ORDER
Jyoti Balasundaram, Member (J)
1. The issue for determination in the above appeal against the order dated 17-10-1985 of the Additional Collector of Central Excise, Indore is whether assembly, erection and commissioning of “Evaporator J” plant amounts to manufacture of excisable goods leviable to duty under TI 68 of the Schedule to the erstwhile Central Excise Tariff. The demand of duty of Rs. 1,05,000/- has been confirmed on Evaporator J plant assembled and erected at site in Jan. 84 in the Staple Fibre Division of the appellants’ company and a penalty of Rs. 20,000/- has also been imposed by the adjudicating authority. Hence this appeal.
2. We have heard Shri J.P. Gupta, Learned Senior Counsel and Shri S.K. Sharma, learned D.R.
3. The appellant company has a Staple Fibre Division and an Engineering Division at Nagda, M.R In the course of manufacture of viscose fibre at the appellants’ factory at Nagda, Sodium Sulphate in liquid form is obtained as a by-product. The plant known as “Evaporator J” is necessary to dry up the liquid sodium sulphate and to reduce it to powder form for packing it and making it marketable. Evaporator J is a plant consisting of several verticle tankers of large dimensions having outlets for pipe connections and pipes of varying sizes connecting the various segments of the said plant. The appellants imported some of the parts and articles from abroad and cleared the same on payment of excise duty. Some articles worth Rs. 1,64,000/- were manufactured in the appellants’ Engineering Division at Nagda and no excise duty was paid on these articles as they were exempt under Notification 118/75-C.E., dated 30-4-1975 as they were not complete machinery, and some articles worth about Rs. 1.78 lakhs were purchased from the market. The uncontroverted position is as follows :
4. A cement concrete platform was constructed upon which iron girders and the supporting structurals were fixed. Thereafter, different parts and the fittings are laid and fixed by stages on the said foundation. The segments of the tankers are fixed one after the other on the said structure and welded and pipes of different dimensions are fixed one after the other in the tankers after making holes therein. The stair-case is laid on the floor for reaching and operating and servicing various parts of the plant. The whole plant is thus built by fixing to the platform and welding. The construction of the plant was spread out over a period of six months and completed in Jan. ’84. The entire assembly and erection is carried out at site. This process of construction as set out in the statement of facts in the memorandum of appeal is undisputed as is evident from the fact that the Department has no comments to offer on the factual position in their cross-objection dated 24-1-1986. During the course of personal hearing the appellants have also filed an affidavit of one Shri Kadam Kanhaiya Lal, Assistant Civil Engineer of the appellant company setting out the process of erection of the plant and also giving the details relating to height of the plant (56 feet approximately) and also stating that the plant is fixed and erected to the earth and is in the nature of movable property. This affidavit has not been rebutted by the Department. Therefore, the factum of erection of plant at site is not in dispute. The contention of the learned Senior Counsel is that the Evaporator plant was built and constructed by stages on cement concrete foundation and permanently laid and embedded in the ground and it is immovable property and not “goods” falling within the purview of CESA, 1944. He further submits that the finding in para 4.6 of the impugned order that the installation of Evaporator cannot be considered as immovable property as the same was not attached to the ground is contrary to the evidence on record. He cites the following decisions of the Tribunal to support the proposition that the assembly and erection of plant at site does not result in manufacture of goods falling within the meaning of Section 2(d) of the CESA 1944 :
1. 1983 (12) E.L.T. 825, Gujarat Machinery Manufacturers Ltd., Karamsad v. CCE, Baroda
2. 1983 (14) E.L.T. 2390 (CEGAT), J.K. Export Industries, Junagadh v. CCE, Ahmedabad
3. 1986 (23) E.L.T. 274, Hyderabad Race Club, Malakpet, Hyderabad v. CCE, Hyderabad
4. 1987 (28) E.L.T. 352, CCE, Baroda v. Dodsal Pvt. Ltd., Baroda
5. 1988 (36) E.L.T. 613, SAE (India) Ltd. v. CCE.
5. The learned Counsel, Shri Gupta next submits that the demand is barred by limitation as the show cause notice proposing levy of duty for construction completed in January 1984 was issued only on 29-3-1985 and there is no whisper of suppression or mis-declaration in the show cause notice. The appellants had informed the Department on 30-4-1984 that most of the components of the Evaporator plant were duty-paid items purchased from the open market while a few components falling under TI68 were supplied by the Engineering Division without the benefit of Notification 118/75. In addition certain imported components were also used in the Evaporator. Thus the installation of the Evaporator in the Staple Fibre Unit was in the knowledge of the excise officers in their factory which was working under the Production Based Control, 1978. He submits that the Excise authorities used to regularly visit the factory during the course of the erection of the plant and were fully aware of the nature of construction. He submits that in view of the settled legal position in the light of the case law (supra) that the erection at site will not give raise to manufacture of excisable goods, there can be no inference that there was any intention on the part of the appellants to evade payment of duty. He further submits that as held by the Hon’ble Supreme Court in the case of Padmini Products -1989 (43) E.L.T. 195, even if the assessee is in doubt regarding liability to duty, intention to evade payment of duty cannot be gathered therefrom. In view of his above submissions, he, therefore, submits that the entire demand is time-barred.
