1. The point for decision in this matter is whether certain Coolers installed by the Life Insurance Corpn. office at Raipur by obtaining the Exhaust Fans and Tully Pumps separately on payment of installation charges to a local company on job basis, would be liable to Central Excise duty.
2. Shri S.K. Gupta, Advocate for the appellants stated that the appellants are a corporation which is a Public Sector Undertaking and their essential function is to undertake life insurance. Carrying on manufacturing business of any kind, is in no way their function. In the instant case, they had purchased exhaust fans and water lifting pumps from a firm in Kanpur and fitted them in a cabinet and installed them in Raipur office. Shri Gupta submitted that this process of installation of the exhaust fans and lifting pumps cannot make the appellants manufacturers of evaporative type of coolers. They have said that it is well-known that their function is life insurance and not manufacture of coolers. According to the appellants, Excise duty is leviable only on goods manufactured by a. person carrying on the business of manufacture of the said goods. Business implies continued occupation of a person in a particular activity for the purpose of deriving profits, benefits etc. and a Central Excise duty is only payable by a person who is engaged in the business of manufacturing goods. It cannot be held that the Life Insurance Corporation is engaged in the manufacture of water coolers.
3. It has also been pointed out, on behalf of the appellants, that the coolers installed by them are sought to be charged to duty tinder Tariff Item 29A(2), which reads as follows : "Air-conditioners and other air-conditioning appliances, which are ordinarily sold or offered for sale as ready assembled units, including package type of air-conditioners and evaporative type of coolers." 4. It is pointed out that as per the wording of the above sub-item of the Tariff, there are two conditions to be fulfilled before a product can be charged to duty ; firstly, they should be ordinarily sold of offered for sale and, secondly, that they should be so sold as ready assembled units. In the instant case, the evaporative type of coolers are not being offered for sale as ready assembled units by the Life Insurance Corporation. In this connection, the decision of the Hon'ble Allahabad High Court in the matter Mother India Refrigeration Industries (P) Ltd. v. Superintendent of Central Excise and Ors.-Civil Misc. Petition No. 472 of 1976, decided on 24-11-1978 1980 E.L.T. 600 (All.) was cited. As per this decision, the central idea underlying Entry 29A is that the dutiable article must be ready assembled unit, which is ordinarily sold or offered for sale. Thus, if a person erects a unit with his own ingenuity that is not liable to duty.
5. Shri Lakshmikumaran learned SDR, has submitted before us that in view of the fact that it is admitted by the Life Insurance Corporation that evaporative type of coolers have been installed by them in their office by separately getting exhaust fans, water pumps etc. and assembling them on payment to a local contractor, it is clear that they were manufacturers of the final goods i.e. coolers. It is pointed out that according to Section 2 of the Central Excises and Salt Act "manufacturer" includes not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account. Shri Lakshmikumaran said that it is not correct to interpret that a manufacturer is one who is continuously engaged in the business of manufacture of certain products. In the light of Sections 3 and 6 of the Central Excises and Salt Act, the appellants had undertaken manufacture of excisable goods and they were required under the Rules to take out Central Excise licence as well as to pay duty on the goods manufactured.
6. It was added on behalf of the Department that the Special Bench B of Customs, Excise and Gold (Control) Appellate Tribunal have themselves held in the case of Orissa Construction Corporation Ltd., Bhubaneshwar v. Collector of Central Excise, Bhubaneshwar--Order No. B-567/83-B, dated 10th June, 1983, (1983 E.L.T 2382) that for the interpretation of Section 2(f) of the Central Excises and Salt Act, 1944, open market sale or standardised mass production is not necessary; nor is ownership of the raw materials or even finished products decisive in determining whether a manufacture had occurred or not. If a manufacturer had brought into existence the product either for himself or for others, by transforming the raw materials into finished goods having a distinct name, character and use, it cannot be said that no manufacture, as envisaged by Section 2(f) of the Central Excises and Salt Act, 1944, had taken place.
7. We have carefully considered the submissions made on both sides. On behalf of the Department, it has been stated that the assembling of Exhaust fans and Tully pumps for installing coolers amounts to manufacture and also that it is not necessary that a manufacturer should be continuously engaged in the business of manufacture for profit and that a manufacturer in terms of Section 2 of the Central Excises and Salt Act includes a person who engages in production or manufacture on his own account. The Department have cited in their favour the decision of CEGAT in the case of Orissa Construction Corporation in which it was held inter alia that open market sale or standardised mass production is not necessary to establish the excisable character of the goods. We find that this aspect of the matter has been dealt with at length and adequately in the judgment of the Hon'ble High Court of Allahabad in the case of Mother India Refrigeration Industries. In this decision, it was held that under sub-items (1) and (2) and Entry 29A of the Central Excise Tariff only such refrigerating and air-conditioning appliances, which are ordinarily sold or offered for sale as ready assembled units, are liable to duty. It is essential, in the first instance, that they should be manufactured as ready assembled units and, secondly, that they should be sold or offered for sale as such. It followed from this decision that, if such appliances are erected by a person from his own effort and for his own use through assembly of different parts, the product will not fall within this Entry and would not be liable to duty, as such appliance would be neither ready assembled unit nor sold or offered for sale as such. The Hon'ble Allahabad High Court took note of Tariff ruling issued by the Central Board of Excise and Customs, which also supports this interpretation. Referring to the argument that the duty leviable under the Excise Act is not the event of manufacture and that the purpose or the object of manufacture is irrelevant and that, further, that it is immaterial whether the article is manufactured for the purpose of sale or consumption or even destroyed, it was held by the Hon'ble Allahabad High Court that while this proposition is generally true under the Excise Act, but when an entry in the schedule specifically refers to and restricts, the applicability to duty to goods which are ready assembled units and which are generally offered for sale, the concept of sale is necessarily brought in. We are of the view that it is hardly possible to take a view different From the views expressed in the above decision of the Hon'ble High Court of Allahabad in so far as interpretation of the scope of sub-item (2) of Entry 29A of the Central Excise Tariff is concerned.
8. It may be added that there may be millions of consumers spread along the length and breadth of the country, who, during summer, are taking recourse to installing coolers in their residences and offices by purchasing separately exhaust fans and pumps and hiring the services of ordinary carpenters for constructing the wooden cabins and putting up the same. It is inconceivable that we should have a pattern of Excise Levy which should treat the residences of millions of ordinary citizens as factories and subject them to the requirements of declaring their premises for taking out a Central Excise licence, maintaining excise records and taking clearances on payment of duties on gate passes, etc.
It is precisely for this reason, no doubt, that while drafting the relevant Tariff Item, sale or offer for sale as ready assembled units was made a pre-condition for charge of duty.
9. Accordingly, we allow the appeal and consequential relief to the appellants.
10. Under sub-item (2) of Item 29A of the CET, air-conditioners' and other air-conditioning appliances which are ordinarily sold or offered for sale as ready-assembled units are liable to Central Excise duty. It is no body's case that the subject goods were ordinarily sold or are offered for sale as ready-assembled units. When the tariff uses the words 'ordinarily sold or offered for sale', definite intention must be attributed in use of these words. When this ingredient is lacking in respect of subject goods, it would not be proper or legal to assess them under this sub-item. It has not been suggested or argued that the subject goods would be liable to duty under some other item of the tariff. With these observations, I agree with the conclusion recorded by brother Anand-that the appeal should be allowed.