Mahindra And Mahindra Ltd. vs Cce [Alongwith Appeal No. … on 18 November, 2005

ORDER

R.K. Abichandani, J. (President)

Facts :

1. This group of appeals is required to be heard afresh by this Tribunal in view of the remand order made by the constitution bench of the Hon’ble the Supreme Court the following terms :

“In all these matters the various Benches of the Tribunal have followed the order dated 12th February, 1999 passed by the New Delhi Bench in the case of Elecon Engineering Co. Ltd. and Ors. v. Collector of Central Excise, Chandigarh and Ors. (107) ELT 337), which we have just set aside. There has been no determination of the facts involved. It, therefore, becomes necessary to set aside all these orders of the Tribunal and remand the civil appeal to the Tribunal for being heard and decided afresh. They shall be decided afresh having due regard to what we have stated in our orders in civil appeal N. 5373 of 999 and connected matters.

All contentions may be raised before the Tribunal by either party including that the goods are not structurals. Liberty is given to both sides to produce additional evidence.

The Civil Appeals are allowed.

No order as to costs.”

2. These appeals were, therefore, required to be decided afresh in the light of the decision of the Supreme Court in Civil Appeal No. 5373 of 1999 and cognated appeals (Collector of Central Excise, Jaipur v. Man Structurals reported in 2001 (130) ELT 401 (SC). In Man Structrurals the Hon’ble the Supreme Court while allowing the appeals filed by the Revenue made the following orders :

“Order – Delay condoned.

2. The learned Solicitor General appearing for the Department fairly states that the Department does not question the correctness of the judgments in Moti Laminates Pvt. Ltd. and Ors. v. Collector of Central Excise , and Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. and Anr. , insofar as the issue of marketability is concerned.

3. Tariff Item 73.08 of the Central excise Tariff covers structures and parts of structures, as therein stated (which are, for convenience, referred to as ‘structurals)

4. It was for the Tribunal to determine, as a fact, whether the structurals that the Department sought to make exigible to excise duty in the various appeals before it were new, identifiable goods which were produced as a result of manufacture of processes and which were marketable. Depending upon its conclusion on these aspects in each of the appeals before it, it was for the Tribunal to determined whether or not the goods in question in each of these appeals were exigible to excise duty.

5. In the judgement and order of the Tribunal that is under challenge the Tribunal has failed to consider the facts of even a single of the appeals before it. It has proceeded simply upon the basis that structurals are not exigible to excise duty. It has failed to appreciate that there is a tariff entry which makes structurals exigible to excise duty and that they are so exigible, provided that they are new identifiable goods that are the result of manufacture or processes and they are marketable.

6. It, thus, becomes necessary to set aside the judgment and order of the Tribunal under challenge and demand the appeals to the Tribunal for being heard and disposed of afresh, bearing in mind what we have stated above. All contentions may be raised before the Tribunal by either party. Liberty is given to produce additional evidence.

7. The Civil appeals are allowed accordingly.

8. No order as to costs.”

3. In the case of Elecon Engineering Ltd. (supra) which was set aside by the Supreme Court, the Tribunal had held in a group of appeals, which included the present appeal, that, there was no manufacture of goods involved in making of structural components by processing structural material and that the goods were not marketable and therefore, no duty could be levied. The Tribunal referred to the very same cases on which reliance was also sought to be placed before us including the earlier decision of the Tribunal in Aruna Industries, Vishakhapatnam and Ors. v. Collector of Central Excise reported in 1986 (25) ELT 316 (Tri), and held that, on legal issues raised as well as the items in question the matter was covered by the pronouncements of the Apex Court, High Court and the Tribunal settling the question of dutiability. It was held that no duty could be levied on immovable structures, factory building, power, plant etc. The Supreme Court, however, in view of its decision in Man Structurals (supra) set aside the said decision by observing that the Tribunal had failed to appreciate that there was a tariff entry (Tariff Heading 73.08) which made structurals exigible to excise duty and that they were so exigible provided that they were new identifiable goods that were the result of manufacture or processes and that they were marketable. It was observed that the Tribunal was required to determine the fact whether structurals that the department sought to make exigible to excise duty in various appeals including the present appeals, wee new identifiable goods which were produced as a result of manufacture or processes, and which were marketable. In view of the Hon’ble the Supreme Court having set aside the decision of the Tribunal in the case of Elecon Engineering (107 ELT 337) and cognate matters which included the present appeals it becomes obvious that notwithstanding the earlier decisions in Aruna Industries and other cases which were cited before the Tribunal in Elecon Engineering Co. Ltd. and which are also again cited before us, the Hon’ble the Supreme Court has required this Tribunal to reconsider the matter in the light of the tariff Item 73.08 which now specifically refers to structures and parts of structures as well as the articles prepared for use in structures. When these appeals came up before the Division Bench of the Tribunal on 11th July, 2005, the Bench was informed that another Bench of the Tribunal had already considered the same issues in some of the remanded matters. Copies of the decisions of the Division Bench in those appeals No. E/1000/95, E/396/04, E/2736/91, E/2311/91 decided on 31.5.2005 and E/340/94, E/62/92 and E/440/92 also decided on 30.05.2005 were placed on record. In all those appeals, the Tribunal was concerned with the same question whether structures or parts of structures and other articles made of iron or steel for use in structures were classifiable under Heading 73.08 of the Central Excise Tariff. The Tribunal relying on the earlier decision in Aruna Industries, Vishakhapatnam and Ors. v. Collector of Central Excise, Guntur and the decision of Wainganga Sahkari S. Karkhana Ltd. v. Collector of Central Excise reported in against which the appeal filed by the revenue was dismissed as upholding the decision in Aruna Industries and the decision of the Bombay High Court in Sunflag Iron & Steel Co. Ltd. v. Additional Collector of Central Excise, Nagpur reported in 2003 (162) ELT (Bom), found no reason to uphold the impugned orders whereby it was held that the goods were excisable and set aside the impugned orders by allowing the appeals. The Division Bench before which these decisions were cited found itself unable to accept the view taken by the other Bench of the Tribunal in the sad appeals and for the reasons given in its order dated 11.7.2005, the Division Bench referred the following question for decision of a Larger Bench of the Tribunal :

“Whether :

(a) making of structures and parts of structures of the types illustrated in the parenthesis of Heading 73.08 of iron or steel

(b) making of plates, rods, angles, shapes, sections, tubes and the like, as articles prepared for use in structures of iron or steelwould amount to manufactured of excisable goods classifiable under Heading 73.08″

These appeals are accordingly placed before us for out decision on the aforesaid question.

4. The Tariff Heading 73.08 came into force w.e.f. 1.3.88 and the said Heading which falls for our consideration is reproduced herein :

“73.08 Structures (excluding prefabricated buildings of Heading No. 94.06) and parts of structures (for example, bridges and bridge sections, lock-gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, bal-ustrades, pillars and columns) or iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel.

7308.10 – Bridges and bridge-sections

7308.20 – Towers and lattice masts

7308.30 – Doors, windows and their frames and thresholds for doors

7308.40 – Props and similar equipment or scaffolding, shuttering or pit-propping

7308.90 – Other”

The above Heading 7308.08 did not exist when the earlier decision of a Division Bench of the Tribunal was rendered on 25.5.86 in Aruna Industries (supra).

5. While out task is to answer the question referred, that has to be done in the light of nature of goods which, according to the Revenue were manufactured and were marketable so as to attract the excise duty under the relevant entry 73.08, as against the contention that there was no manufacturing process involved and the goods were not marketable and hence not excisable. Before we set out the rival contentions raised during a prolonged hearing, we would briefly indicate the type of the goods that according to the Revenue are excisable and are found to be covered under the relevant entries of Heading 73.08 of the authorities below.

