ORDER
G.A. Brahma Deva, Member (J)
1. Miscellaneous application is filed by the party, M/s. Asea Brown Boveri Ltd. for retention of file at Bangalore Bench. On hearing both sides, miscellaneous application is allowed.
2. The appellants have filed an appeal accompanying with the Stay application against Order-in-Original No. 37/2002, dtd. 18-3-2002.
3. On last occasion, when the matter came up for hearing stay petition, on hearing both sides for sometime, we directed them to be ready to argue the main matter. Accordingly, appeal was taken for regular hearing with the consent of both sides.
4. Shri Shivadass appearing for the appellants submitted that the short point to be considered in this case is whether erection of furnace at site is liable to excise duty. He said that the appellants are engaged in the manufacture and supply of equipment, components and accessories of induction/arc furnace. They enter into contracts with several customers for the supply of these items. Some of the contracts also envisage the appellants undertaking the erection and commissioning of induction furnace at the site of the customer. The dispute is in respect of activity undertaken by the appellants with reference to the erection and commissioning of induction furnace at the site of the Customer.
5. While explaining the activity undertaken by the appellants, he said that the appellants supply some of the components and parts of the induction furnace from their factories situated at various places like Vadodara, Bangalore, Faridabad etc. Certain other parts required by the induction/arc furnaces are procured and sent directly to the site of the customer. At the site, a civil platform is constructed by the customer and separate foundations are made for the various equipment. After the civil equipment is constructed, the furnace frame and structure are placed at the foundation, aligned and grouted. The bottom is then aligned with refractory material. Thereafter, induction coil is lowered and is aligned concentrically to the structure. Other parts like magnetic yokes, coils etc., are thereafter lowered into the structure. After drying of the refractory, the cement top concreting is done. Likewise,
various other equipments like cooling pumps, hydraulic power pack are also kept on the foundation, aligned and grouted. All these items are thereafter interconnected with the cables and other material.
6. He said that it was the case of the Department that the process undertaken by the appellants at the site of the customers results in the emergence of a new commodity viz., induction/arc furnace. Accordingly, show cause notice has been issued and the Commissioner who adjudicated the order confirmed the demand of duty and imposed penalty.
7. He contended that the Department accepted the factual position as can be seen from Para 49 of the impugned order that the induction/arc furnace in question comes in existence only after the process of assembly/installation erection and commissioning takes place at the site of the customer. Department proceeded to treat the item as excisable goods on the ground that furnaces are grouted to earth but it can be dismantled from its base and can be sold in parts or re-assembled at another site. Arrived at the conclusion that item is excisable based upon this theory is no longer good in view of the various decisions of the Supreme Court and the Tribunal. He said that the issue involved herein has been covered by a series of decisions and reliance was placed on the following decisions :-
SI.No.
Name of the
party
Description
of the item on which duty was demanded
01.
Triveni Engineering &
Industries Ltd. v. CCE
– 2000 (120) E.L.T. 273 (S.C.)
Turbo
alternator
02,
CCE, Nagpur v.
Wainganga Sahakari S.Karkhana Ltd. – 2002 (142) E.L.T. 12 (S.C.)
Manufacture of
trusses, columns and purlines atsite
03.
CCE, Chandigarh
v. Damodar Ropeways & Construction Co. Pol. Ltd. –
2003 (151) E.L.T. 3
(S.C.) = 2003 (54) RLT 125 (S.C.)
Ropeway
system
04.
CCE, Miimbai v.
Jasts Engineering Co. Ltd. -2002 (146) E.L.T. 29 (S.C.)
Spray paint
booth
05.
Palmtech Engineers Put. Ltd.
v. CCE, B’lore
-2001 (132) E.L.T. 492 (T)
Steel
storage tank
06.
Indian
OH Corporation & Ore.
v. CCE, Bel-gaum – 2002 (144)
E.L.T. 616 (T) = 2002 (51) RLT 182 (T)
Steel
storage tank
07.
F.C.K. Thermal (P) Ltd. v. CCE, Calcutta-l -2001 (131) E.L.T. 340 (T) = 2001 (43) RLT 843
Kilns
/furnaces
08.
