/98- CD.4) (1998 (100 E.L.T.T9) regarding the excisability of plant
and machinery assembled at site.
number of Apex Court judgments have been delivered on
this issue in the recent past. Some of the important ones are mentioned below:
Quality Steel Tubes Pvt. Ltd. v. CCE (1995 (75) E.L.T. 17 (S.C.);
Engineering Works Pvt. Ltd. v CCE, Meerut (1996 (88) E.L.T. 622 (S.C.);
Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (S.C.);
Silica Metallurgical Ltd. v. CCE, Cochin (1999 (106) E.L.T. 439 (Tribunal) as confirmed by the Supreme Court
vide their order dated 22.2.99 (1999 (108) E.L.I. A58 (S.C.);
Duncan Industries Ltd. v. CCE, Mumbai (2000 (88) ECR 19 (S.C.));
Engineering & Industries Ltd. v. CCE (2000 (120) E.L.T. 273 (S.C.) (vii)
CCE, Jaipur v. Man Structurals Ltd. (2001 (130) E.L.T. 401 (S.C.)
plethora of such judgments appears 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:-
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).
goods should not be immovable.
Where processing of inputs results in a new products 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.
Where change of identity takes place in the course of construction or erection
of a structure which is an immovable property, then there would be no
manufacture of goods involved and no levy of excise duty.
Integrated plants/machines, as a whole, may or may not be goods. For
example, plants for transportation of material (such as handling plants) are
actually a system or a net work of machines. The system comes into being upon
assembly of its component.
such a situation there is no manufacture of goods as it is only a
case of assembly of manufactured goods into a system. This cannot be compared
to a fabrication where a group of machines themselves may be combined to
constitute a new machine which has its own identity/marketability and is
dutiable (e.g. a paper making machine assembled at site and fixed to the earth
only for the purpose of ensuring vibration free movement) e. If items assembled
or erected at site and attached by foundation to earth cannot be dismantled
without substantial damage to its components and thus cannot be reassembled,
then the items would not be considered as moveable and will, therefore, not be
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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.
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xx (iii) Refrigeration/air conditioning plants.
are basically systems comprising of compressors, ducting, pipings, insulators
and sometimes cooling towers etc. They are in the nature of systems and are not
machines as a whole. They come into existence only by assembly and connection
of various components and parts. Though each component is dutiable, the
refrigeration/air conditioning system as a whole cannot be considered to be
excisable goods. Air conditioning units, however, would continue to remain
dutiable as per the Central Excise Tariff.
Based 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.
Suitable Trade Notice may be issued for the information and guidance of the
Receipt of this order may please be acknowledged.
Hindi version will follow.
the basic factual aspects were not considered by the CEGAT we deem it proper to
remit the matter to it for a fresh consideration in the light of the judgment
in Virdi Brothers case (supra) and Cethar Vessels case (supra) and
Circular referred to above.
The appeals are accordingly disposed of without any order as to costs.