6. In appeal No. E/4673-74/89 the show cause notice was issued on 4.7.89 alleging that the appellant had manufactured the excisable articles such as purlins, breams trusses, etc. at their own factory site at Nasik with the job work rendered by M/s. New Bharat Builders (Bom) Pvt. Ltd. on job charges basis as per the designs, drawings and specification provided by them. It was stated that similar type of goods were readily available in market being bought and sold and therefore, they satisfied the test of marketability. It was alleged that these structural steel articles fell sub-heading 7308.90 and that they were removed and captively consumed by the appellant in their own factory premises for erection of new sheds, without payment of Central Excise duty of Rs. 11,09,469.17. In this matter, the Collector of Central Excise & Customs made an order on 11.9.89 confirming the said demand holding that steel structural articles such as purlins, trusses, etc. were excisable goods and were classifiable under sub-heading 7308.90 before and after 1.3.88 and chargeable to duty at the rates specified against the heading in the schedule. While considering the aspect of manufacture he referred to the decision of manufacture under Section 2(f), and that of “excisable goods” under Section 2(d) and Rule 2(a) of the Rules of Interpretation of the Schedule to the Excise Tariff Act. Under the said Rule 2(a), it was laid down that any reference in a heading to goods shall be taken to include a reference to those goods incomplete or unfinished, provided that, incomplete or unfinished goods have the essential character of complete or finished goods. It shall also to be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule) removed unassembled or disassembled. It was held that, in this case the raw material used for erection of a shed was angles, channels, sheets, beams etc. which had been further worked to form articles which were known as purlins, trusses, beams, etc. called as structurals steel articles ultimately used in the erection of the sheds. The original iron/steel members were subjected to cutting, welding, drilling, fastening etc. and the modifications of the said raw material was made specifically and exclusively to suite the plans and designs of the shed to be erected. The contention that the processes carried out die not amount to manufacture of new and distinct articles which are capable to sale to any consumer in the market and the original character of the said goods had not changed, was rejected considering the definitions of “manufacture” and “excisable goods” as well as the Rules of Interpretation of the Excise Tariff Schedule. It was held that the processes carried out were not incidental or ancillary to the completion of manufactured product, namely, angles, channels, beams, but they were in relation to manufacture of such articles which were required to erect the shed. What had emerged by the process of drilling, welding, cutting etc., according to drawings and design suitable to a particular shed were complete or finished goods ready to be fitted to erect the shed. Before becoming part of immovable structure these had attained identity as purlins, trusses, beams etc. As regards the question as to whether the purlins, trusses, beams etc. were excisable goods, it was held that they were excisable goods because of their nature, character, description and use coming under the particular chapter heading 7308.90. The contention that such type of goods are not known in trade parlance as purlins, trusses etc. and that they were not marketable and that they came into existence only by their functional use and were not movable goods was rejected in view of Rule 2(a) of Rule of Interpretation of Schedule to the Central Excise Tariff Act, according to which even incomplete or unfinished goods were also classifiable provided that they had the essential character of complete and finished goods and in fact those goods had such essential character even though in that stage they may not be marketed. The contention that the sub-heading 7308.90 came into force only on 1.3.88 and could not, therefore, be made applicable to the period prior to 1.3.88, was also rejected by holding that the raw material i.e. angles, channels etc. were classifiable under Chapter 72 while the iron and steel structurals articles made therefrom were classifiable under chapter heading 73.08 “Other articles of iron or steel”. The heading in chapter 73 introduced from 1.3.88 was more specific and included structural items but it did not mean that structural steel articles were not classifiable prior to 1.3.88. It was further held that the excisable goods in this case came into being only after 1.3.88, even though the manufacturing process was going on since earlier time. On the question of marketability, it was observed that the schedule to the Tariff Act was based on Harmonized Commodity Coding System and provided detailed clarificatory or interpretative notes or rules. It was observed that there may be goods manufactured but not placed in the market as they where consumed captively in the manufacture of excisable goods. It was held that the ratio of various decisions of the Tribunal cited was not applicable as they were pertaining to goods classifiable under the erstwhile Tariff Item 68 when there were not statutory rules of Interpretation of Central Excise Tariff. Even prior to the decision of Aruna Industries (supra) which was relied on before the Collector, in Structurals and machineries (Bokara) Ltd. 1987 (17) ELT 127 it was observed that, if the nature of work is examined with reference to contract, the work orders and designs and drawings, there could be no doubt that the work was of highly intricate, specialized, or technical nature and after the processes were undertaken by the appellant, the raw material consisting of beams, angles etc. got such shape and character that they could be readily fitted into structure”. It was noted that these observations were in the content of similar and identical products, purlins, trusses etc., and were in conformity with the present Central Excise Tariff Schedule. It was held that steel structural items before becoming part of immovable property had an essential character of complete and finished articles which were dutiable under heading 7308.90.

6.1 In Appeal No. E/2691/91, the show cause notice was issued on 25.10.89 to the appellant alleging that they manufactured and cleared steel structurals and other articles of iron and steel such as, stands, stringer, gantries, columns trestles, and various type of other structural items made out of MS columns, sections, beams, angles, plates, etc. involving central excise duty to the tune of Rs. 64,79,400.27 as detailed in Annexure B to the show cause notice without filing the classification list and determining and paying central excise duty thereon. The imputations were set out in Annexure A to the show cause notice. It was, inter-alia, mentioned in the imputations at Annexure A to the show cause notice that the Senior Engineer of the appellant had deposed that the appellant had manufactured at site the said item out of the raw material like beams, sections, angles, channels, plates, rods, etc. The process carried out on the raw material for the manufacture of these items were cutting, welding, jointing, drilling and assembling. They were manufactured as par the specific drawings and designs.

6.2 In Appeal No. E/4514/91, it was stated in the show cause notice dated 5.4.91 that the Engineer of the chemical plants of the appellant had in this statement dated 11.1.89, inter-alia, stated that the appellant had entered into a contract with IRCON to fabricate the steel structures and parts thereof at their works at village Hussainpur, and that the work was completed by December, 1988. He stated that they fabricated different members such as trusses, beams, purlins etc. at the site and subsequently transported/lifted them o the erection site. He further stated that these trusses after transportation, were mounted on columns, bolted and aligned with the neighbouring trusses and then finally welded. It was alleged in the show cause notice that the central Excise duty involved was Rs. 48,55,666.52. It was alleged that the appellant manufactured fabricated steel structures and parts thereof such as trusses, purlins falling under sub-heading 7308.90 of the tariff schedule.

6.3 In Appeal No. E/4796/91, as demand of excise duty to the tune of Rs. 54,397.78 was made on the ground that the appellant had suppressed that they manufactured steel structures and used them for erection of steel sheds as per annexure A to the show cause notice dated 30.1.91 issued to the appellant. The structure in question relatable to sub-heading 7308.90 of the Tariff was cooling tower along with other articles such as lifting bail, charging stand, charging bucket, ladle hanger etc. relatable to sub-heading 7326.90.

6.4 The appellants Appeal Nos. E/418-419/92 were called upon by show cause notice dated 26.4.90 to show cause why the excise duty amount of Rs. 4,68,502.90 should not be demanded from them on the ground that the appellants after manufacturing/fabrication had removed various types of steel structures for erection, installation, assembly, bolting and welding etc. for raising steel structures at various locations of site. In the show cause notice dated 29.10.90 issued to the appellant it was mentioned that columns, purlins, beams, rafters, glazing frames, crane girders, hoppers, bracings, gable runners, platform, hand-rails, gratings, walk-ways, stairs, gutter supports, ladders, railings etc. were tailor made in accordance with the drawings and specifications for making a structure of a specific need and were classifiable under sub-heading 7308.90. The demand of Central Excise duty to the tune of Rs. 15,99,844/- was made in the notice on that count. In the annexure to the notice, details in respect of the members of the steel structures were given under the heading “description of the goods-various members for the steel structures”. In the show cause notice dated 5.11.89 excise duty of amount of Rs. 6,39,633.55 was demanded on the similar grounds.

6.5 In Appeal No. E/2176/92, the Revenue issued show cause notice for Rs. 32,90,683.40 on the ground that the appellant had manufactured steel structures falling under sub-heading 7308.90 of the Schedule to the Tariff Act and removed them without payment of excise duty. The partner of the appellant had in a statement dated 26.12.89 stated that they had undertaken the fabrication work of steel structures and they had fabricated columns, trusses, beams, etc. as per the requirement of M/s. JCT Ltd. He categorically stated that they had fabricated columns, trusses, beams, girders etc. first on the ground that thereafter these were erected by taking them to the actual site of erection in the premises of JCT Ltd., Phugwara.

6.6 In Appeal No. E/4150-51/92 as per the show cause notice dated 31.7.91 given to the appellants, they had manufactured steel structures falling under heading 73.08 of the Schedule to the Tariff Act and removed them without payment of excise duty amount of Rs. 50,64,200.66. From the copy of the terms of the contract at Annexure B to the show cause notice, it appears that the scope of work included pre-assembly of fabricated structures i.e. structures fabricated by EMTICI and fabricated by Elecon and “dismantling the same, if required before stacking and erection”. Photos of pre-assembly wee required to be submitted. It was also stipulated the, “if is necessary to assembled the structures on the floor prior to final welding which ultimately will take care of rectification required if any clause 2(h). The fabrication of structures was done as per the drawings supplied by Elecon from time to time. The items to be fabricated at site were mentioned at Annexure II to the letter dated 2.2.88 and these included ladders, gantries, sliding frames, roof trusses, purlins and rafter bracings, walkway runners, hand rails, trestles, stools, lifting beams, columns, stair case with handrails, doors etc. In clause 7 of the contract, the scope of work was stipulated which included pre-assembly of structures and dismantling the same before stacking and it was indicated that it was advisable to assemble the structures on floor, prior to final welding.

