2004 (97) ECC 140 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri V.K. Agrawal, Member (T) and Shri P.S. Bajaj, Member (J)

Indian Tube Mills &
Metal Industries Ltd. & Anr.

Versus

CCE, Jaipur

Appeals No. E/3254-55/2003-NB(C)

[Arising out of Order-in-Original No. 74/2003, dated 2.7.2003 passed by the Commissioner of Central Excise, Jaipur]

Final Order No. 359-60/2004-NBC, dt. 18.5.2004, Certified on 2.6.2004

Excisability

Duty demand & Penalty -- SCN issued in respect of 8 tanks allegedly manufactured and cleared without payment of duty -- Duty & Penalty confirmed in respect of one storage tank on the ground that it was smaller in size than other 7 tanks and could be removed from one place to another -- Held this tank was also fabricated at the site following the same process as carried out for 7 other tanks & embedded to earth permanently & could not be brought to market without dismantling -- Hence, finding of impugned order holding the one tank in dispute, as excisable goods, cannot be legally sustained -- Impugned order set-aside -- Appeal allowed with consequential relief.

PRESENT :

Shri Arun Khosla, Adv. for the appellants.

Shri Kumar Santosh, SDR for the respondent.

Cases Cited :

1. Bhawanapura Sugar, 2001 (47) RLT 409 (Trib).................................................. [Para 5]

2. Triveni Engg. & Industries Ltd. v. CCE, 2000 (71) ECC 225............................... [Para 5]

Per : P.S. Bajaj

The above captioned two appeals have been directed against the common Order-in-Original vide which the Adjudicating Authority has confimed duty demand of Rs. 66,925 with equal amount of penalty and interest, against the company -- Appellant No. 1, and also imposed personal penalty of Rs. 1 lakh on Appellant No. 2 -- the Vice President of the Company. The duty demand alongwith penalty has been confirmed against the company for having manufactured and cleared one mild steel/Carbon steel storage tank without payment of duty. On appellant No. 2 penalty has been imposed under Rule 209-A being the Vice President of the Company who facilitated the company in the evasion of the duty on that storage tank.

2. The learned Counsel has contended that show cause notice was issued in respect of 8 tanks which were allegedly manufactured and cleared by the appellants without payment of duty, and 7 out of those had been admitted by the adjudicating authority to be not excisable goods but erred in demanding duty in respect of one storage tank on the ground that it was smaller in size than other seven tanks and could be removed from one place to another. He has also contended that all the tanks were constructed at the fertilizer plant site of M/s Chambal Fertilizer and Chemical Ltd. (CFCL) and permanently embedded to earth and as such, no tank irrespective of its size, height or diameter could be removed from one place to another and as such, one tank could not be singled out and treated as excisable goods. He has also contended that benefit of Notification No. 67/95 dated 16.3.95 exempting the capital goods from payment of duty when used in the factory of production, has been wrongly denied to the appellants in respect of tank in question. He has further contended that benefit of the Board Circular dated 15.1.2002 allowing exemption to the goods including the tanks had been wrongly denied to the appellants. He has referred to the Tribunal's Final Order dated 28.10.2003 in the case of M/s New Constructions and Ors. in which M/s Chambal Fertilizers Ltd. was also a party and vide which the Tribunal allowed the benefit of the above cited Notification No. 67/95 dated 16.3.95 and set aside the order of the adjudicating authority raising the duty demand in respect of the goods involved therein i.e pipes, fittings, etc. and also penalty confirmed against them. The impugned order therefore, deserves to be set aside.

3. On the other hand, the SDR has reiterated correctness of impugned order.

4. We have heard both the sides and gone through the records. From the record, it is quite evident that the company -- Appellant No. 1 is engaged in the manufacture of mild steel/carbon steel storage tanks. The company M/s Chambal Fertilizer and Chemical Ltd. (in short CFCL) set up its fertilizer plant in Gadepan (Kota) in January 1994. However, the expansion of that plant was undertaken by that company and awarded work for the same to one M/s Toyo Engg. Corporation (TEC) and that company awarded sub-contract to the appellants for fabrication of 8 mild steel/carbon steel tanks at the site. Out of those 8 tanks to be erected by the appellants, under the sub-contract, three were of 30 Mtr dia x 18 Mtr Height, two of 22 Mtr Dia x 12 Mtr Height, while one was of 38 Mtr Dia x 18 Mtr Height and other two were of 9.8 Mtr Dia x 6.5 Mtr and 3.5 Mtr dia x 3 Mtr heights, respectively, as is evident from the material brought on record and the statement of Appellant No. 2 which was recorded on 30.12.98 during the investigation of the Central Excise officers. All these tanks after fabrication were installed and embedded to earth permanently at the site by the appellants. The process of fabrication of these tanks at the site carried out by the appellants as disclosed by them in the reply to the show cause notice and not contested by the Department, was as under:

