1. By this appeal the appellants viz. Tata Iron & Steel Company (ISCO) challenge the Order-in-Original No. 58/Commissioner/2001 dated 29.11.2001 passed by the Commissioner of Central Excise, Jamshedpur by which the Commissioner has confirmed a duty demand of Rs. 16,63,777.25 (Rupees Sixteen lakhs, sixty-three thousand, seven hundred seventy-seven and paise twenty-five) under Rule 9(2) read with proviso to Section 11A(1) of the CE Act, 1944 and equal amount of mandatory penalty under Section 11AC of the CE Act, 1944 in addition to same amount of penalty under Rule 173Q (1), Rules 9(2) and 52A of the CE Rules, 1944. He has also ordered for charging interest under Section 11AB/11AA of the Act. He has also confiscated the goods viz. staircases weighing 590.583 MTs valued at Rs. 1,10,91,848.36 with option to redeem the same on payment of fine of Rs. 22,00,000 (Rupees twenty-two lakhs).
2. After hearing the parties, the operative portion of the order allowing the appeal was pronounced in the open Court on 26.3.2003.
3. The brief facts of the case are that TISCO are one of the leading steel manufacturers in the country. During the modernization Phase 3 programme in the Steel works, they set up a Hot strip Mill, a LD-2 Mill (steel making furnace) and a Slab casting shop in the said Steel work.
The setting up of the mill involved inter alia, substantive structural steel work including fabrication and erection work at site. Structural work involving fabrication and erection at site as described in the various work orders were undertaken by five reputed contractors engaged by them on principal to principal basis on the terms and conditions specified in the said work orders. Proceedings were instituted against the appellants by issue of show cause notice alleging that TISCO during the period from July 1993 to March 1995 have manufactured 590.583 MTs of ladders and staircases, at their three mills namely Slab casting Shop LD-2 and Hot Strip Mills falling under sub-heading 7326.90 of the CETA, 1985 and removed the same for captive consumption without payment of Central Excise duty amounting to Rs. 16,63,777.25 @ 15% ad valorem in contravention of provisions of Rules 49, 43, 52A, 173B, 173C and 173G of the erstwhile CE Rules, 1944 and the proceedings culminated in the order impugned as noted above. The appellants assail the impugned order inter alia on the following grounds: (1) There was no manufacture of any excisable goods in the fabrication and erection at site of the said goods within the meaning of CE Act, 1944. This view is now settled by the judgment rendered by the Supreme Court in the case of CCE v. Wainganga Sahkari S. Karkhana Ltd., 2002 (82) ECC 457 (SC) : 2002 (50) ELT 125 (SC).
(2) The goods formed part of the respective mills for which they were constructed, erected and installed. They were specifically designed only to meet the requirement in the respective three mills as part of building structures and to specifically fit therein. The goods were tailor made and could not be marketed as such. No evidence has been brought by the Revenue that the goods in question were marketable as the goods were useless for any other purpose than the installation and erection for particular shop and/or were fully incapable for sale to any other consumer in the market inasmuch as no other person did or could have any use thereof. There is no proof that the goods were allegedly brought and sold in the market and could be bought by common man and used as ladders and stair cases in his house/shop or office or other establishments. The goods were fabricated for and were erected in the respective mills of the Steel work and were not only still situated therein at the same place where they were erected and installed but were also used exclusively in the respective mills.
(3) The goods could not be removed by dismantling for use elsewhere and the goods came into existence as a part of entire structural steel work under item No. 1 of Group A of the respective work orders. Further, the fixation of the goods by fastening and grouting to earth was essential for the said goods to be made functional and as such the goods became immovable property and hence the goods could not be held as excisable goods.
(4) The onus to prove marketability of any particular product before it can be held that the same is liable to duty or leviable to duty under the Act is on the department. This burden has not been discharged by the Revenue.
(5) The Explanatory notes as contained in Heading No. 73.08 of the HSN, it would be seen that the heading covers complete or incomplete metal structures as well as parts thereof. On page No. 1108 of the HSN, it is stated that "For thp purpose of this heading, these structures, are characterised by the fact that once they are put in position they 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 some times incorporate products of other_heading such as panels of woven wire or expanded metal of heading 73.14' (6) The Commissioner has failed to appreciate the meaning as given in the HSN notes nor the meaning of the term "structure" as is known in common parlance. Even according to the Dictionary meaning, "Ladder" is a structure consisting of a series of bars or steps.
Therefore, the definition of the term "Ladder" as set out by the Commissioner in para 4.9.1 and 4.9.2 supports the appellants' contention.