6.7 In Appeal No. E/4371/92, demand was made for excise duty payable on fabrication of trusses, purlins, columns, angles etc. The Manager (Administration), Shri B.S. Kalsi had statement dated 15.10.2000 that they had fabricated steel structure in trusses, purlins, roofing frame work, columns, etc. in the premises of M/s. Mohan Fibre Products. According to him, the structural steel supplied “was first fabricated by doing certain processes like cutting to sizes and welding etc. and assembled according drawings supplied”. Thereafter, the fabricated trusses, purlins, roofing frame work were erected at the specified place according to the drawings and the terms of the contract. The demand of excise duty of Rs. 2,07,669.42 was made on the ground that structures of steel and parts thereof had been fabricated and used for erection of stands without payment of excise duty. According to the Revenue, he fabrication of steel structures like trusses, columns etc. was undertaken at site and the same were erected by manual labour.

6.8 In Appeal No. E/143/93, the demand of excise duty of Rs. 9,43,047.19 was made on the ground that the appellant had manufactured excisable goods, namely, parts of steel structures i.e. trusses, round sagred, inserts, rain water gutter, drop boxes, openable window, north light glazing, shutters, frame work partition, wind ties on roof and rain water pipes which were of the nature of goods capable of being bought and sold and falling under chapter 73 of the Schedule to the Central Excise Tariff Act.

6.9 In Appeal No. E/1244/92, a demand of excise duty of Rs. 23,20,258.74 was made in respect of manufacture of various structurals, namely, beams, columns, portals, pushings and various members of the structural fabricated at the site of the factory. The structurals were “first fabricated on the ground and then lifted by the help of derricks, hoists, etc. and installed”. Shri T. Bawa in his statement recorded on 8.8.99 had stated the he was a contractor in structural fabrication and that the process of fabrication involved marking, cutting, welding and assembling as per drawings. He stated that these items (structuals) were completely fabricated at site as per the process mentioned by him on the ground and lifted by derricks for erection. He stated that he felt that M/s. Elecon Engineering had to pay excise duty.

6.10 In Appeal No. E/1885/95, a demand of excise duty amounting to Rs. 3,22,195.99 was made on the ground that the documents and facts on record showed that the appellant had manufactured structures of iron an steel falling under sub-heading 7308.90 and cleared them without payment of duty as per the show cause notice dated 15.9.92. Similar demand pursuant to show cause notice dated 10.1.92 was made for a sum of Rs. 1,80,245.50. The excise duty amount demanded was 1,82,57,983.05, which related to the goods manufactured as per details at Annexure B to the show cause notice. During the course of the execution of the project, namely, coal handling plant, fabrication work was done at the site for erecting the plant.

Contentions on behalf of the Appellants :

7. It was contended on behalf of the appellants-assessees that conversion of various parts like angles, shapes, sections etc. into structures, will amount to manufacture, but if the structures emerge as an immovable property then no duty would be payable, since the test of marketability is not satisfied. It was submitted that even if the structures ere specifically mentioned in the Tariff Heading 7308 and the process amounted to manufacture, the product will not be dutiable because not duty is payable on structure which are immovable. Reliance was placed on Triveni Engineering Industries v. CCE reported in support of this contention. It was then argued that if the structures are movable and capable of being bought and sold as such, then they would be dutiable under heading 73.08. However, parts which form a part of immovable structure will not be considered as immovable and would be liable to duty. It was fairly submitted that the fact that the structure is immovable ipso facto would not mean that the parts are also immovable. The individual parts will be chargeable to duty if they satisfy the test of manufacture and marketability. It was submitted that this view was settled by the judgement of the Supreme Court in Triveni Engineering Industries wherein the turbo alternator and the steam turbine were held to be dutiable. As regards the dutiability of all parts like ,angles, sections, plates, etc., it was submitted that for the period prior to 1.3.88, the question as to whether conversion of bare angle was consistently held as not amounting to manufacture in the following decision :

(a) Aruna Industries v. CCE 1986 (25) ELT 380 Approval by Supreme Court in Waingaga Sahakare Karkhane v. CCE

(b) CCE v. SAE India (3 judges) Affirmed by Supreme Court in 1996 (84) ELT A48

(c) Standard Industrial Engg. Co. Ltd. v. CCE (3 judges) 1998 (38) ELT 196

(d) Steel Authority of India Ltd. v. CCE (3 judges) 1988 (36) ELT 316

(e) Pawar Construction v. CCE (2 judges) affirmed by Supreme Court in 2003 (153) ELT A296

(f) Sunflag Iron & Steel Co. v. Addl. CCE

(g) Gannon Dunkerely & Co. v. Union of India

(h) South India Structural Corporation Ltd. v. ACCE

(i) Union of India v. Bajaj Tempo Ltd.

(j) Kinetic Honda Motors v. Union of India

(k) Shapoorji Pallonji & Co. Ltd. v. Union of India Judgement of Bombay High Court dated 29.4.2005.

It was submitted that as per the above decisions, a consistent view as taken that prior to 1.3.88, being the date on which the Tariff Item 73.08 was brought into effect, the process of converting bare angle into prepared angle will not amount to manufacture. It was submitted that the decisions taking a contrary view in Structurals and Machineries Bokara Pvt. Ltd. v. CCE, Patna (3 judges), Arti Steels v. CCE reported in 2002 (144) ELT 360 and Richardson & Cruddas (1972) Ltd v. CCE reported in 1988 (38) ELT 176 (3 judges) were no longer binding because the Supreme court set aside the same and remanded the matter to the Tribunal and on remand, the Tribunal held by its Final Order dated 24.2.2004 that the process of converting bare angles into prepared angles did not amount to manufacture. It was then submitted that merely because specific excise entry was included, namely, Heading 73.08, that ipso facto does not mean that the process amounts to manufacture. The revenue has to further prove that the process undertaken amounts to manufacture and also that the result products are marketable. This contention was supported by the following decision :

(i) Moti Laminates Pvt. Ltd. v. CCE

(ii) Hyderabad Industries Ltd. v. UOI

(iii) Shyam Oilcake Ltd. v. CCE

(iv) UOI v. Ahmedabad Electricity Co. Ltd.

(v) Aman Marble Industries P. Ltd. v. CCE

(vi) CCE v. Markfed Vanaspati Allied Indus 2003 (153) ELT 491 (SC)

(vii) CCE v. SR Tissues Pvt. Ltd. 2005 (125) ECR 85 (SC)

(viii) CCE v. Technoweld Industries

It was submitted that as per these decisions, merely because there was a specific entry in the tariff, it does not mean that duty was payable, and that, only if the process amounts to manufacture and the product was marketable, that the duty would be payable. It was further argued that Heading 73.08 would apply in a situation where there is an integrated plant in which bare angles etc. are manufactured from ingots or billets, and thereafter bare angles are converted into prepared angles for use as structures in which event, though the process of converting bare angle to prepared angle did not amount to manufacture, duty was payable on prepared angle as, “latter the better principle’ will be applied in such cases in order to ensure that duty was paid on the entire value addition. Reliance was placed on the decision of the Supreme Court in Prabhat Sound Studio v. Additional CCE , UOI v. J.G. Glass Industries ltd. and Siddharth Tubes Ltd. v. CCE reported in 2000 (115) ELT 32 (SC), in support of this contention. It was submitted that in such a situation duty will be levied at both the stage, namely, at the state of bare angle and at the stage of prepared angle. Moreover, if prepared angles are imported as such then they will be chargeable to additional duties of Customs under heading 73.08 and therefore, the entry will not be redundant and will apply to the above situation. It was submitted that since the process of converting bare angles to prepared angles had been consistently held as not amounting to manufacture prior to 1.3.88, the same law will apply even for the period after 1.3.88 and that merely because specific entry was introduced w.e.f. 1.3.88 the process will not amount to manufacture. It was also submitted that even for the period after March 1988, the Madras High Court in South India Structural Corporation Ltd. v. ACCE reported in 1988 (102) ELT 13 (mad) had held that the mere process of converting bare angles into prepared angles will not amount to manufacture. It was submitted that this judgment of the Madras High Court was binding on this Tribunal even though the jurisdiction of that Court does not extend to Delhi. It was also argued that various processes undertaken for converting bare angles to prepared angles do not amount to manufacture since there is no change in the name, character and use of angles and there is no transformation of bare angle into a different commodity. It was submitted that for any product to be dutiable, be if final product or intermediate product, the test of marketability was required to be satisfied. He relied on the following decisions in support of this contention :

(a) Moti Laminates Pvt Ltd. v. CCE

(b) Union Carbide India Ltd. v. UOI

(c) Bhor Industries Ltd. v. CCE

(d) CCE v. Ambalal Sarabhai

(e) Hindustan Ferodo Ltd. v. CCE 1997 (89) ELT 16 (SC)

(f) Union of India v. Sonic Electrochem Pvt. Ltd.

