Asia Foundations and Vs. Collector of C. Ex.

1. The applicants have filed an appeal being aggrieved by the order passed by the CCE, Guntur. The said appeal was presented in the Registry on 20-12-1989. Simultaneously, a stay application duly supported with an affidavit shown before the Notary was also presented for dispensing with the pre-deposit of the duty amount. The applicants have made a prayer to dispense with the pre-deposit of the duty amount of Rs. 1,14,28,688/- and also made prayer for setting aside the impugned order. Shri R.K. Habbu, learned Advocate appeared on behalf of the applicants. He has reiterated the contentions made in the stay application. Shri Habbu has pleaded that the duty involved is Rs. 1,14,28,688/- and the period involved is January 1987 to 5-11-1988 and the show cause notice is dated 5-1-1989 which appears on page 61 of the Paper Book. Sh. Habbu has pleaded that the applicants are a job work contractor for the Ministry of Defence. The contract work included various items of civil electrical and mechanical works for North Dry Dock. He has drawn attention of the Bench to Item No. VI which has been described on page 4 of the Appeal Paper Book and also referred to the pamphalet which is on the last page of the Paper Book "Structural steel fabrication for Dry Dock". Shri Habbu, learned Advocate stated that the goods manufactured by the applicants cannot be termed as 'goods' as the same are not marketable. In support of his argument he has referred to the judgment of the Supreme Court in the case of CCE v. Amba Lal Sarabhai, 1989 (43) ELT 214 SC. He has also referred to Section 3 and Section 4 of the Central Excises & Salt Act, 1944 and has pleaded that the disputed goods are not excisable at all and in fact no goods came into existence. Shri Habbu argued that the Collector had mainly relied on the judgment of the Tribunal reported in Richardson & Cruddas 1988 (12) ETR 541 and has laid special emphasis on para No. 7 & 8 of the judgment and has stated that the facts are different as in that case the principle fabrication work was done in the factory and the goods were taken at site thereafter. Shri Habbu has placed reliance in the case of Aruna Industries v. CCE Guntur, 1986 (25) ELT 580. He has pleaded that the facts of the present appeal are same. He has also referred to two more judgments of the Tribunal in the case of SAE (India) Ltd. v. CCE, 1988 (36) ELT 613 and R.S. Steel Works v. CCE, Meerut, 1989 (24) ECR 746. Shri Habbu has argued that the goods should be capable of being sold in the market. The disputed goods in the present matter are not marketable and cannot be treated as 'goods'. He further argued that the order of the Tribunal in the case of Richardson & Cruddes was challenged before the Supreme Court and the Supreme Court had admitted the appeal filed by Richardson & Cruddes, Bombay and the same is reported in 1990 (45) ELT A67 Tit-Bits SC. On the financial aspect Shri Habbu referred to the Balance Sheet of the applicants for the year ending 31-3-1989 and has pleaded that there is a net profit of Rs. 2,63,14,589/- and this profit is mainly from the other income at Rs. 3,73,95,6477- earned by the applicants. He pleaded that the liquidity position of the applicants is bad as the applicants are not in a position to deposit any amount.

2. Shri K.D. Tayal, learned SDR who has appeared on behalf of the respondent has placed heavy reliance on the judgment of the Supreme Court in the case reported in 1988 (12) ETR 541. He has argued that the first fabrication was done on the ground and thereafter the same was erected and as such manufacturing activity is involved and states that the goods are marketable and are for a specific purpose. He stated that the judgment of the Supreme Court cited supra is not applicable as in that case the goods in dispute were at intermediate stage whereas in the present matter there is no such situation. He also stated that the tariff was amended w.e.f. 1-3-1988 and the amended tariff entry is 7308.90 - Others and further argued that there is no dispute as to the excisability of the goods from 1-3-1988. On the financial aspect Shri Tayal drew attention of the Bench on pages 2 & 3 of the 13th Annual Report 1988-89. In para 3.1 on page 2 he mentioned that the applicants themselves have mentioned that the turnover and gross profit on an annualised basis have shown an increase of approx. 21 per cent and 22 per cent respectively over those for the previous year. He has also referred to page 3 of the Annual Report where the applicants had distributed dividend of Rs. 20/- per equity share of Rs. 100 and had also issued 1:1 Bonus shares. He has pleaded for the injunction of the stay application. In reply Shri Habbu again pleaded for the grant of stay and stated that no excise duty is payable by the applicants. Shri Tayal has referred to the following judgments:Andhra Sugars Ltd. v. Collector (3) Structural & Machineries (Bokaro) Pvt. Ltd. v. Collector -1984 (17) ELT 127 CEGATOrissa Construction Corporation Ltd v. Collector -1983 (14) ELT 2382 Shri Habbu in reply argued that the above judgments cited by the learned SDR do not help him.