"The plates were cut to size by gas cutting to sizes, as per drawings; Bottom plates were placed on foundation piece by piece and welded by manual metal arc welding. Thereafter, shell plates which were bent to the required curvature and erected on the bottom plates, were welded to each other by same manual metal arc welding. After this process, one shell tier core was erected and welded to the shell plates. After all shell plates were welded, floating roof plates were put inside the tanks and welded to form a floating roof. The Nozzle pipes with flanges were welded on shell plates for connecting pipes to the tank. This method was followed by the appellants for fabrication of floating roof tanks. In a case of fixed cone -- roof tanks, roof structures were erected one by one on the top shell course and welded to form an umbrella. On that roof structure, roof plates were erected and roof manholes and nozzle pipes with flanges were welded on the roof plates for connecting pipes and safety valves, levels gauges etc."

5. From the above referred process, it is evident that the tanks had been fabricated and embedded to the earth permanently. The tanks could not be removed without totally dismantling them. The Adjudicating Authority itself in para 26 of the impugned order regarding 7 out of the total 8 tanks fabricated by the appellants at the site, has observed as under:

"The tanks were of huge size having diameter and height ranging from 9.8 Mtr x 6.5 Mtr to 36 Mtr x 18 Mtr with the capacity ranging from 400 Cub Mtr to 18000 Cub Mtr./10000 Mtr. These tanks were erected at the site and after completion thereof, it did not appear possible to move them physically as these size of the tanks remained huge enough and on sale/disposal of these tanks, these were to be dismantled and sold as metal sheet/scrap. Therefore, these tanks were not movable and could not be brought to the market for sale or purchase and could not be considered as excisable goods. While making case observations, the adjudicating authority has relied upon the ratio of the law laid down in Triveni Engg. & Industries Ltd. v. CCE, 2000 (71) ECC 225 : 2000 (120) ELT 273 as well as in M/s Bhawanapura Sugar, 2001 (47) RLT 409 (Trib)."

6. After making above referred observations and following the ratio of law laid down in the above referred two cases, the Adjudicating authority has dropped the duty demand in respect of the 7 tanks but singled out one tank and confirmed the duty in respect thereof on the simple ground that it was similar in size than the other 7 tanks and could be moved from one place to another. But had lost sight of the fact that this tank was also fabricated at the site by following the same process as carried out for seven other tanks and embedded to earth permanently. It could not be brought to the market without dismantling, in that very condition, it could be taken out from the site as sheets scrap. Moreover, this tank though smaller in size with diameter 3.5 Mtr x 3 Mtr height was fabricated as per the drwing for its use in the plant, and installed and embedded to earth as was done in the case of other 7 tanks. Therefore, kipping in view all the facts and circumstances, detailed above, the tank in question could not be held to be excisable goods and the benefit of ratio of law laid down in the above two cases could not be denied in respect thereof, by the adjudicating authority. Similarly, benefit of Board Circular dated 15.1.2002 allowing exemption from duty excisability, to the plant, machines, erection, fabrication of pipes, tanks, etc. when embedded to earth permanently and removable only after dismantling, also could not be denied to the appellants in respect of disputed tank in question. Therefore, the findings of the impugned order of the adjudicating authority holding the one tank in dispute, as excisable goods, cannot be legally sustained. No demand could be raised in respect of this tank also.

7. Since the duty demand is liable to be set aside on the above discussed ground, the issue of availability of benefit of Notification No. 67/95 dated 16.3.95 allowing exemption from payment of duty in respect of capital goods when used within the factory of production, as claimed by the appellants, is not required to be gone into.

8. In the light of what has been discussed above, the impugned order is set aside. The appeals of the appellants are allowed with consequential relief, if any, permissible under the law.

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