It was further contended that the contracts of the appellants with their customers were for erection, fabrication of the entire structure which were raised as immovable properties. He argued that even if the customer who places an order for reaction of the shed is offered such prepared angles for sale, he will not accept the same and thus the test of marketability was not satisfied in the present case. It was submitted that the mere fact that the goods were captively consumed will not mean that they are marketable and that the department was required to lead further evidence, independently to show that the goods were marketable. It was submitted that no evidence was forthcoming in the present cases as regards marketability and therefore, the duty demand was not sustainable. It was argued that Rule 2(a) of the Rules of Interpretation was not relevant for charging of duty because there rules were relevant for classification and not on the aspect of excisability. It was submitted that the process of cutting, drilling holes, welding, punching, bending etc. did not amount to manufacture. It was argued that there was nothing to show that trusses, purlins, etc, are marketable items.

8. Contentions on behalf of the Revenue.

The learned authorized representatives for the department appearing in all these matters took us through the relevant record showing the nature of the articles fabricated and submitted that there were not cases where duty was charged merely on prepared angles. In all these cases, various structural items such as trusses, purlins, columns, beams, etc. were fabricated on the ground before erecting the structures at the site. It was submitted that having regard to the definition of “factory” in Section 2(e) of the Central Excise Act, “factory” means any premises including the precincts thereof, wherein or in any part of which, the excisable goods are manufacture or any manufacturing process connected with the production of these goods is being carried on and therefore, any premises where the manufacturing process is being carried on, would be “factory”. He submitted that if the manufacturing process was carried on near about the place where the structure was to be erected, then the process of manufacture will not cease to be such process on the ground that it was not being carried on in some premises registered as s factory under the Factories Act. He also submitted that the Hon’ble Supreme Court had remanded this group of appeal and other appeals setting aside the decision of the Tribunal, in which the earlier decisions of the Apex Court, High Court and the Tribunal were referred to and relied on, by observing that the Tribunal had failed to appreciate that there was a tariff heading 73.08 which made structurals exigible to excise duty and they were so exigible provided they are new identifiable goods that are the result of manufacture or processes and they are marketable. On the aspect of marketability, it was contended that it was as settled legal position that even one consumer can provide marketability for the goods. It was submitted that when such structurals are required to be sued for erecting the structure for which they are prepared, the person ordering the raising of such structure provides adequate market for such goods. It was submitted that the items specified in various show cause notices and the agreements for erecting the structures show that these various items came into existence by being manufactured in some cases near the site or elsewhere and thereafter they were used in erecting the structure. It was submitted that there articles like trusses, purlins, beams, columns, etc. were fist fabricated and thereafter taken to the site for ultimate installation. It was argued that the duty was asked on structures as they existed prior to such installation and not on any immovable property. It was submitted by referring to technical literature, that trusses, purlins, etc, were recognized as difference commercial commodities, and that the manufacturers of these commodities offered them for sale which shows that they were marketable. It was also submitted the same sub-heading 73.08 was also included in the Customs Tariff and customs duty was payable in respect of imports of such structurals which fact by itself shows that they could be traded and customs duty would be payable thereon as goods when imported. It was also submitted that there the goods were captively consumed, it should be presumed that they are marketable unless provided otherwise. It was further submitted that the Customs co-operation Council (now World Customs Organization) would not have dealt with these structurals covered under heading 73.08 unless the goods covered thereunder were internationally traded things. It was submitted that all over the world these structurals falling under heading 73.08 were recognized as commodities and that they are internationally accepted as separate commodity groups recognized in the harmonized system of classification evolved by the World Customs Organization. The learned authorized representatives, submitted that the word “truss” in civil engineering connoted series of triangular frames fabricated to support and strengthen a roof or bridge or other elevated structure and that it was not correct to say that trusses were not goods. He submitted that trusses were used in many kinds of machinery, such as cranes and lifts and in aircraft wings and fuselages. He pointed out literature showing that trusses and purlins were offered by the manufacturers as commodities. He also submitted that purlins were a known commodity used for supporting rafters.

8.1 In support of their contentions reliance was placed by the learned authorized representatives appearing for the Revenue on the following decisions :

(a) The decision of the Supreme Court in Empire Industries Ltd. and Ors. v. Union of India and Ors. reported in 1965 (20) ELT 179 (SC) was cited for the proposition that to constitute manufacture it is not necessary that one should absolutely make out a new thing, because it is well settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand, it is the transformation of a matter into something else and that something else is question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such. In other words, if by application of labour and skill and object is transformed to the extent it is commercially known differently, it will suffice to say that manufacture has taken place for the purpose of central Excise. The degree of transformation and skill spent are irrelevant. Therefore, the question whether a particular process is a process of manufacture or not, has to be determined having regard to the facts and circumstances of each case and having regard to the well-known test laid down by the Supreme Court in various decision (paragraphs 31, 33 and 37).

(b) The decision of the Supreme Court in Collector of Central Excise, Meerut v. Kapri International P Ltd. , was cited to point out that it was held that cutting of cotton fabrics from running length into small pieces and giving them a definite required shape which brings into existence new marketable commodity like bed spreads, table cloth and napkins etc., would be production of a new commodity which has a definite commercial identity in the market.

(c) The decision of the Supreme Court in Brakes India Ltd. v. Superintendent of Central Excise , was cited to point out that the Supreme Court upheld the decision of the Madras High Court holding that brake lining blanks purchased by the appellant, when put to process of drilling, trimming and chamfering can be said to be manufactured within the meaning of Section 2(f) of the said Act.

(d) The decision of the Supreme Court in Lal Woollen & Silk Mills (P) Ltd. v. Collector of Central Excise, Chandigarh , was cited to point out that the Supreme Court had observed that admittedly “dyed yarn” and “grey yarn” were covered by two separate distinct heads of tariff items with different duty and this itself recognizes that to be two different good with separate levy. It was held that in view of this, it cannot be urged that there is not manufacture of “dyed Yarn” from the “grey yarn”.

(e) The decision of the Supreme Court in Camlin Ltd. v. Commissioner of Central Excise, Mumbai reported in 2005 (180) ELT 307 (SC), was cited for the proposition that it was settled law that for a goods to be marketable it was not necessary that there must be actual instances of sale by the assessee. Marketability is essentially a question of fact to be decided on facts of each case and once it is shown that a product had actually been bought, marketability gets established.

(f) The decision of the Supreme Court in Collector of Central Excise, Kanpur v. Gayatri Glass Works , was cited to point out that it was held in paragraph 5 of the judgment that molten and broken glass arises at the stage of final manufacture of glass. Molten and broken glass is saleable, for a considerable value. It has utility, inter alia, in the manufacture of glass itself and that it was difficult in the circumstances, to hold that molten and broken glass fall outside the scope of Item 23A of the First Schedule to the Central Excise & Salt Act, 1944.

(g) The decision of this Tribunal in Appeal No. E/2386/88, was cited for the proposition that when multiple processes bring about a distinct product they would amount to manufacture for the purpose of the excise tariff and that the totality of process undertaken on the raw material, i.e. cold rolled steel strips brought about a product adapted to a particular use viz. steel strips or box strappings which had enhanced characteristics and a different utility and were widely known and used in the strapping market for industrial packaging application and, therefore, cold rolled strips were used only a raw material for the manufacture of tensile steel strippings known as “box strappings”.

(h) The decision of this Tribunal in Ajit India Pvt. Ltd., Madras v. Collector of Central Excise, Bombay/Madras reported in 1985 (19) ELT 541 (Tribunal) was cited for the proposition that the aluminium sections subjected to several processes resulted in bringing into existence complete door frames or window frames or other items and that the pieces are in CKD packs or ready-to-assemble condition and may be fitted at site only after some minor operation, such pieces would be called goods and such processes ‘manufacture’ and these goods would be classifiable under Tariff Item 68 and liable to duty.