Silicnl Metallurgical Ltd. v. CCE, Cochin 1999 (106) E.L.T. 439 (T)
Electrical
arc furnace
09.
Bharat
Gears Ltd. v. CCE, Mumbai – 2001 (132) E.L.T. 294 (T)
Industrial
furnaces
10.
Asea Brown Bovcri Ltd. v. CCE, Visakhapat-nam – 2002 (143) E.L.T. 87 (T)
Turbo
Alternator
11.
Kirloskar Ferrous Industries Ltd. v. CCE, Belgaum – 2002 (53) RLT 194
D.G. Sets
8. While justifying the action of the Department, in treating the item as excisable goods, Shri Narasimha Murthy submitted that investigation conducted by the officers in this regard leads to the conclusion that induction furnace is excisable goods, movable and saleable. He said that during investigation a statement of Shri N. Vishwanathan, Manager (After Sale Service) of the appellants was recorded on 12-12-98 and same is relevant and in this context, he drew our attention to Para 9.2(ii) of the show cause notice which is as under:-
“9.2(ii) Shri N. Vishwanathan, Manager (After Sales Services) of M/s. ABB, Vadodara, in his statement recorded on 12-12-98 under Section 14 of the said Act, inter alia, stated as under (Annexure “Z-10” of R.U.D):
(a) He had joined M/s. ABB in 1964 and since then, he had been associated with erection and commissioning of furnaces. (b) On being asked as to how the furnace was sold/supplied to the customer, he stated that there are various sections within the furnace group of M/s. ABB for procurement of equipments and supply thereof, erection and commissioning etc. He further stated that marketing/tendering section of the company would contact the customer for negotiations and once the order is finalized, the execution/planning section raised indent to the purchase department for mobilizing various parts, equipments, accessories etc. within the time of contract for supply of induction furnace and ensure its deliveries. Once the material has reached the site of customer, the contract section instructs field service/after sales service for carrying out the erection, if the terms of contract stipulated erection within the scope of M/s. ABB. In any case, the commissioning of the plant is normally carried out by the after sales service department irrespective of the fact whether erection has been done by M/s. ABB or others. (c) On being asked to explain exact nature and scope of work of field service wherever the erection is also included in M/s. ABB's contract, he stated as under :
“I write a letter to the customer whether foundation and other infrastructural required for erections are ready and after confirmation that the same is ready, I arrange to send out engineer to site to assess/take up erection activities. We take the help of our contract labour/local workers for carrying the erection. The progress of erection work is noticed by the site engineer of M/s. ABB who confirms whether it is ready for sending the commissioning engineer. Based on site engineer’s request and readiness of customer, we arrange to send the commissioning engineer, who will take up commissioning checks and energies the furnace. Once the liquid metal is tapped out the furnace commissioning gets completed. However, our commissioning engineer may stay for few more days to ensure behaving of all the components/equipments is normal. On commissioning of the furnace either “joint report” is made with the customer issues a letter to M/s. ABB for successful commissioning of the furnace.
(d) On being asked, he elaborated the sequence of erection of various components, accessories, parts which are required for making/erecting a functional induction furnace.
(e) On being asked, how these accessories as well as furnace structures are supported, he deposed that the furnace structure is brought to the foundation and before lowering of the structure foundation bolt are inserted. Before lowering the structure on the foundation, the furnace is leveled and aligned with reference to the drawing and it is grouted with concrete. All the other equipments are similarly grouted the foundation,
(f) On being asked that as to whether any of these equipments or furnace structure’s portion is actually not inserted or embedded inside the earth, he stated that nuts and bolts are prefixed to the bottom of the structure while lowering and the lower portion is taken inside the hole of the foundation and the beam through which bolt passes is allowed to rest on the foundation, thereafter, foundation bolt is grouted. In other words, the bolt gets embedded in the concrete which is put up to the foundation i.e. top layer of furnace beam and upper layer of foundation touching the beam. Therefore, in order to ensure that there is no gap or vibration by virtue of gap between foundation and beam, the nut is tightened. This has been done to ensure that the structure is not toppled or vibrates. Similar is the method for other equipment also except for transformer which is mounted on the wheels and is positioned by locking the wheels.”
