[Order per : K. Sankararaman, Member (T)]. - The two appeals involve the same issue and were argued together by the learned Senior Advocate Shri A.N. Haksar who appeared for the appellants along with learned Advocate Shri R. Sudhinder and by Shri K.K. Jha, learned Senior Departmental Representative who appeared for the respondent Collector. This common order disposes of both the appeals.
2. The appellants have filed these two appeals challenging Order-in- Original No. 11/CEX/ADC/91, dated 28-2-1991 passed by Additional Collector of Central Excise, Chandigarh and Order No. 8/CE/1992, dated 14-8-1992 passed by Collector of Central Excise, Chandigarh. Both these authorities had held in their respective orders that the appellants were liable to pay Central Excise duty on crushed stones under Tariff Heading 2505.00 and steel ribs under Tariff Heading 7308.90. The amounts of duty confirmed and the penalties imposed were as follows :-
(1) Order passed by Additional Collector dealt with in Appeal No. E/1601/91B :
Duty demanded Rs. 2,07,465.30
Penalty imposed Rs. 15,000.00
(2) Order passed by Collector dealt with in Appeal No. E/5417/92B :
Duty Demanded Rs. 25,10,503.75
Penalty imposed Rs. 3,00,000.00
Shri A.N. Haksar, learned Senior Advocate stated that the case of the appellants is that the items in question on which duty demand has been raised in terms of the impugned orders are not manufactured goods to attract Central Excise duty. They have entered into a works contract with National Hydro Electric Power Construction Limited for construction of Power House Complex, Switchyard Power Tunnel and Civil Works at the Chamera Hydroelectric Project. In the course of executing their project, they fabricate Steel Ribs at site using the materials provided by their customers. The fabricated structures are attached to the earth in the tunnels and these are not goods to attract Excise duty. As regards the other item crushed stones from boulders, such an activity is not manufacture. There are judicial decision which support their taking such a view. Moreover Tariff Heading 7308.90 for structures came to be introduced only from March, 1988. The notice is for the period before that date. An additional plea was taken that the demands were also barred by limitation as the show cause notices were issued more than six months after the relevant dates. He relied upon the Supreme Court decision in Cosmic Dye Chemical v. Collector of Central Excise - .
3. The arguments were resisted by Shri K.K. Jha, learned Senior Departmental Representative. He supported the impugned order contending that crushing of boulders into stones constituted manufacture attracting excise duty. Again, the fabrication of the steel materials supplied by the customers into steel ribs brought into existence a different product and hence excise duty became payable. He pleaded for two appeals to be dismissed.
4. We have considered the submissions and perused the record. As regards the duty demanded in respect of crushed stones, the stand taken by the appellants before the adjudicating authorities was that the product was outside the purview of Tariff Heading as the said Heading covers minerals in the form of stones and slates or stones having proportion of minerals. For their work of construction of tunnels they cannot use stones containing minerals as that will be harmful and weaken the structure. The stones crushed by them cannot be equated with mineral substances and hence no duty is attracted. That apart, no manufacture is involved in crushing the stones. By process of crushing, the bigger stones get converted into smaller stones. But, both before and after crushing, the substance remain stones only and there is no emergence of any new and distinct commodity.
5. The appellants have contended that steel Ribs have been classified under heading 7308.90. This classification for structural items came to be provided for only from 1-3-1988 and hence not applicable for the earlier period. On merits, it is their submission in the appeals that they receive from their customers (for whom the job in question is being handled by them) steel sections which are cut, welded, bolted, etc. and are given the shape of Ribs as per drawings. The ribs are fabricated by putting channels against one another and these are not actually different from channels themselves. The resultant ribs are only stronger than the channels and there is no difference before or after the processes carried out. They have then stated that fabricated steel ribs are made by them as per the specific requirements of the structure under the project. These items are totally tailor-made and suitable for tunnel purposes and not at all capable of being bought and sold. These fabricated materials are marketable at all. They have then added that the ribs are used in RCC process for reinforcing the columns and beams for tunnel. They have relied upon the following decisions in support of their contention that fabrication of structural items does not constitute manufacture of a different product and does not attract excise duty.
(1) Standard Industrial Engineering Co. v. Collector of C. Excise - . Drilling and cutting that went into the making of purlins and trusses out of angles, channels and rounds is not manufacture.
(2) Aruna Industries, Vishakapatnam v. Collector of Central Excise, Guntur - (Tri.), Fabrication and erection of structural steels not manufacture - Angles, Beams, Sheets were taken and put together in a new form what is called trusses, purlins etc. They come into being only because of the roof they support or the wall they hold up.