(i) The decision of three Member Bench of this Tribunal in Structurals and Machineries (Bokaro) Pvt. Ltd. v. Collector of Central Excise, Patna was cited to point out that the Tribunal had in the context of Item 68 of the Central Excise Tariff held, in paragraphs 8 and 9 of the judgment that, finished goods known as purlins, trusses, etc. for erection of structures made out of raw steel as per intricate designs and specifications, must be held to be manufactured and the resulting product as goods and these cannot be called as isolated act of cutting or welding not changing the identity of the raw material. It was held that the analogy of pre-fabricated houses, here parts of pre-fabricated houses are so constructed as to be fabricated or fitted into a pre-fabricated house, can be applied to such products which are commonly known as structurals.

(j) The decision of the Supreme Court in A.P. State Electricity Board v. Collector Central Excise, Hyderabad , was cited for the proposition that the marketability of goods is essentially a question of fact to be decided in the facts of each case and there can be no generalization. The fact that the goods are not in fact marketed is of no relevance, and so long as they are marketable, they are goods for the purpose of Section 3. Even if there was only one purchaser of these articles, it must still be said that there is a market for these articles. The marketability of articles does not depend upon the number of purchasers not is the market confined to the territorial units of this country.

(k) The decision of the Supreme Court in Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad , was cited to point out that it was held in paragraph 10 of the judgment that when rules were amended, a fiction was created that any article produced or manufactured, if captively consumed was statutorily presumed to satisfy the test of marketability and this presumption could be rebutted if it was established that the article produced and captively consumed was neither that the article produced and captively consumed was neither goods nor marketable nor capable of being marketed.

(l) The decision of the Supreme Court in Dharampal Satyapal v. Commissioner of Central Excise, New Delhi, , was cited to point out from paragraph 19 of the judgment that the Supreme Court did not find any infirmity in the impugned judgment of the Tribunal which held that the compound (Lucknowri kimam) which was made by the assessee by use of “sala kimam” bough by the assessee as raw material and blending it with saffron, perfumes, methol etc., was marketable and classifiable as chewing tobacco or a preparation for chewing tobacco under Chapter sub-heading 2404.49/2404.40.

(m) The decision of the Delhi High Court in Taylor Instrument Co. Ltd. v. Commissioner of Income Tax and the decision of the Bombay High Court in Consolidated Pneumatic Tool Co. (India) Ltd. v. Commissioner of Income Tax were cited for the proposition that the binding authority of a High Court does not extend beyond its territorial jurisdiction.

(n) The decision of the Allahabad High Court in Agra Metal Perforators v. Commissioner, Sales Tax reported in 1981 (48)STC 378 (Alld), was cited to point out that it was held that after perforation, the iron sheet emerges as a different commercial commodity and that a perforated iron sheet cannot be used for purposes for which plain iron sheet can be used. It was observed that a perforated iron sheet cannot be restored to its original shape and thus, it was a different commercial commodity.

(o) The decision of the Supreme Court in state of Tamil Nadu v. Pyare Lal Malhotra reported in 1983 (13) ELT 582 (SC), was cited to point out that the Supreme Court in paragraph 13 held that, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which had altered the identity of the commercial commodity, has taken place.

(p) The decision of the Supreme Court in Commissioner of Central Excise, Jaipur v. Hindustan Zinc Ltd. , was cited for the proposition that it is settled law that for a product to be marketed there need not be actual purchase or sale and so long as a new and distinct commodity known has come into existence there is manufacture. Thus, where headers were attached in order to see that lead and aluminium sheets become positive and negative electrodes so that current can pass through them, it amounted to manufacture of a new product.

(q) The decision of the Supreme Court in Pefco Foundary Chemicals Ltd. v. Collector of Central Excise, Pune was cited to point out that it was held by the Supreme Court that the processing undertaken in the assessee’s factory to render the cylinder liner as fully machined resulted in changing the goods from crude cast iron in size and shape to an identifiable commodity. The duty of excise is on manufacture of a goods and not on its use.

Reasons :

9. The Tariff Heading 73.08 relates to structures (excluding pre-fabricated buildings that fall under Heading 94.06), parts of structures of the types illustrated in the parenthesis, and articles prepared for use in structures of iron and steel. It is a trite thing to state that the excisable goods covered by this Heading 73.08 under their description in column 3 do not include immovable structure. The heading obviously includes structures, parts of structures, or articles prepared for use in structures in their state of moveability when they are excisable goods. The liability that may arise on manufacture of structures, part so structures or articles prepared for use in structures cannot vanish by fixing them on a structure embedded in land and making them a part of immovable property such as constructed sheds. In all these cases, the fabricated iron and steel structures or parts therefore have been already used by erecting the designated structures. Admittedly, there is not any case, in these appeals, of excise duty being charged on mere “prepared” angles, rods or tubes etc. which are not used in erecting the structures. The fabricated goods have already been used in erecting the designed structures in all cases, as stated before us on behalf of both the sides.

9.1 Lengthy arguments were advanced on the footing as if excise duty was being charged on mere angles, rods, sections, tubes etc. which were the raw material, simply because there was process of cutting or drilling involved which by itself may not amount to manufacture. On scrutiny of the show cause notice and other record, it becomes clear that all these cases were on the question evasion of excise duty that became payable on the structure, parts of structures when they were fabricated and used thereafter for erecting the designed structure. It is only for the purpose of valuation of the parts of structures used in erecting the designed structure, that the quantities of raw material such as angles rods, tubes, plates etc. used for the purpose and their value were considered for working out the duty evasion. The entire exercise of projecting the matter as if mere angles, rods, tubes or plates that went into the making of the designed structures, were being subjected to excise duty is misconceived and misleading.

9.2 Out of the parts of structures illustratively enumerate din the parenthesis of Heading 73.08, “bridges, and bridge sections” fall under sub-heading 7308.10, “doors and lattice masts” under sub-heading 7308.20, and props and similar equipment for scaffolding, shuttering out pit-propping under sub-heading 7308.40. The remaining enumerated item, i.e. lock-gates, roofs, roofing framework , bal0ustrades, pillars and columns as well as all other like articles not enumerated, but are pars of structures of iron or steel, will fall in the residuary sub-heading 7308.90 – “Other”.

9.3 As per the explanatory notes in respect of Heading 73.08, this heading covers complete and complete metal structures as parts of structure. We may reproduce hereunder the explanatory note which gives an indication as to the type of structures or parts of structures or prepared members for use in structures are included in this heading :

“This heading covers complete or incomplete metal structures, as well as part of structures. For the purpose of this heading, these structures are characterized by the fact that once they are put in position, they generally remain in that position. They are usually made up from bars, rods, tubes, angles, shapes, sections, sheets, plates, wide flats including so called universal plates, hoop strip, forgings or castings, by riveting, bolting, welding, etc. Such structures sometimes incorporate products of other headings such s panels of woven wire or expanded metal of heading 73.14. Parts of structures include clamps and other devices specially designed for assembling metal structural elements of round cross-section (tubular or other). These devices usually have protuberances with tapped holes in which screws are inserted, at the time of assembly, to fix the clamps to the tubing.

Apart from the structures and parts of structures mentioned in the heading, the heading also includes products such as :

Pit head frames and superstructures; adjustable or telescopic props, tubular props, extensible coffering beams, tubular scaffolding and similar equipment; sluice-gates, piers, jetties and marine moles; lighthouse superstructures; masts, gangways, rails, bulkheads, etc, for ships; balconies and verandahs, shutters, gates; sliding doors, assembled railings and fencing; level-crossing gates, and similar barriers; frameworks for greenhouse and forcing frames, large-scale shelving for assembly and permanent installation in shops, workshop, storehouses, etc., stall and racks, certain protective barriers for motorways, made for sheet metal or from angles, shapes or sections.

The heading also covers parts such as flat-rolled products, “wide flats” including so-called universal plates, strip, rods, angles shapes, sections and tubes, which have been prepared (e.g., drilled, bent or notched) for use in structures.

The heading further covers products consisting of separate rolled bars twisted together, which are also used for reinforced or pre-stressed concrete work.”

9.4 The Schedule to the Excise Tariff Act contains rules for the interpretation of the Schedule. As pr Rule 2(a) of the Rules of Interpretation even incomplete or unfinished goods having essential character of the complete or finished goods are included in relation to the goods referred in any tariff heading. This applied even to the parts of structures and articles prepared for use in structures of iron or steel.

