Judgment:
1. Shri K.K. Banerjee, ld. Adv., appearing for the appellant submits that the duty has been confirmed against the appellants on kilns/furnaces constructed or set up in the premises of the customers during the financial year 1992-93,1993-94 and 1994-95.
2. The appellants' factory was visited by the Central Excise officers on 2-9-1994 who conducted various checks and verifications. Documents/ records pertaining to the purchase orders for the kilns/furnaces were also seized by the officers. After a lapse of about two and a half years from the date of visit, show cause notice dated 16-4-1997 was issued by the Commissioner of Central Excise, Calcutta-I alleging that the appellants had manufactured kilns/furnaces in its factory and removed the same in knocked down condition from their factory.
Accordingly notice proposed to confirm demand of duty on the said kilns/furnaces by classifying the same under Heading 8514.00 and 8417.00. Longer period of limitation was invoked by alleging suppression of facts and wilful mis-statement with an intention to evade payment of duty. The said show cause notice was adjudicated by the Commissioner vide his impugned order dated 24-11-1997 confirming demand of duty of Rs. 34,43,835/- along with interest under the provision of Section 11AB of the Central Excise Act. An equivalent amount of personal penalty was also imposed under Section 11 AC of the Act.
3. Shri Banerjee submits that the kilns/furnaces constructed by the appellant are tunnel kilns which are long narrow kilns (72 M in length, 2 M in width, 6 M in height and 3 M below the floor) that are hottest in the middle through which ceramics/refractory bricks, etc., travel on cars. Such type of kilns are constructed by fixing steel frame on the foundation to the earth. Such foundation goes below the ground level and then layering the inside wall of the structure with refractory bricks, like building. Photocopies of such kilns are enclosed. The appellant in its factory fabricated some steel items for the frames or structures of the said kilns/furnaces. The said frames were taken to the sites of the said customers. Majority of the machinery/items/ components were purchased from external sources and were sent either direct to the site or routed through the factory of the appellant. The appellant did not pay any duty on the steel structures, like columns, trusses, roofing frames, etc., since not 'goods' within the meaning of the Central Excise Act, 1944 (in short the Act) and not marketable.
Even otherwise, the value of such steel structures was much below the exemption of Rs. 30 lakhs as envisaged in the Notification No.175/86-C.E., dated 1-3-1986 or 1/93-C.E., dated 28-2- 1993, as the case may be.
4. In view of the foregoing Shri Banerjee strongly argues that the type of kilns/furnaces constructed at the customer's site has not been appreciated by the Commissioner. It would appear from the photocopies that the said kilns/furnaces cannot be manufactured and thereafter taken to the site in unassembled condition. They come into existence as a result of foundation of structures and masonry works, like building.
These cannot be dismantled from one place and reassembled in another place. A permanent foundation is to be laid on the ground. Thereafter further erection work is to start. Such furnaces/kilns can never come into existence before construction step-by -step or stage-by-stage.
When after construction, kilns come into existence these become immovable, therefore, not 'goods' within the meaning of the Act. The Supreme Court in the case of Quality Steel Tubes (P) Ltd., reported in 1995 (75) E.L.T. 17 (page 9) has held that plant and machinery embedded to earth, structures, erection and installation are not excisable goods since they do not pass the twin test of being capable to be bought and sold in the market. The Supreme Court again in the case of Mittal Engg.
Works (P) Ltd., reported in 1996 (88) E.L.T. 622 (page 14) has held that plants and installation not liable to duty. In a recent decision the Supreme Court in the case of Triveni Engg. & Indus. Ltd., reported in 2000 (120) E.L.T. 273 (page 19) after relying on the decision of Mittal Engg. Works (P) Ltd. and Quality Steel Tubes (P) Ltd. (supra), the Supreme Court observed as under :- "The marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into its components - turbine and the other alternator - but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional".
That the impugned kilns/furnaces were/are not goods since immovable and as such not dutiable, in support the following cases are relied upon :- 5. Shri Banerjee further submits that the fabricated items, i.e.
portions of the structure fabricated at the factory cannot be regarded as goods since the same are not capable of being marketd. Reliance is placed on the following cases :- 6. As regards inspection clause in the purchase orders M/s. Indo Flogates Ltd., the Commissioner purportedly observed that if the kilns were not manufactured in the factory of the appellant there would have been no such clause in the purchase order. The purchase order related to inspection of equipment purchased from external sources. It does not speak of inspection of kilns/furnace at the factory. In any event the Commissioner has failed to consider the nature of the impugned kilns before arriving at the conclusion that kilns were manufactured at the factory of the appellant.
7. Shri Banerjee also assails the order on limitation. Imposition of personal penalty under the provision of Section 11 AC and charging of interest under Section 11AB has also been assailed on the ground that the said sections came into effect from 28-9-1996 and cannot be pressed into services for the period prior to the said date.
8. Shri R.K. Roy, ld. JDR, appeared on behalf of the Revenue and submits that the duty has not been charged on the entire kilns, but on the parts manufactured by the appellant.
9. After giving our careful consideration to the issues involved and after going through the impugned order we find that the adjudicating authority in Para 3.2 has observed that "again, I find that the noticees' argument that the Revenue has sought to levy excise duty on immovable properties or turnkey project is mis-placed. The notice is quite explicit in this regard. Duty has been demanded on equipment manufactured and supplied in knocked down/semi assembled condition for which specific delivery notes were issued and invoices raised." A reading of the above paragraph would show that the nature of the basic dispute is not clear. If the appellants' contention that the duty has been demanded on the kilns/furnaces constructed by them at the site of their customers is accepted then we find that the issue is no more res integra and has been settled by the recent decision of the Hon'ble Supreme Court in the case of Triveni Engg. & Indus. Ltd. - 2000 (120) E.L.T. 273. The appellants have taken a specific stand that the kilns/furnace comes into existence during the course of erection and construction of the same. The photographs showing the kilns have also been placed on record. As such we agree with the ld. adv. that the kilns being an immovable property attached to earth cannot be said to have been manufactured in the appellants' factory and cleared in knocked down condition inasmuch as what has been cleared from the appellants' factory is the various structures/components to be used in the manufacture of kilns at the appellants' factory. However, as pointed out earlier this basic dispute i.e. whether the duty has been demanded on the entire kiln or on the various parts manufactured by the appellants is not clear, we set aside the impugned order and remand the matter to the Commissioner for fresh adjudication. We make it clear that if the duty is being demanded on the kilns/furnaces, the same would not be sustainable in view of the Supreme Court's decision in the case of Triveni Engg. and Industries Ltd. Similarly no duty can be demanded in respect of the bought out parts, either sent directly to the customers' premises or routed through the appellants' factory. As regards the goods manufactured in the appellants' own factory they have contended that the same are not goods and in any case the value of the same would be within the exemption limits provided under Notification No. 175/86 or 1/93. Since there are no separate findings of the Commissioner on this point and in view of non-clarity of basic dispute as pointed out in the preceding paragraphs we are constrained to set aside the impugned order and remand the matter to the Commissioner for de novo adjudication in the light of the observations made by us in the preceding paragraphs. The appeal is thus allowed in above terms.