6. Learned DR, Shri S.K. Sharma, contends that contravention of Rules 9,173B read with 173Q(b) & (d) ipso facto amounts to suppression and that the visits by Central Excise Officers is not sufficient to rebut the charge of suppression which is evident from the fact that the appellants did not intimate to the Department regarding assembly and erection of Evaporator plant. On the merits of the matter he draws our attention to the finding in the impugned order that the appellants had themselves filed a classification list with effect from 1-3-1984 for manufacture of Evaporator in their Engineering Division and seeks to draw an analogy from this, that the Evaporator plant which is the subject matter of this appeal is also to be treated as excisable goods liable to duty. He cites the decisions of the Hon’ble Supreme Court in the case of Name Tulaman reported in 1988 (38) E.L.T. 566 regarding excisability of Weigh-Bridges and the decision of the Patna High Court in the case of TISCO reported in 1988 (33) E.L.T. 297 on excisability of crane in CKD condition and submits that in view of the decisions (supra) there can be no doubt that the erection and assembly of Evaporator plant amounts to manufacture of excisable goods and, therefore, the demand is sustainable. In addition he reiterates the findings in the impugned order.
7. We have heard both sides and carefully considered their submissions. Taking up the time bar aspect first, we find that the show cause notice dated 29/30-3-1985 proposing levy of duty on the Evaporator Plant assembled at site in January 1984, does not allege any suppression of facts or wilful misstatement. The adjudicating authority has relied upon the order of the Tribunal in the case of Rekha Industries, Bombay reported in 1983 (13) E.L.T. 1163 to hold that, since the appellants had manufactured the subject goods without payment of central excise duty and without compliance with the Central Excise formalities, the question of time bar did not arise under Rule 9(2) of the Central Excise Rules at the relevant time. However, he failed to note that the decision in Rekha Industries was rendered in the context of Rule 9(2) as it existed during the relevant time when it did not stipulate any period of limitation. However, in 1980 November, Rule 9(2) was amended to incorporate the period of limitation prescribed under Section 11A in to Rule 9(2) and, therefore, for this reason the applicability of Rekha Industries is straightaway ruled out.
8. We find force in the arguments of the learned Senior Counsel that the appellants were under a bona fide belief in view of the existing case law that erection at site would not give rise to manufacture of excisable goods and, therefore, it cannot be inferred that there was any intention on the part of the appellants to evade payment of duty. The Hon’ble Supreme Court has held in the case of Collector of Central Excise v. Chemphar Drugs and Liniments reported in 1989 (40) E.L.T. 276, that in order to make a demand under Section 11A for a period beyond six months and upto a period of 5 years something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information which the manufacturer knew otherwise (emphasis supplied) is required to be established. Room for doubt regarding payment of duty has been held not to attract the extended period of limitation, in the case of Padmini Products v. Collector of Central Excise reported in 1989 (43) E.L.T. 195 (S.C.). In the case of Steel Authority of India Ltd. v. Collector of Central Excise reported in 1991 (53) E.L.T. 125, the Tribunal has held that in the absence of any allegation of suppression in the show cause notice, the extended period of limitation cannot be invoked. The same order holds that since the Department had knowledge of the manufacturing process in all Plants of the Integrated Steel Plant, it cannot be said that there was any suppression on the part of the appellants. In the present appeal, the factory is working under Production Based Control since 1978 and the concerned Excise authorities regularly used to visit the factory during the course of the construction of the Plant and undoubtedly were fully aware of the nature of the construction. Yet the question of levy of duty was never raised. In the above circumstances, we hold that the demand is hit by time bar.
9. On the issue of excisability of the Evaporator Plant assembled and erected at site, it has been the consistent view of the Tribunal that erection at site from the structural material would be a permanent structure not admitting of the definition or description of “goods”. In the case of Collector of Central Excise, Baroda v. Dodsal Pvt. Ltd. reported in 1987 (28) E.L.T. 352, the Tribunal held as follows :
“15. The above facts which are borne out by the records refer to the process of manufacture carried on by the appellants (respondents?). At this stage we have to ask the question whether by the mere process of straitening, cutting, bending, punching and galvanising steel angles, plates, channels and bars which are duty paid, they would become different articles attracting excisable duty. The raw materials would continue to be in the same condition except that certain operations have been carried on them according to specifications. The materials do not undergo any transformation or total change that they would hop into Item 68. There is no evidence that such pieces, small or big, are being sold in the market as “component parts of a transmission tower.” Transmission tower is a metal or timber structure used to carry a transmission line. It is an engineering device for the purpose of holding electricity transmission lines. We have come across component parts of a machinery, component parts of a vehicle, and such other goods. But one cannot say that there could be component parts of a transmission tower. For other essential parts would differ in size and dimensions depending on the location where tower has to be erected. The term structural shape means the joining of individual members of a structure to form a complete assembly. The structure itself does not come into existence at the place of clearance. The materials required for completing a tower etc. could be individual items collected at the spot for convenient transport of the items. But one cannot say that the component parts of a structural design are removed in a CKD fashion to be assembled at the site. In the decision 1986 (8) E.C.R. 166 the Tribunal has considered the scope and nature of excisability of structurals. The Tribunal has taken into account the definition of structural angles, structural shapes, channels, etc. It was held that sheet cut or drilled with holes would not cease to be a sheet. “The angle is still an angle/ the channel a channel, the sheet a sheet, the beam a beam, To be sure they had to be sized, cut, drilled so that they could be up together into one structure.” We are, therefore, not convinced that the products removed from the respondents’ factory would be transmission tower in knocked down condition. The transmission tower does not come into existence at the factory and it would be far fetched to state that the component parts were removed in C.K.D. condition.