(7) According to Notification No. 61/90-CE dated 20.3,90 as amended by Notification No. 41/94-CE dated 1.3.93 the subject goods were exempt from payment of d uty as the Notifications exempted goods falling under Chapter sub-heading 73.08 from payment of Central Excise duty if such goods are fabricated at site of work for use in construction work at such site. In the present case, the goods undisputedly have been fabricated at site of work and used thereafter there in the act of constructing the building structures i.e. the Mills as referred to above.
(8) The appellants were entitled to Modvat Credit in respect of the duty paid on the inputs amounting to Rs. 6,86,501.34. However, they could not claim the benefit because the final products were not dutiable nor excisable. Once it was held by the Commissioner that the goods are excisable then the Commissioner ought to have extended the benefit of Modvat Credit. But this has not been done.
(9) Mandatory penalty under Section 11AC cannot be imposed for the reason that the Section itself came into being with effect from 29.9.86 whereas the period involved in this case was from 7/93 to 3/95.
(10) The Commissioner has imposed combined penalty equal to the amount of duty under Rules 9(2), 52A and 173Q. But there is no justification for imposition of any penalty on the appellants.
4. Dr. Samir Chakraborty, learned Counsel assisted by Shri Abhijit Biswas appeared for the appellants and re-iterated the grounds of appeal. Dr. Samir Chakraborty invited our attention to the work order copy of which is filed at page 10, 11, 12, 14, to 16 of the paper book.
He submitted that the ladders and staircases fabricated at site are attached to the earth and the items have become an immovable property and are thus non-excisable. He has also invited our attention to para 2.0 of the show cause notice that the contractors had carried out the work entrusted to them against the purchase orders/work orders issued by the appellants under specific terms and conditions. He has pressed into service the judgment in the case of UO1 v. Sonic Electro Chem (P) Ltd., 2002 (145) ELT 274, para 9 in particular, wherein it is held that ".....manufactured item must be commercially known product to be marketable". He submitted that the contractors engaged by the appellants are all reputed contractors and are not hired labourers. The learned Counsel also cited the following case laws in support his plea for allowing the appeal:CCE Nagpur v. Wainganga Sahkari S. Karkhana Ltd., 2002 (82) ECC 457 (SC) : 2002 (50) RLT 125 (SC) wherein it was held that Trusses, Columns and Purlines, fabricated at site are not manufactured items.
(b) Agauta Sugar & Chemicals v. CCE, Meerut, 2001 (43) RLT 779 wherein it was held that where supplier of parts assembled turbo generating set in appellants premises on job work basis, the job worker and not the appellants to be treated as manufacturer.India Cements Ltd. v. Additional Commissioner of Central Excise, 2000 (117) ELT 131 wherein it was held that merely because the appellants supplied two basic raw materials, namely steel and cement to contractors and the items were produced at the project site which belonged to appellant, it does not follow that the appellants are the manufacturer.
(d) Voltas Ltd. v. CCE, Guntur, 2002 (144) ELT 108 wherein it was held that relationship between appellant-contractor and sub-contractor, being on principal to principal basis and not by hired labourer, sub-contractor using his own machines, sub-contractors to be the real manufacturer and not the appellant.Dempo Engg. Services v. CCE, 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, within the meaning of Section 2(f) of the CE Act.Ujagar Prints v.UOI, 1988 (18) ECC 435 (SC) : 1988 (38) ELT 535, Pawan Biscuits Ltd. v.CCE, 2000 (70) ECC 653 (SC) : 2000 (120) ELT 24 (SC), Triveni Engineering & Industrial Ltd. v. CCE, 2000 (71) ECC 225 (SC) : 2000 (40) RLT 1 (SC), formica India Division v. CCE, 1995 (8) RLT 273 (SC), Genset India Ltd. v. CCE, 1998 (62) ECC 299 (T) : 1998 (28) RLT 772 (T), and in the case of CCE v. India Hume Pipe, 1999 (109) ELT 305 (T) in support of his plea for allowing the appeal.