9.5 The system of nomenclature which is universally adopted covers the same articles of Heading 73.08 even in the context of the Customs Tariff, which means that they are internationally considered as commodities which can be traded and, therefore, are goods. The International Convention on harmonized System an Coding System was adopted to provide a uniform nomenclature developed by the World Customs Organization (WCO). It comprises about 5,000 commodity groups, each identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification. The system is used by more than 190 countries and economies as a basis for their customs tariffs and for the collection of international trade statistics. Over 98% of the merchandise in international trade is classified in terms of the HS.

9.6 The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade. It is also extensively used by governments, international organizations and the p4ivate sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade. The Harmonized System is governed by ‘The International Convention on the Harmonized Commodity Description and Coding System’. The official interpretation of the HS is given in the Explanatory Notes published by the WCO. The Explanatory Notes are also available on CD-Rom, as part of commodities actually traded internationally.

10. There can be no dispute over the proposition that immovable property, be it immovable steel structure embedded in earth or a constructed building, cannot be subjected to excise duty which applies to excisable goods, i.e. to movables. In the making of an immovable structure or building are used a variety of moveable. Raising iron and steel structures like sheds involves fabrication work and many of the articles used in raising the structure come into existence through fabrication as per the pre-determined design to be fitted into the structure that is to be raised. For example, roof frame may be fabricated for the roof structure of a shed. Such fabrication of frames may be done at the construction site or at some factory premises. The iron and steel frames fabricated at the factory premises away from the site of construction would be brought to the site for their use in erecting the structure. The frames pre-fabricated and brought at the site and frames fabricated the site of erection both are goods manufactured. There will be variety of parts of structures of iron and steel that can be fabricated either at the site or at some factory premises away from the site. The iron and steel raw material, such as angles, plates, tubes, etc., are used in making part of structures and they acquired a distinctly different shape to suit the structural design. For example, if iron or steel angles and plates are cut to make a steel table or chair which can be dismantled, it cannot be said that there are no goods manufactured because the iron and steel angles or plates remain such angles and plates though of different sizes, and merely holes are punches and screws fitted. Unlike in liquid mixtures, the raw material of iron and steel or wood will retain their identity, but it is precisely their being cut, and designed, punched and fitted to make an article commercially known that involves manufacture of an article distinct from the angles, sheets, tubes etc. used in it. Mere drilling holes or mere cutting jobs in isolation may not by themselves involve manufacture of an article, but, converting raw material like angles, tubes, plates etc. to bring about a distinct commodity will surely amount to manufacture as it is not “mere” drilling holes or cutting, but the activity is aimed at bringing about a distinct commodity. Thus, making of porta cabin from iron and steel angles with, roof framework i.e. trusses, doors, windows, laddes in it made by drilling holes and cutting the raw material, will be a moveable structure having identity as a distinct marketable commodity. When the porta cabin is dismantled it nonetheless remains the manufactured products i.e. porta cabin dismantled or disassembled. The material such as angles, rods, shades, sections plates, tubes, etc. of such designed structure in their pre-assembled or disassembled form are prepared for use in the said structure, namely porta cabin. One cannot, with any conviction or authority, say that these dismantled parts of the structures are raw material used in its original form and that mere cutting or drilling holes has made no difference. The items in the parenthesis of Heading 7308 described as excisable goods include roofs roofing framework, doors, windows and their frames, thresholds for doors, shutters, pillars, column, bal-ustrades pillars, sheets of iron and steel, each one of these items has a complete distinct identity. The contractor undertaking the works contract for erecting a structure may not himself manufacture all such items used for structure. He may order the doors and windows to be made by a particular manufacturer and roof framework by the other, depending on the specialization and expertise of the manufacturer of different items. The contractor may supply designs and raw material for various parts of structures and get the work done on job work basis. To save time and expenses he may get the fabrication done at the site of construction instead of getting it done at some distance in a factory. When the required parts are they will be fixed as per the designed structure and will continue to be moveable object until made immovable by permanently fixing them in the designed immovable structure. To say that no parts of the structures came into existence as distinct commodities because ultimately they got permanently fixed into an immovable structure will run counter to the legislative intent to impose excise duty on such excisable goods at a stage when they have a separate identity as marketable goods anterior to their being permanently fixed in the immobile structure.

10.1 It has been said in Aruna Industries (supra) by the Hon’ble Member (Technical) in the oft coated passage that, “there are no such goods as trusses, columns, purlins….A truss is only a frame. The steel members of a truss may be items of merchandise, but a truss never….A truss does not form a recognizable article of commerce in the same way an angle or channel does because a truss is only a function which a steel member article performs when placed in a position obtained by the engineer” With respect, the erudite language projects the meaning of ‘truss’ as a verb and ignores it as a noun. While, as a verb the word “truss” would mean to tie-up or bind tightly and therefore, doing of such ting may not be a recognizable commercial article when used as a noun the word ‘truss’ denotes a rigid framework designed to support a structure. When one speaks of ‘truss’ in the context of Tariff Heading 73.08 as an excisable article, it necessarily means the framework called ‘truss in civil engineering, fabricated for use in a structure to support its roof. In architect or and structural engineering, a ‘truss’ is a structure consisting of straight slender member connected at joints. In order for a ‘truss’ to be rigid, it must be composed entirely of triangles. Such trusses are statically determinate; because the stress in each and every member can be completely determined once we know the external loads and the geometry of the truss. It is widely known that there are leading manufacturer of steel building products, including roofings, walling, gutters and fascias, frames, and trusses, purlins, flooring and structural framework having distribution centers and assuring on time delivery. Structural products include a huge range of purlins in C and Z profiles for use as roof purlins or wall girts all cut to length. A snap-in purlin bridging system for quick installation was also widely known.

11. Thus, when a truss is fabricated a distinct article is brought into existence different from mere raw material, namely angles or tubes used in making of the truss. Large industries have thrived in the manufacture of trusses and purlins of use in the erection of steel structures and there is a huge market world over for such products as is clear from the advertisement issues by the manufactures of iron and steel structures such as stramit roofing, walling, rain water and structural products referred to during the hearing. Truss prices are listed on the websites for various spans of trusses with delivery information, by those dealing in building supplies.

11.1 It is, therefore, difficult to view that trusses which are rigid framework to support roofs, bridges, cranes, etc, have no existence as a recognizable item of commerce “because a truss is only a function” as opined by the Hon’ble Member (T) in paragraph 26 of the judgment in Aruna Industries (supra). The mix-up of the expression “truss” as a transitive verb and the use of the word truss as a noun denoting rigid frame work in the engineering world is more than obvious and the error has unfortunately percolated in several subsequent decision that have followed Aruna Industries (supra). For the foregoing reasons, we cannot and, therefore, do not subscribe to that view and hold that trusses, purlins, and similar parts of structures are commercial articles having distinct character and identity than the raw material used for fabricating them, in the field of structural engineering. As noted above, purlins are articles distinct from raw angles, and C and Z types of purlins are well known in the field of structural engineering manufactured as marketable commodities.

11.2 One more aspect needing clarification in the context of the applicability of the ratio of Aruna Industries (supra) needs to be emphasixed. One of the points for determination in that case, as reflected in paragraph 13 of the judgment was, “whether the place where ‘manufacture’ had taken place was a factory with in the meaning of Section 2(m) of the Factories Act?”. This was an issue relevant in the context of those appeals because, placing reliance on the notification 46/81-CE which exempted goods, falling under the residuary item 68, other than those manufactured in a “factory”; and the explanation to the notification, in terms indicated that the word ‘factory had the meaning assigned to it in clause (m) of Section 2 of the Factories Act, 1948. The Revenue had contended that steel structural which were fabricated at the work, site allotted to the contractors and were shifted to the project site for the erection of the shed were goods, different from and having a distinct character and use as compared to the raw materials and attracted duty under the residuary Tariff Item 68. The contention raised on behalf of the appellants-assessees was that there was no manufacture involved and trusses, purling etc., made as per designs and drawing acquired their names only after fabrication (paragraph 9). It was further contended that there was no manufacture in a “factory”, and that exemption notification No. 46/81envisaged goods other than those manufactured in a factory. The duty paid material was handed over and as per the contract the processing was carried out at the site and there was, therefore, no manufacture in a “factory”. In the context of these contentions, it was held in paragraph 20 of the judgment:

“From the facts of the present case, it is clear that the shed was erected stage by stage and step by step right from the foundation till the fabrication of the roof’. In paragraph 22 of the judgment it was held that even assuming that there is a manufacture, we have to find out if the goods were manufactured in a factory. The explanation to Notification No. 46/81 indicated that he expression “factory” has the meaning assigned to it in clause (m) of Section 2 of the Factories Act. It is common case that the respondents erected the structures on the site allotted to them by VSP. It was urged on behalf of the respondents that an open yard could never be a factory. In AIR 1962 SC 29 (Ardeshir H. Bhiwandiwala v. State of Bombay (now Maharashtra) it was held that the expression “premises” must not be restricted to mean building and be taken to cover open land as well. In the at case, even the salt works were treated as factory. But on the facts of the present case, we have already held that the assesses were only erecting a construction and that they were fabricating the materials on the spot. In the case of Engineering Construction Corporation (Criminal Rev. 267/78) the Hon’ble Gujarat High Court has held that the provisions of the Factories Act would not apply. To a similar effect is the decisions of 1962 (1) LLJ SC 427 (supra), the decision of the Madras High Court in LPA 22-24/74 (ESIC V.K. Ramachandran), it was held that construction workers who put up the additional constructions have no similar nexus with the factory as they are birds of passage and the moment they completed the construction they are out of the picture. In the present cases, the workers were merely birds of passage and cannot be considered as workers working within the factory”.