16. A perusal of the contracts with the Gujarat Electricity Board would also confirm that the respondents have been given the work of fabrication and the supply of galvanised steel towers. The prices refer separately to the fabrication and supply of towers from steel and erection of the lines. The Schedule of fabrication have been set out and refers to the erection of towers as well. The exact depth of the foundation etc. have all been adverted to in the abstract. Thus it could be seen that the contract is a works contract including the fabrication of certain steel or iron materials according to the specifications. This yet another aspect which would prove that a transmission tower cannot be construed as “excisable goods”.
17. The S.D.R. laid emphasis that the respondents had been given licence to manufacture transmission tower by the DGS & D and they intended to manufacture the towers. The respondents do not dispute that they have fabricated and erected the transmission tower. But the question is whether it would amount to manufacture within the meaning of Section 2(f) of the Central Excise Act. The licence granted by the DGS & D and the use of the term ‘manufacture’ by him would not ipso facto follow that the processes carried on by the respondents would amount to manufacture under the Act. If the totality of the circumstances are taken into account it would be clear that the respondents have been assigned the works contract of erecting a transmission tower and not manufacture component parts of a transmission tower.
20. We are, therefore, unable to accept the contentions of the Revenue that there has been a manufacture of excisable goods, the several members continued to be within Item 26AAA and if there is no transformation into a different commodity, the recourse to Item 68 would not be justified. The Appellate Collector has rightly observed that the activity would not come under the purview of a manufacture and the transmission towers which were erected at the site from the structural material would be permanent structures and would not admit of the definition or description of the goods. The decisions under the Sales Tax Act cited by the SDR have been given with reference to particular provisions and do not have material bearing to determine the excisability of the products in the proceeding. The other decisions cited by the SDR are with reference to the facts and circumstances of those cases. Though the principle laid down in those decisions cannot be questioned the facts of the present case are different. The facts are more or less similar to the fact, in Aruna Industries case.”
9.1 In the case of Hyderabad Race Club v. Collector of Central Excise, Hyderabad reported in 1986 (23) E.L.T. 274 it has been held that the Totalizator System which has been erected at site and is permanently fixed to earth cannot be called to be movable and hence cannot be held as “goods”.
9.2 The Tribunal in the case of SAE India Ltd. v. Collector of Central Excise reported in 1988 (36) E.L.T. 613, has held that fabrication of steel structures does not amount to manufacture and that the transmission towers erected at site from structural material would be permanent structure and would not admit of the definition and description of the goods.
9.3 In the light of the case law set out above, we hold that the assembly, erection and commissioning of the Evaporator J Plant does not admit of the definition and description of ‘goods’ within the meaning of the Central Excises and Salt Act, 1944. The learned DR’s reliance on the judgment of the Supreme Court in the case of Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise reported in 1988 (38) E.L.T. 566 does not appear to be well founded – the issue of immovable property was never raised before the Supreme Court and also weigh-bridges consisting of 3 different parts viz. platform, load-cells and indicating systems came into existence as goods prior to the installation of the weigh-bridges into the earth. In the above appeal, the Evaporator J Plant does not come into existence prior to its installation and embedding into the earth as has been set out in para 4 above.
9.4 The judgment of the Patna High Court in the case Tata Iron and Steel Co. Ltd. v. Union of India reported in 1988 (33) E.L.T. 297 cited by the learned DR also does not advance the case of the Department. The Patna High Court was seized of the issue of dutiability of the cranes cleared in knocked down condition and the Court held that the complete crane fabricated and assembled at one Unit of the assessee and transported to the assessee’s plant in knocked down condition was excisable under TI 68 of the Schedule to the erstwhile Tariff. In this case, however, there cannot be any dispute that the item in question Evaporator J Plant was built on cement concrete foundation and permanently laid and embedded in the ground. Therefore, it is immovable property as it is attached to the ground.
10. In the light of the above discussion we hold as follows :
(a) the assembly, erection and commissioning of the Evaporator J Plant by the appellants does not amount to manufacture of excisable goods under the Central Excise Tariff;
(b) the demand of duty is barred by limitation;
(c) penalty is set aside.
11. In the result we set aside the impugned order and allow the appeal with consequential relief to the appellants. The cross-objection accordingly abates.