5. Shri T.K. Kar, learned SDR appearing for the Revenue reiterated the findings in the impugned order. He particularly referred to the findings in paras 4.13 onwards of the impugned order. He submitted that ladders and staircases were manufactured by the appellants by supplying all inputs, viz. steel, electrodes, gas etc. and by providing land, building, power inside their factory premises to the different contractors engaged by them. He has submitted that the learned Commissioner has rightly relied upon the various judgments such as Ujagar Prints v. UOI, 1988 (18) ECC 435 (SC) : 1988 (38) ELT 535 wherein it has been held that manufacture implies a change and there must be transaction, a new and different article emerging with a distinctive name, character or use. In this case, he submitted that ladders and staircases were manufactured by the contractors engaged by appellants and the appellants had supplied the inputs required for the manufacture of the excisable goods as mentioned above. He has also submitted that the Commissioner has rightly relied upon the judgment of the Hon'ble Apex Court in the case of Gramophone Co. of India Ltd. v.CCE, 2000 (67) ECC 23 (SC) : 1999 (114) ELT 770 wherein it has been held that the moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own, character and use, and name, whether it be the result of one process or several processes, manufacture takes place. He also referred to the judgment relied upon by the Commissioner in the case of Sirpur Paper Mills Ltd. v. CCE, 1998 (59) ECC 46 (SC) : 1998 (97) ELT 3 (SC) wherein it has been held that just because the plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property as the paper making machinery is marketable as it can be dismantled and sold. Further, the Larger Bench judgment in the case of Maruti Udyog Limited v. CCE, 2001 (134) ELT 188 has held that fabrication of the items in dispute was not only carried out by the three different job workers within the factory premises of the appellants, but also on their shop floor itself and the appellants supplied all the raw materials for fabrication/repair/modification as well as the samples like electrodes, gas paint, primer, thinner etc.
and the work was got carried out under the total control and supervision of the appellants. It was further held therein that in the eye of law the appellants are the manufacturers of bin, trollies and pallets of iron and steel. He further submitted that heading 78.08 of HSN does not have reference of ladders and staircases in its explanation and hence these items cannot be said to be structure or part of structure. He submitted that the order impugned is well reasoned and prayed for sustaining the same.
6. We have carefully considered the submissions made by both the sides.
We observe that the following issues are arising for determination in this appeal: (a) Whether the appellants are manufacturers of the goods or the Contractors; and (b) Whether the goods viz Ladders and Staircases manufactured by the Contractors engaged by the Appellants are dutiable or not. and whether they are "goods" or "Immovable property".
7. Examining the first question, we note that the appellants have engaged following contractors for the purpose of carrying out the structural work by inviting bids.
We have perused copy of the work orders including the terms and conditions of the contracts entered into by the appellants with the contractors, which are filed in the paper book and we note that the quantities, unit and rates and amounts are specified in the respective Annexures of the work orders and the fabrication work were undertaken by the respective contractors on a principal to principal basis in accordance with the terms and conditions specified in the respective work orders. We find from Item No. 1 under Group A of Annexure 2 in the case of contract with M/s Globe Hi-Fabs that (Page 1 to page 11 of the paper book) that the description of the work refers to fabrication at site, transporting, erecting, and fixing in position at all heights and depths above and below the ground level a complete item of structural work as specified therein involving various sub-items which included staircases and ladders. We also note from the respective work orders that while there was provision for supply of certain free issue of materials, the respective work orders also provided for supply of materials by the contractor and cost whereof at agreed specifications/quantities/norms were provided for in the rates contained in the work orders for the respective jobs carried out thereunder. The work order also provided for payment by the contractor of entry/exist axes on tools, tackles, equipment etc. brought in by the Contractor thus indicating the use of their own tools, tackles and equipment by the contractor for the purpose carrying out the work.
Liability with regard to Provident Fund, insurance coverage under Workmen's Compensation Act, Accident policy, Fire and Burglary, Policy covering personnel and property damage was the responsibility of the Contractors. Further, all the contractors were also assessees under the Income Tax. From the above, it would be seen that the relationship between the Appellants and the Contractors were on principal to principal basis and not that of hired labourers. We note that the Tribunal in the case of India Cements Ltd. v. Additional Commissioner, 2000 (117) ELT 131 has held that material supplier is not a manufacturer and merely because the appellants therein supplied two basic raw materials, viz. Steel and cement to contractors, and the items were produced at the project site, which belonged to the appellant, it does not follow that the appellants there are the manufacturers. Further in the case of Voltas Ltd. v. CCE, Guntur, 2002 (144) ELT 108 it was held that wwhen the relationship between the assessee and the contractor is on a principal to principal basis, and not by hired labourer, the assessee cannot be held to be a manufacturer. In the case of Agauto Sugar & Chemicals v. CCE, Meerut, 2001 (43) RLT 779, it was held that when supplier of parts has assembled turbo generation set in appellants' premises on job work basis, the manufacturer is the job worker and not the appellants.
Following the ratio of the above decisions, we answer the first question that in the present case the manufacturers are the contractors and not the appellants herein as the relationship between them was on a principal to principal basis.