In paragraph 23 of the judgment, it was held that, “Even assuming that the respondents are manufacturers since the goods are not manufactured in a factory under Section 2(m) of the Factories Act or cleared from a factory, the provisions of the Central Excise Rules could not apply”.

11.3 The residuary Tariff Item 68 as it existed at the relevant time and the exemption notification No. 46/81-CE dated 01.03.1981 which granted exemption from the whole of the excise duty to the goods other than manufactured in “factory” as defined in Section 2(m) of the Factories Act which were relevant for the decision in Aruna Industries (supra) are reproduced below: –

Tariff Item : 68 – All other goods, NES

“All other goods, not elsewhere specified, manufactured in a factory but excluding-

(a) alcohol all sorts including alcoholic liquors for human consumption;

(b) Opium, Indian hemp and other narcotic drugs and narcotics; and

(c) dutiable goods as defined in Section 2(c) of the Medicinal and Toilet preparations (Excise Duties) Act, 1955.

Explanation – In this item, the expression “factory” has the meaning assigned to it in Section 2(c) of the Factories Act, 1948/”

(Emphasis added.)

Notification No. 46/81-CE

Exemption to goods other than the goods manufactured otherwise than in a factory- in exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in suppression of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 85/79-Central Excise, dated the 1st March, 1979, the Central Government hereby exempts all goods, falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944), other than goods manufactured in a factory, from the whole of the duty of excisable livable thereon.

Provided that nothing contained in this notification shall apply to sandal wood oil.

Explanation – In this notification, the expression ‘factory’ has the meaning assigned to it in clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948).

2. This notification shall come into force with effect from the 1st day of April, 1981].

[Notification No. 46/81-CE, dated 01.03.1981 as amended by Notification No. 92/81-CE dated 01.04.1981 and No. 74/83-CE, dated 01.03.1983]”

It is the above exemption notification on the basis of which structural in Aruna Industries and group of other appeals which were fabricated at the site of the construction and not any factory as defined in Section 2(m) of the Factories Act, were found to be not liable to excise duty. The definition of the word “factory” as given in Section 2(m) of the Factories Act, 1948, is reproduced below: –

“2(m) “factory” means any premises including the precincts thereof –

(i) Whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on or;

(ii) Whereon twenty or more workers are working or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on –

but does not include a mine subject to the operation of [the Mines Act, 1952 (35 of 1952] (335 of 111952), or a mobile unit belonging to the armed forced of ht Union, railways running shed or a hotel, restaurant or eating place.

[Explanation (I) – For computing the number of workers for the purposes of this cause all the workers in [different groups and relays] in a day shall be taken into account]

[Explanation II – For the purposes of this clause, the mere fact that an electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof, shall not be construed to make it a factory if no manufacturing process is being carried on in such premises or part thereof;]”

11.4 Thus, as per the notification 46/81 dated 01.03.81 read with Tariff Item 68, the goods which were manufactured at the site of the construction i.e. otherwise than in a factory as defined in Section 2(m) were exempted from the whole of duty of excise leviable thereon which means that excise duty was payable only in respect of the goods manufactured in a “factory”, as defined in clause 2(m) of Section 2 of the Factories Act, 1948. The said notification which was issued in the context of Item 68 of the First Schedule to the Central Excise and Salt Act, 1944, no longer operated in the context of the provision of Heading 73.08 of the Tariff Act, 1985. In other words, so far as the Tariff Heading 73.08 is concerned, the said notification of exemption to the goods manufactured otherwise than in a “factory” as defined in Section 2(m) of the Factories Act, became wholly irrelevant and by virtue of the definition of the word, “factory” in the Central Excise Act, excisable goods manufactured even on an open site were to be treated as manufactured in a factory. This will be clear from the definition of the word “factory” in Section 2(e) of the Central Excise Act, which is reproduced hereunder and which would be applicable in the context of the provision of the said Act:-

“Section 2(e) – Factory means and premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on”

11.5 The decision in Aruna Industries (supra) was in respect of structural manufactured in open site i.e. otherwise than in a factory as defined in Section 2(m) of the Factories Act, which were exempted from excise duty under the said notification issued in the context of the Tariff Item 68. The First Schedule which contained Tariff Item 68 was omitted by Section 4 of the Central Excise Tariff Act, 1985. The ratio of the decision in Aruna Industries and all other decision which have followed it has to be viewed in the background of the exemption notification issued in respect of goods manufactured otherwise than in a “factory” as defined in Section 2(m) of the Factories Act and the Tariff Item 68 of the First Schedule which was omitted

11.6 We may now refer to the contention that Aruna Industries has been affirmed by the Supreme Court in Commissioner of Central Excise, Nagpur v. Wainganga Sahakari S. Karkhana Ltd. (supra). The order made by the Supreme Court in Wainganga is reproduced hereunder:

“Order: – The Tribunal was concerned with whether making trusses, columns, and purlins amounted to manufacture. The Tribunal followed an earlier decision in Aruna Industries, Vishakhapatnam v. CCE, Guntur it did not follow another decision in the case of structural and machineries (Bokaro Private Ltd. v. Collector of Central Excise, . It is submitted on behalf of the Revenue that there are conflicting views taken by the Tribunal and that such conflicting views have been taken even after the impugned order. In one of these subsequent judgments, in the case of Richardson & Cruddas (1972) Ltd. v. Collector of Central Excise, 1988 (38) ELT 176, the case of Aruna Industries (supra) has been considered and found to be applicable to a situation where the assessee was erecting the structures at the construction site and fabricating materials on the spot; it was, therefore, found that this could not be considered to be fabrication in a factory. Now, in the instant case, the Tribunal noted that it had been found as a fact by the Collector that the assessee has undertaken fabrication work at site. This was a case, therefore, to which the decision of Aruna Industries (supra) applied and the Tribunal’s order cannot be faulted.” [Emphasis supplied]

It will be noticed that Hon’ble the Supreme court held that the decision of Aruna Industries applied to the case before it because it was found as fact by the Collector that the assessee had undertaken fabrication work at site and not in a factory. It is, therefore, obvious that the question whether fabrication work was done in an open site or in a “factory”, as defined in Section 2(m) of the Factories Act having become irrelevant in the context of Heading 73.08, the ratio in Aruna Industries would not on that count be applicable in respect of fabrication work done in an open site, having regard to the provisions of the said Act including the definition of “manufacture” in Section 2(f) and “Factory” in Section 2(e) of the said Act red with Heading 73.08 of the First Schedule to the Tariff Act. It would therefore, be incorrect to assume that the decision the Supreme Court in Man Structural approves the ratio of the decision of the Tribunal in Aruna Industries on the question of manufacturing process involved, which arises in the context of Heading 73.08 for decision by this Tribunal pursuant to these matters having been remanded by Hon’ble The Supreme Court after setting aside the decisions earlier given in these appeals in which the ratio of Aruna Industries was followed.

12. As noticed hereinabove, the first part of Tariff Heading 73.08 deals with structures and part of the structures of the nature, which are enumerated in the parenthesis and which are made of iron and steel, while the later part refers to the articles named therein which are prepared for use in structures of iron and steel. Bridges and bridge-sections, Towers and Lattice masts.