He said that since the goods nuts and bolts are fixed to the bottom of the structure and in order to ensure that there is no gap or vibration or in other words, to ensure that structure is not toppled or vibrates, the activity undertaken amounts to manufacture of goods and accordingly, the item in question is movable and in support of his contention, he referred to and relied upon the decision of the Sirpur Paper Mills Ltd. v. CCE, Hyderabad reported in 1998 (97) E.L.T. 3 (S.C.) – 1998 (1) SCC 400.
9. Shri Shivadass while replying submitted that the decision of the Sirpur Paper Mills Ltd. has been considered by the Supreme Court in the case of Triveni Engineering Ltd. [2000 (120) E.L.T. 273] and in this context, he drew our attention to Para 18 and 20 of the said decision which are as under :-
“18. Here, the decision of this Court in Sirpur Paper Mills Ltd. v. CCE, Hyderabad [1998 (97) E.L.T. 3 (S.C.) = 1998 (1) SCC 400], which is relied on by the ld. Counsel for the Revenue, needs to be referred to. In that case, the question was whether paper-making machine which was assembled and erected by the appellant by using duty paid components and by fabricating certain parts in their factory, was liable to excise duty. The CEGAT recorded the finding that the whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and also for safety. This Court held that in view of those findings it was not possible to hold that the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to earth like a building or a tree. The test, it was noted, would be whether the paper-making machine could be sold in the market and as the Tribunal had found as a fact that it could be sold, so the machine was held to be not a part of immovable property of the company.
20. The marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into two components – turbine and the other alternator – but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional.”
He said that ratio of the decision in the case of Sirpur Paper Mills Ltd. is not applicable to the facts of this case since in that case, whole purpose being attaching the machine to concrete a base was to prevent wobbling of the machine, but, in the instant case nuts and bolts were already pre-fixed to the bottom and only it was in order to ensure that there was no gap or vibration by virtue of gap between foundation and beam, the nut is tightened.
10. He said that according to the ruling given by the Supreme Court in the case of Triveni Engineering Ltd., two tests are to be fulfilled. Not only the point raised by the other side as referred to in Para 18 of the said decision, but also the “item must be subject to marketability as it was held in Para 20 of the said decision. He said that on installation, the item as such was neither sold nor capable of being sold and accordingly since it does not fulfil the test of marketability, the item as such cannot be regarded as movable to attract duty. He also said that the Central Board of Excise and Customs has issued a Circular dated 15-1-2002 reported in 2002 (139) E.L.T. T34 wherein they have clearly held that the goods assembled or erected at site cannot be considered as movable property and therefore not excisable goods.
11. Alternatively, he argued that even if the induction furnace is considered as an excisable commodity, the benefit of Notfn. No. 67/95-C.E., dated 16-3-95 would be available to the appellants. He said that this issue has already been considered by the Tribunal in the following cases : –
"(a) Larsen & Toubro Ltd. v. CCE & C. Indore-II - 2002 (50) RLT 353 (b) Thermax Surface Coatings Ltd. v. CCE, Chennai-III - 2002 (148) E.L.T. 783 (T) = 2001 (46) RLT 956".
12. On going through the relevant Notification and period of dispute covered under this appeal, Shri Narasimha Murthy fairly concedes that benefit of Notfn. No. 67/95-C.E., dated 16-3-95 would be available to the appellants. It was also submitted by the Counsel for the appellants that Department was not justified in invoking the larger period.
13. On a careful consideration of the submissions made by both sides with reference to the facts and on perusal of the records, we find that disputed period is covered under Notfn. No. 67/95-C.E., dated 16-3-95 and accordingly they are entitled to benefit of exemption in terms of Notfn. No. 67/95-C.E. Accordingly, party succeeds on this issue. Since the appellants are succeeding on the issue of eligibility of benefit of Notfn. No. 67/95-C.E., we do not feel it necessary to go into various issues raised by both sides. Thus, this appeal is allowed accordingly.