3. We have heard both sides. The facts are not disputed. It is not disputed that the erection was done at site. The facts of the present case are similar to those of Aruna Industries reported supra. In the case of Richardson & Cruddes the goods were removed from factory to site and the judgment is distinguishable from Aruna Industries v. CCE.The latter judgment of the Tribunal is in the case of Richardson & Cruddes cited supra. Richardson & Cruddes being aggrieved from the order passed by the Tribunal had filed an appeal before the Supreme Court which has been admitted.

4. During the course of arguments we have enquired from Shri Habbu as to the quantum of clearance from 1-3-1988 to 5-9-1988. Shri Habbu expressed his inability as to the value of clearances from 1-3-1988 to 5-9-1988 and as such also could not give approx. figure of the duty amount to the Bench. We have perused the Balance Sheet of the applicants. For the year starting from 1-7-1988 to 31-3-1989 viz. for 9 months there is a net profit of Rs. 2,18,14,589/- and after adding back the depreciation at Rs. 1,61,34,3177-the net profit works out to Rs. 3,79,48,906/-. During the course of arguments Shri Tayal, learned SDR drawn the attention of the Bench to 13th Annual Report for the year ending 1988-89.

"3.1. The turnover and gross profits, on an annualised basis, have shown an increase of approx. 21 per cent and 22 per cent respectively over those for the previous year. The management's efforts to contain the impact of cost escalations have started showing results.

4. Dividend - Having regard to the quantum of surplus available for distribution and the need to conserve the funds, the Directors recommend for members approval a dividend of Rs. 20.00 per equity share of Rs. 100 (Rs. 26.66 on an annualised basis). The dividend, if approved, will be paid on and after 16th October 1989. The said dividend distribution would absorb an amount of Rs. 40,00,000/- (previous year Rs. 40,00,000).

5. Bonus Shares -Pursuant to the consent received from the Controller of Capital issues, New Delhi, the Board of Directors of the Company allotted on 15th April 1989,200,000 Numbers Equity Shares of Rs. 100 each to the members in the ratio of 1:1. The said bonus shares rank peri passu with the existing shares except that they shall be entitled to the dividend only from the Company's financial year commencing from 1st April 1989." A simple perusal of the statistics as to the financial position discussed above clearly shows that the applicants' unit is a profit making unit. The Hon'ble Supreme Court in the case of Spencers & Co. v.U.O.I. had observed that liquidity position of the assessee while disposing of the stay application has to be seen. There is no information as to the liquidity position of the applicants as it stands today. During the course of arguments we had also enquired from Sh.

Habbu as to the liquidity position as it stands today. Sh. Habbu replied that the liquidity position is bad. No evidence has been placed before us.

5. Keeping in view the totality of the facts and circumstances of the case we are of the view that upto 28-2-1988 prima facie merits of the case are in favour of the applicants. Undoubtedly, for the period starting from 1-3-1988 to 5-11-1988 the earlier judgments of the Tribunal do not help the applicants. We would not like to express our views as to the merits of the case at this stage as the matter is sub-judice. Keeping in view the overall position we dispense with the pre-deposit of the duty amount of Rs. 1,14,28,688/- on the condition of the applicants depositing Rs. 28,00,000/- in cash in four equal instalments as under: The applicants shall intimate to the Registry the payment of each and every instalment by 30-3-1990,30-4-1990,30-5-1990 and 30-6-1990. In case there is default in the payment of any instalment the stay order shall stand automatically vacated. We further order that during the pendancy of the appeal the Revenue authority shall not pursue the recovery proceedings for the balance duty amount. In case the applicants fail to comply with the terms of this order the Stay order shall stand automatically vacated.