Judgment:
1. This is an application filed by M/s Indian Oil Corporation Limited praying for waiver of pre-deposit of Central Excise duty amounting to Rs. 26,52,878.00 and equal amount of penalty imposed under Section 11AC and another penalty of equal amount imposed under Section 1730 of the Central Excise Rules.
2. Shri M. Chandreshekharan, ld. Sr. Advocate submitted that the petroleum products are stored in huge tanks having capacity varying from few Hundred Kilo litres to Thousands of Kilo litres depending upon the requirements that they awarded the contracts for designing construction, procurement, erection, testing and commissioning of Bulk Oil Storage Depot at Sagar (Madhya Pradesh) to M/s Engineering Project (India) Ltd. [EPIL]; that the contract comprised of fabrication, erection and installation of 9 M.S. Storage tanks the capacity of which varied from 510 Kls to 3060 Kls and the width and height varied between 10 Mtrs and 7 Mtrs to 14 Mtrs and 20 Mtrs respectively: that M/s EPIL in turn entered into Works contract with M/s Arunoday Steel Industries (ASI) whereby the entire work relating to fabrication and installation of the 9 tanks was awarded to M/s ASI: that M/s ASI are independently engaged in the manufacture and sale of Tanks, vessels etc., having their factory at Bhandup: that in pursuance of the contract, M/s ASI fabricated and erected the 9 Storage thanks at site: that as the tanks have been fabricated by M/s ASI, they are the manufacturer and if any Central Excise duty is leviable, it has to be levied on M/s ASI: that the legal position is well settled in view of a catena of judicial pronouncements that a person who actually undertakes the manufacturing activity is liable for the payment of Central Excise duty and reliance was placed on the decision in the case of Techma Engineering Enterprises Vs Collector [1987 (27) ELT 460]. He also submitted that M/s ASI were not their hired labour as they are independently engaged in such fabrication activity: that the applicants were not involved in any aspect of the fabrication and there was no supervision by them at all: reliance was placed on the decision in the case of Citroflex Pvt.
Ltd., V/s Colletor of C. Excise [1998 (103) ELT 319]. The ld. Sr.
Counsel further submitted that the tanks are being fabricated of brick-by-brick principle and a completely manufactured tank does not come into existence at all prior to installation in an identifiable from: that these tanks are very huge in size and once the fabrication is complete, the tank becomes imbedded to earch, a part of immovable property and hence cannot be considered to be "goods" at all; that the pre-condition of marketability has not been satisfied by the Department in the present matter and the duty cannot, therefore, be charged on the tanks. Reliance was placed on the decision in the case of Dempo Engg.
Services Vs Collector of C.Ex. & Customs, Goa [2000 (117) ELT 328] wherein it was held that fabrication of steel structures and roofing systems by process of drilling, welding and fasting does not amount to manufacture. He further mentioned that the reliance of the adjudicating authority on the decision in the case of Sirpur Paper Mills Ltd. Vs.
Collector [1998 (97) E.L.T. 3 (S.C.)] is entirely misplaced inasmuch as in the present case, tanks do not emerge till installation and the bolting thereof to the civil foundation is not merely with a view to secure maximum operational efficiency and safety, but to meet the statutory requirements and to remain as a permanent structure once for all. Reliance was also placed of the decision in the case of Municipal Corporation of Greater Bombay Vs Indian Oil Corporation Ld. [JT 1990 (4) SC 533]. He finally said that notice was issued on 16.12.1998 and the relevant date for the purpose of Section 11A was considered to be 24.03.1994 that is the day on which the tanks were allegedly handedover to them by M/s EPIL; that in fact all the tanks had come into existence much prior to March 1994 and if M/s ASI and EPIL were only hired labourers, the question of considering any date of so called handing over of the tanks as relevant date does not arise; that bills raised by M/s ASI are much before the date of 24.03.1994 and as such the demand is beyond the period of five years.
3. Opposing the prayer, Shri M.P. Singh, ld. DR submitted that M/s ASI have submitted in their reply to the show-cause notice that they are the hired labours for the manufacture of goods from materials supplied by M/s EPIL on behalf of M/s IOC and the duty should have been paid by M/s IOC who were the primary manufacturer; that M/s EPIL submitted in their reply to the show-cause notice that they were appointed by M/s IOC as Project Management consultant for design, procurement and construction of the Oil Storage Depot and they were neither manufacturers nor the owners of the fabricated tanks; that IOC reserved the right to terminate the contract in case the progress of the work was delayed; that IOC had supplied the machinery for fabrication of the impugned tanks and, accordingly, they are to be considered as "manufacturers" and the duty has to be demanded only from them. He further mentioned that out of the raw-material supplied during that period, the commodity has come into existence and as such duty under Central Excise Act becomes levied. On the question of limitation, the ld. DR contended that making of payment is not the criteria for considering that the product has been manufactured as payment can be made in advance also; that the goods are liable to duty only when they are actually put to use captively. In reply, the ld. Sr. Counsel mentioned that it is entirely wrong statement to say that the necessary machinery for fabrication of the tanks was provided by the applicants.
4. We have considered the submissions of both the sides. The applicants have made out a strong prima facie case in their favour inasmuch as there is no rebuttal of their submissions that the impugned tanks were fabricated brick-by-brick and the tank does not come into existence prior to installation. Further, they have also made out a strong prima facie case on the question of "who is to be considered manufacturer of the tanks". Accordingly, we waive the requirement of pre-deposit of entire duty and penalty and stay the recovery of the same during the pendency of the appeal.