Doors, windows and their frames and thresholds for doors, Props and similar equipment for scaffolding, shuttering or pit-propping, are items from those enumerated in the parenthesis, falling under sub-heading 73.08.10, 73.20, 7308.30 and 7308.40. The article mentioned in the Parenthesis are only illustrative and indicated by ways of examples. Roofs, roofing framework, shutters, bal-ustrades, pillars, columns which are also in the parenthesis are not mentioned in the aforesaid sub-heading and they would, therefore, fall in the residuary sub-headings 7308.90 – “Other”, and, these too would be considered to be illustrative and not exhaustive so for as the said residuary sub-heading is concerned. The later part of the Heading 73.08 refers to plates, rods, angles, shapes, tubes and the like, prepared for use in structures of iron or steel in respect of articles other than those mentioned in the parenthesis and which are prepared from these members for use in structures of iron or steel. The question whether they would be included in the residuary sub-heading “Other” in sub-heading 7308.90 would obviously depend upon the fact whether they are prepared for use in structures and have acquired independent identity in their movable state before being permanently fixed in the structure like the items mentioned in the parenthesis while is illustrating parts of structures. We have hereinabove, while referring to the demand of duty made from the appellants, referred to the nature of the part of structures which were first fabricated on the ground and thereafter were used in the designed structure which was erected by permanently fixing them in such structures. All these had acquired their identity before they were so permanently fixed and as observed above, they are well known in the market as separate commodities. Their state of being movables, being parts of structures fabricated for the purpose of being used in the erection of a structure, came to an end only after they were permanently fixed in the structure. The liability to pay duty, that had arisen at the time when they were manufactured as parts of structures had however, crystallised, and it was possible to ascertain the same even after they got fixed by referring to the quantities of the raw material that went into making them for the purpose of ascertaining their value. Therefore, any enquiry into the raw material used was only for the purpose of ascertaining the value of the parts of the structures which were already fabricated at the site, ands was not an enquiry for imposing excise duty on the raw material, i.e. members such as angles, plates, etc. It was an enquiry to ascertain the value of the parts of the structures which were fabricated such as trusses, ladders, doors, windows, columns, beams, rafters, glazing frames, crane girders, hoppers, bracings, gable runners, platform, hand-rails, gratings rails, walk-ways, stairs, gutter support, ladders, railings etc. We have already noted the contractual terms and the relevant statements which clearly indicate that the parts of the structure were first fabricated on the ground and thereafter they were used for erecting the designed structures. In our opinion, all these parts of structures which were fabricated were distinct marketable commodities the existence of which was brought about by the process of manufacture as defined in Section 2 (f) of the Act. These were not simply members such as angles, etc., with holes or cut to a different size, but he process was undertaken to bring them into a particular commercially known shapes and assemble them for that purpose as per the designs and having fabricated them, to use them for permanently fixing them in the structures which were to be erected as per the design under the works contracts.

13. There can be no dispute over the proposition that it is always open to the assessee to prove that even though the goods in which he was carrying on business were excisable goods being mentioned in the Schedule, they could not be subjected to duty as they were not goods either because they were not produced or manufactured by it or if they had been produced or manufactured they were not marketed or capable or being marketed, as laid down in Moti Laminates P. Ltd., by the Hon’ble the Supreme Court. It is a settled law that, for the product to be marketable there need not be actual purchase or sale. So long as a new and distinct commodity known in the market has come into existence their is manufacture. In A.P. State Electricity Board , the Supreme Court in paragraph 10 of the judgment after considering the earlier decision of the Court, held that the “marketability” is essentially a question of fact to be decided in the facts of each case and there can be no generalization. The fact that the goods are not in fact marketed is of no relevance. It is also not necessary that the goods in question should be generally available in the market. Even if the gods are available from one source or from a specified market, it makes no difference so long as they are available for purchasers. It was also held that even if there was only one purchaser of these articles, it must be held that there is a market for these articles. The marketability of these articles does not depend upon the number of purchasers nor is the market confined to the territorial limits of the country. The work of fabricating parts of structures such as trusses, etc, referred to hereinabove, is a regular feature in the field of construction of sheds and other structures in which such parts of structures can be used. When such parts of structures are required to be used in the structure which is to be erected for which they are prepared, the person ordering the raising of such structure, in or opinion, provides an adequate market for such goods.

13.1 Commodity-character in the concept of marketable commodity is transitory relationship between the goods and the buyers. The goods during their passage, sometimes through several hands from the possession of the first into the possession of the last owner, are commodities, but, as soon as they have reached their economic destination in the hands of the ultimate consumer, they obviously cease to be marketable commodities and become “consumption goods” as opposed to the concept of “commodity”. Differences in the marketability of commodities is phenomenon of a far reaching practical importance. Marketability of commodities has its own limitation. Marketability of gods is limited with respect to the persons to whom they can be sold. The owner of a commodity does not have the power to sell it to any person of his choice. The owner has no choice of selling his commodity to persons who have no requirement of it, who are prevented by legal or physical circumstances from purchasing it, or who have no knowledge of the availability of the offer. The marketability of commodities is also limited with respect to the area within which they can be sold. For a commodity to be sold in any one place, it is also necessary that there must be a number of persons to whom it can be sold, that there be no physical or legal barrier to its transportation to that palace or to its being offered there for sale, and that the cost and expenses of transportation shall not exhaust the gain that can be derived from the expected opportunity to sell. There are commodities, which as a result of spatially limited requirements for them, can be sold only in a single town or village, others that can be sold only in a few provinces, some only in a certain country, others in all civilized countries, and still others that can be sold in all the inhabited parts of the world. Again the marketability of a commodity is restricted quantitatively to the requirement for tit that have still to be met and the quantitative limits of marketability are remarkably different for different goods. Commodities are also limited in their marketability with respect to the time periods in which they can be sold. Thus, there are goods for which requirements exist only in winter; others for which they exist only in summer; and in respect of perishable goods marketability gets restricted to a narrow time period. The marketability of commodities is restricted sometimes to greater and sometimes to smaller number of persons, and within sometimes narrower and sometimes wider spatial, temporal, and quantitative limits. Several factors limiting the marketability of commodities will have a multiple weight wherever commodities are transferred from hand to hand, from place to place and from one time period to another. Commodities whose marketability is restricted to a small number of persons, whose area of sale is limited, which can be preserved only for a short time, which can be brought to market only in strictly limited quantities at any one time, or whose price are subject to fluctuations, etc., may all retain some degree of marketability within certain limits, but they are not capable of circulating freely. Moreover, commodities that must be specially fitted to the need of the consumer to the usable at all, are not saleable in equal degree in the hands of every owner. Thus the concept of marketability in the context of marketability of parts of steel structures of the above nature falling under Heading 73.08 cannot be viewed through a hawker’s eye. Hawking in its traditional sense, where the hawker moves with the goods screaming for the attention of potential customers, cannot be applied to the marketability of such structures or parts of structures, unless the concept of hawking itself is widened to include “E-hawking”. The customer in the context of such product is the person who places the order for fabrication of such parts of structure to be raised by entrusting the contract to the manufacturer of such structural or by itself engages workers on job basis to get them manufactured. Such customers provide adequate marketability to the moveable structures and part of structures falling under heading 73.08 which remain excisable goods until they are permanently fixed to become part of some immovable structure. Therefore, in our opinion all the above items fall under Heading 73.08 are marketable commodities.

14. When a part of structure is prepared and disassembled, the members thereof will be angles, rods etc., prepared for use in such structure.

These are not angles, or plates merely cut or drilled without reference to a particular structure. The later part of Heading 73.08 would apply to the members such as plates, rods, angles, etc., that are prepared for use in structures or their parts in their pre-assembled or dis-assembled state of an identifiable article of the types of the part of structures covered under Heading 73.08.

Answer to the question referred:

15. For the foregoing reasons, we are unable to accept any of the contentions raised on behalf of the appellants and we answer the question referred to us as under:-

(i) The immovable iron and steel structures not being goods will not fall under Heading 73.08 of the Excise Tariff.

(ii) The structures or parts thereof mentioned in the parenthesis of Heading 73.08 illustrating parts of structures namely, bridges and bridges-sections, lock-gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, bal-ustrades, pillars and columns, as well as parts of structures such as, trusses, purlins, columns, beams, rafters, glazing frames, crane girders, hoppers, bracings, gable runners, platforms, hand-rails, grating rails, walk-ways, stairs, gutters supports, ladders, gantries, railings, portals, pushing’s, round surged, inserts, drop-boxes, windties, framework partitions, north light glazing, sliding frames and the like articles in their movable state will be subject to excise duty under Heading 73.08, notwithstanding their getting permanently fixed in the structures.

(iii) The plates, rods, angles, shapes, sections, tubes, and the like prepared for use in structures of the types covered under the Heading 73.08, as aforesaid, will also be excisable goods subject to duty in their pre-assembled or disassembled state.

16. The reference stands disposed of accordingly. The appeals will now be placed before the appropriate Division Bench for disposal.