On the other hand the adjudicating authorities had relied upon two Tribunal decisions :
(1) Structurals of Machineries Bokaro Pvt. Ltd. v. Collector of Central Excise, Patna - .
From out of Raw Steel various products of highly intricate designs and specifications known as structurals have been manufactured. These cannot be called to be isolated act of cutting or welding and not changing the identity of the raw material.
After the processes, the raw material consisting of beams, angles, etc. gets such shape and character that they can be readily fitted into structures, such products are known as structurals.
(2) Richardson and Cruddas (1972) Ltd. v. Collector of Central Excise, .
This case distinguished the Aruna Industries case referred to earlier, a case relied upon by the present appellants.
In this case the appellant company had admitted that the structural members were manufactured by them in their factory; and broadly named, column, beams, bracings, purlins. These were taken to the work site and certain operations like assembly, welding/bolting, erecting in position, final painting were done there. It was held that manufacture had taken place in respect of the goods in question.
6. The appellants have filed an affidavit affirmed by their Chief Engineer regarding the fabrication of the steel ribs. It is stated therein that their clients had supplied them duty-paid steel joists which were in running length of 8 to 10 metres. The length had to be reduced according to the required specifications by cutting them. Also, these being in straight length, they had to be bent according to the curvature of the tunnel. At the site of the construction, they had a hydraulic bending machine by which the joists were bent to the required curvature. Holes were drilled along the length of the joists in order to enable the same to be fastened with nuts and bolts to other joists which were placed along the running length of the tunnel. To support the arc of the tunnel, several joists were bent and fastened to one another in order to provide a complete structure known as steel rib. The steel rib comes into existence for the first time inside the tunnel as a part of immovable property. When the structure acquired the shape of a steel rib inside the tunnel it had already become immovable. There was no structure that came into existence as steel ribs before they were constructed in the Tunnel. The joists remained as joists and they were not joined outside the tunnel to form a steel rib.
7. When the appeal had come up for hearing earlier, the Senior Departmental Representative had reported that the copy of the affidavit was not found in his file. A copy was then given by the other side. On going through the same, he had observed that the averments in the affidavit were different from the findings in the order as it was stated in the affidavit that the steel ribs were formed inside the tunnel as part of immovable property. He had requested for time to get clarification thereon from the Commissioner. The request was allowed and appeal came to be heard subsequently by us when the learned Senior Departmental Representative had no specific comments to make to rebut the contents of the affidavit. In the circumstances, we are inclined to accept the contents of the affidavit filed on behalf of the appellants. The present case is distinguishable from the ones relied upon by the adjudicating authorities as the goods in question therein had been manufactured in the factories of the assessees and taken to site for further processing and fabrication. In the present case, the steel rib, on which duty is sought to be recovered has been shown to be coming into existence inside the tunnel and embedded to the earth. The appellants are entitled to succeed on this issue.
8. As regards the second question regarding the duty demand on stores by crushing bigger stones, the affidavit filed by the appellants and considered above, states that stones were collected from the river bed and that no activity of quarrying and excavating was done. The stones, so collected were taken to the construction site and sorted and graded. Seventy percent of the stones conformed to the required size required for concreting. The balance thirty percent not conforming to the required size were broken into pieces of required size for concreting the tunnel walls. This is confirmed by a certificate issued by their customers M/s. National Hydroelectric Power Corporation Ltd. They have stated that oversize River Shingles were crushed/broken in crushing plant as per work requirement.
9. Tariff Heading 2505.00 covers inter alia mineral substances, not elsewhere specified including clay........ slate and stone. Stone is mentioned as an inclusive item. The question raised by the appellants that the stones do not have mineral contents and in fact should not contain them for purposes of concreting has no relevance. The material in question being stones which are included the Tariff Heading 2505.00 and the Chapter Note 2 of Chapter 25 referring to Heading 25.05 covering only products that have been washed, crushed, ground etc. there cannot be any challenge to the classification of stones and crushed stones under that sub-heading. There are, of course, several decisions on the question whether crushing or powdering of various substances would constitute manufacture on behalf of the appellants, reliance was placed on the Tribunal decision in Collector of Central Excise v. Mahavir Minerals Store Supply Co. - wherein it was held that crushing of Dolonite into powder and chips does not bring into existence a new commodity. This was, however, distinguished in Ajanta Marble & Chemical Industries v. Collector of Central Excise - . This decision was in the context of the new Tariff and took note of the Chapter Note under Chapter 25 referred to earlier in this order. It was held that crushing, grinding and sieving of limestone to obtain limestone chips and powder amounts to manufacture. In an earlier decision in Gujarat Reclaim and Rubber Products Ltd. v. Collector of Central Excise & Customs, Bombay reported in the Tribunal had held that crushing of old Rubber into powder is manufacture. This of course was under the Tariff. In addition to these decisions cited before the authorities below, we find that there is a full Bench judgment of the Madhya Pradesh High Court at Jabalpur holding that the process of conversion of stones into gittis ballast and metal in crushers having given rise to a new commercial commodity amounts to manufacture. We would hold, on merits that the crushing of stones into small stones of size would constitute manufacture. Even while holding so we are of the view that the longer period of limitation would not be applicable as the issue cannot be said to have been free from doubt. The appellants would be entitled to the benefit of doubt.