8. Coming to the next question as to whether the goods manufactured are excisable or not, we observe that in the instant case, as we have held above, the goods viz. ladders and staircases have been got manufactured by the Contractors and these parts are part of building structures falling under sub-heading 7308.90 of the CETA. We observe that these goods are tailor made according to their specifications and are used as part of building structures in the respectively mills. It is an admitted position that these goods are used captively by TISCO and they have not availed any benefit of Modvat Credit. The goods are not only situated in the respective buildings but are also exclusively used in the respective mills. This factual position is not controverted by the Revenue. The Commissioner has observed in the order impugned that the meaning of 'structure,' 'ladders' and 'staircases' have not been defined in the Act and hence he has resorted to the dictionary meaning of these terms. The New Oxford Dictionary of English defines the term 'structure' as "a building or other object constructed from several parts". The term "ladder" is defined as a structure consisting of series of bars of steps between two upright lengths of wood, metal or rope, used for climbing up; or down something. The term "stair" according to the above dictionary means "set of steps leading from one floor of a building to another and staircase means set of stairs and its surrounding walls or structure. The Commissioner after examining the definition of the above terms, has however, held that the above goo4s cannot be termed as part of building structure by any stretch of imagination. We are not able to accept this finding of the Commissioner that the staircases and ladders are not part of building structure inasmuch as it is common knowledge that every building if it has more than one floor, has to have ladders or stair case to climb up and climb down. Even in multi storied building where alift" is provided, staircase is necessarily provided and the staircase is very much an essential part of such building structures which are immovable property. Like-wise, where necessary, ladders are also provided and such ladders also become a part of the building and it also becomes an immovable property because these are permanently fitted to the structure by grouting or by fastening, welding, drilling etc. and have become integral part of the building structure. Once they have become an integral part of the building, it can be safely held that these are immovable property. The Commissioner has held in para 4.12 that "Since Tisco was the owner of the goods, there was no occasion for sale and purchase. But this does not mean that the goods was/are not capable of being bought and sold. Had they not manufactured the said goods in the above manner, they would have definitely bought the items from outside market". This finding of the Commissioner cannot be countenanced for the reason, it is common knowledge that ladders and stair cases (not prefabricated) are not ordinarily available in the market for being bought and sold. No doubt, pre-fabricated door, window or for that matter, ladder are cable of being bought and sold in the market on specific demand generally according to particular specification. But the heading 73.08 under which the TISCO claims the benefit itself deals with structures etc. which are not pre-fabricated.
We find that Notification No. 61/90-CE dated 20.3.90 provides for exemption of goods falling under heading No. 73.08 in respect of the goods such as structures, and parts of structures, towers, lattice masts, roofs, roofing frame works doors and windows and their frames and hold for doors, shutters of iron or steel, plates rods, angles shapes sections and the like prepared for use in structures of iron or steel fabricated at the site of construction work for use in such construction work and specifically excludes pre-fabricated structures.
In the present case, the staircases and ladders have been fabricated at the site of construction for use in such construction work as part of structures. When Heading No. 73.08 specifically covers structures, it has to be held that staircases and ladders are part of structures only and are immovable property and thus not excisable. TISCO have also not taken benefit of Modvat Credit in respect of the duty paid on the raw material used for manufacture of the impugned goods. The Hon'ble Apex Court in the case of UOI v. Sonic Electrochem (P) Ltd., 2002 (83) ECC 752 (SC) :2002 (52) RLT 878 has held that Plastic body of electro mosquito repellant is not liable to duty under Clause 5(f) of the Notification No. 160/86 as the same is not goods because it is not marketable. It was also held therein that marketability criteria of a particular goods is the commercial identity of the article known to the market for being bought and sold. Further the Hon'ble Apex Court in the case of CCE, Nagpur v. Wainganga Sahkari S. Karkhana Ltd., 2002 (82) ECC 457 (SC) : 2002 (50) RLT 125 (SC) has held that Trusses, columns and purlines, fabricated at site are not manufactured item. Further the Tribunal in the case of Dempo Engg. Services v. CCE, Goa, 2000 (117) ELT 328 has held that fabrication of steel structures and roofing systems by process of drilling, welding and fastening does not amounts to manufacture within the meaning of Section 2(f) of the Act. In view of the above discussion, we are of the considered opinion that the goods viz. staircases and ladders got manufactured by the appellants in the present case cannot be considered as excisable goods. We, therefore, following the ratio of the various judgments cited supra hold that the impugned order is not legal and proper and we set aside the same and allow the appeal. Ordered accordingly.