JUDGMENT
V.K. Agrawal, Member (T)
1. The issue involved in these two appeals filed by M/s. A.C.C. Ltd. & M/s. Naveen Projects Ltd. is whether Belt Conveyor System installed in the factory premises of M/s. A.C.C. Ltd. is leviable to Central Excise duty.
2. Shri B.L. Narasimhan, learned Advocate, submitted that M/s. Naveen Projects Ltd. (NPL) are engaged in the manufacture of Conveyors; that M/s, A.C.C. Ltd. placed an order for erection and commissioning of 16 Belt Conveyors for material handling at Bilaspur (H.P.); that NPL manufactured the Belt Conveyor and other parts of Conveyors in their factory at Ghaziabad which were cleared on payment of appropriate excise duty; that they procured the other items from other manufacturers and got them supplied directly to the site of A.C.C.; that with the help of these items they fabricated, erected and commissioned the Conveyor System and material handling facilities like gantry with walk-way, railings, structural supports, transfer towers, etc.; that the Conveyor System included execution of civil works which were carried out by A.C.C. Ltd.; that the whole Conveyor System is a conglomeration of many items which were attached to the earth on a permanent basis and the entire length of Conveyor System becomes operative only when the entire civil structural works, mechanical items and safety device were erected and commissioned; that the activity of fabricating, erecting and commissioning of the Conveyor System at the site does not amount to manufacture as it does not satisfy the test of change in name, character and use; that the Conveyor Systems are permanently attached to earth, and therefore, are not goods and hence no excise duty can be charged; that the Conveyor System had been fabricated on brick by brick basis and for the first time when they came into existence they were already firmly embedded to earth; that it is not as if Conveyor System was fabricated as a unit and then installed; that if it is dismantled, what would emerge is a salvageable parts and waste and scrap; that on dismantling, the conveyor system cannot be obtained; that the Tribunal in the case of Litdhiana Bottling Co. v. CCE -1997 (93) E.L.T. 776 has held that Conveyor System did not satisfy the test of being goods within Section 3 of the Central Excise Act on account of their being immoveable as also on account of their being not marketable goods. He also relied upon the decision in the case of Wintech Taparia Ltd. v. CCE, Indore [2001 (132) E.L.T. 698 (T) = 2001 (46) RLT 19] wherein the Tribunal held that
Food Processing Line is not marketable and not moveable. Reliance was also placed on the decision in the case of CCE, Chandigarh v. Vardhman Spg. Mills [2001 (132) E.L.T. 663 (T) = 2001 (45) RLT 982] and Fenner India Ltd. v. CCE [2001 (47) RLT 723]. The learned Advocate also submitted that as the Conveyor System had been erected after 16-3-95, they are eligible to avail of exemption under Notification No. 67/95-C.E., dated 16-3-95 as these are capital goods used captively for manufacture of final product which are chargeable to duty. In this regard he relied upon the’decision in the case of Triveni Engg. & Industries Ltd. v. CCE [2001 (136) E.L.T. 617 (T) = 2000 (36) RLT 619 (T)] wherein it was held that there is no requirement in Notification No. 67/95 that capital goods have to be used by the same manufacturer in his factory and the benefit of Notification is available if the goods assembled and erected at the site of the customer of the appellants has been used within the factory of production. Finally the learned Advocate relied upon the decision in the case of CCE, Chandigarh v. Fenner India Ltd., Final Order No. 331/2001-B, dated 28-6-2001 [2001 (133) E.L.T 455 (T)] wherein it was held that conveyor attain its identity as conveyor system after operation required to make it workable take place and it cannot be transported as complete conveyor system to another place but it has to be dismantled into parts of conveyor system. Shri K.K. Anand, learned Advocate, adopted the submissions of Shri B.L. Narasimhan. In addition he submitted that no penalty is imposable on M/s. A.C.C. Ltd. as they bonafide felt that no duty is attracted on erection of conveyor system; that the reasons given in para 34 of the impugned Order do not even remotely prove existence of guilty knowledge on the part of M/s. A.C.C. Ltd.
3. Countering the arguments Shri R.D. Negi, learned D.R., submitted that the case of the Department is that the appellants had fabricated, assembled erected and installed conveyor system on which no excise duty was paid by them; that NPL had entered into two agreements both dated 18-9-92 with A.C.C. Ltd.; that one agreement was for the supply of 16 conveyor systems, accessories, spare parts, M.S. angle, channels, sheets; that other contract was for the erection and commissioning of the Belt Conveyor System; that the components, parts, accessories and steel items were further assembled/ fabricated at site by NPL as a result of which a different and distinct product came into existence before it was embedded to the earth; that it has been held by the Supreme Court in the case of Sirpur Paper Mills Ltd. v. CCE. Hyderabad [1998 (97) E.L.T. 3 (S.C.)] that the assembling of paper making machine from bought out items and same fabricated at the site amounts to manufacture. The learned SDR also submitted that it is evident from the contract entered into between the two appellants that sale and purchase of conveyor system have been made, and therefore, it cannot be claimed that the goods involved are not marketable; that embedding of product in a concrete base is only to ensure its wobble free operation and the product does not become immoveable property on this account. The learned SDR also mentioned that as the date of instalment of the conveyor system was before 16-3-95, the benefit of Notification No. 67/95 is not available to them; that as neither classification list nor price list was filed for conveyor system the penalty is imposable; that even ACC Ltd. did not intimate about the erection and commissioning of the impugned conveyor system; that they cannot claim to hold bona fide belief as the facts are different in this matter. In reply Shri Narasimhan, learned Advocate, referred to para 27 of the impugned order wherein it has been mentioned that the complete conveyor system came into existence only after the same has been grouted to the earth.
4. We have considered the submissions of both the sides. It is well established law that “to become goods an article must be something which can ordinarily come to the market to be bought and sold [UOI v. Delhi Cloth & General Mills, 1977 (1) E.L.T. (J-99 S.C.)]. In Moti Laminates Pvt. Ltd. v. CCE [1995 (76) E.L.T. 241 (S.C.) = 1995 (7) RLT,1 (S.C)], the Apex Court held that “the expression produced or manufactured has further been explained …..to mean that the goods so produced must satisfy the test of marketability” . Thus the test of marketability or capable of being marketed is to be satisfied before any item can be held to be exigible to excise duty. The learned Advocate for the Appellant No. 2 has submitted that the impugned Conveyor Systems have been erected at the site of Appellant No. 1 brick by brick and the complete conveyor system came into existence in an immovable condition. It has also been admitted by the adjudicating authority as it is mentioned in the adjudication order as under :-
“……some parts were purchased by M/s. NIPL from the market which
were directly supplied by their Delhi office to the factory premises of M/s. ACC and some were supplied from their own factory at Ghaziabad. Thus to complete the manufacture of the conveyor systems, M/s. NIPL have undertaken the fabrication as well as assembling of the various components at the site of M/s. ACC which is akin to the assembling of the paper making machine in the case of Sirpur Paper Mills Ltd.”
5. It is thus apparent that the impugned conveyor systems came into existence only at the site of the Appellant No. 1. In the detailed process of fabrication/erection given by the Appellants, it is mentioned that the systems are erected piece by piece with civil foundations, concrete pillars, RCC walls, etc. The Supreme Court laid down the test of permanency in the case of Municipal Corporation of Greater Bombay v. Indian Oil Corporation Ltd. 1991 SUPP. (2) SCC 18 as under :-
“….. ..that the test was one of permanency, if the Chattel was movable to
another place of use in the same position or liable to be dismantled and reerected at the latter place, if the answer to the former is in the positive, it must be a movable property but if the answer to the latter part is in the positive then it would be treated as permanently attached to the earth.”
6. The Apex Court applied the said test of permanency in the case of Triveni Engineering & Industries Ltd. v. CCE – 2000 (120) E.L.T 273 (S.C.) and held that “The marketability test requires that the’goods as such should be in a position to be taken to the market and sold………” There is nothing on record to show that the Conveyor Belt systems can be taken to the market “as such” and sold. On the other hand the learned Advocate has emphasized that if the system is dismantled, only Salvageable parts and waste and scrap would emerge and the conveyor system cannot be obtained. The Revenue has also not adduced any evidence on record that the concrete base was only to make wobble free operation of the conveyor system. The Appellate Tribunal in the case of Fenner India Ltd. v. CCE – 2001 (47) RLT 723, following its earlier decisions, has held that the conveyor system comes into existence as immovable property and hence is not excisable goods. Again the Tribunal in the case of M/s, Fenner India Ltd., Madurai vide Final Order No. 331/2001-B
[2001 (133) E.L.T. 455 (T)] held that “Conveyor System cannot be transported as complete conveyor system to another place but it has to be dismantled into parts of such conveyor system”. Following these decisions and the judgment of the Apex Court in the case of Triveni Engg. & Industries Ltd., we hold that the Revenue has not succeeded in establishing the marketability of the impugned Conveyor Belt System. Accordingly, we set aside the impugned order and allow both the appeals.