10. We thus allow the appeal in regard to the demand of duty on steel ribs on merits and on the crushed stones on the ground of limitation. The penalties are not justified, the same are set aside.
11. The impugned orders are set aside and the appeals allowed.
12. [Order per : S.L. Peeran, Member (J)]. - I have gone through the draft order prepared by my ld. brother, of the above case, of which the hearing took place on 17-8-1995. On a careful consideration of the draft order, I most respectfully disagree with my ld. brother on the aspect of dropping of demands in respect of `steel ribs’ and its classification under chapter sub-heading 7308.90 and for dropping the confirmation of larger periods in respect of demands raised for crushed stones. However, I agree for its classification under sub-heading 2505.00 in view of the cited judgments covering the issue.
13. The reasons are that my ld. brother has relied on the affidavit filed by appellants before the Tribunal. I must state that the appellants had not moved an application as per law for adducing this affidavit as an additional evidence. On 21-9-1994, “the Bench felt that for the proper disposal of the appeal, copies of the drawing and also the photographs of the [disputed] item and other technical literature are essential”. The Sr. Counsel Shri A.N. Haksar had agreed that the issue is arguable. Hence, the case was adjourned to 22-12-1994, On this date, the case was not listed but came up before the Bench only on 30-5-1995, on which date, ld. Sr. Advocate stated that appellant had filed a detailed affidavit regarding the process of manufacture on 9-1-1995. Shri Sharad Bhansali, ld. SDR had submitted that the copy of the affidavit was not found in his file. Hence, one copy was furnished to him and the case was adjourned to 17-8-1995, on which date Shri K.K. Jha, ld. SDR appeared. He could not explain as to whether the affidavit had been forwarded to Department for comments or not, as the earlier SDR had been transferred. Ld. SDR had pointed out that the plea raised in the affidavit is a new plea and it cannot be permitted to be raised and that the lower authorities had followed the earlier judgments on the point. He also pointed out that the technical literature and photographs as directed had not been also filed by appellants. On a careful consideration of the pleas, I find that the affidavit has not been accompanied by an application and the Tribunal did not allow it to be taken as an additional evidence. However, in my opinion, it is not proper to accept it, and allow the appeal barely on this affidavit, in absence of any verification of the facts. They had merely stated that fabrication of steel ribs did not amount to manufacture under Section 2(b) of the Act as it involved only cutting, welding, bolting etc. which were given shape as per drawing . It was stated then before Collector as per Collector’s order that the ribs were fabricated by putting channels against one another and as a matter of fact those were not different from channel themselves. It was stated that resultant ribs were only stronger than the channels and there was no difference before or after the process carried out. They had also stated that steel ribs were ultimately used in construction work of Tunnel and, therefore, those became part of total whole structure, which was immovable property. The ld. Collector examined the issue and held that in view of the scope of Heading 73.08, it is wide enough to include such products which are prepared for use in structures irrespective of the type and nature of process undertaken for preparing such products for use as structures, hence he rejected the appellant’s contention. I find that this finding is not conclusive and that the Collector has not dealt with the points raised by the appellant that no goods arises as known to market as `steel ribs’ as the process does not result in a manufacture and the product continues to be channels. The Tribunal had directed the appellants to produce the drawings relied by them alongwith technical literature and photographs, which the appellants have failed to produce. In absence of these materials, merely to proceed on an affidavit, which has also not been admitted by any miscellaneous order, as additional evidence, I am not agreeable to consider the contention of the appellants to drop the case. As I notice that the Collector has also not fully appreciated the appellants’ point and clear findings have not been recorded, therefore, the only course is to set aside both the authorities on this aspect of the matter, on the question of classification of `steel ribs’ and confirmation of duty and remand the matter to the respective authorities for de novo consideration. As the issue is the same before both the authorities, it is but proper that both the authorities coordinate between them for deciding the case to avoid multiplicity of proceedings, by one authority choosing to decide the case, as per law.
14. As regards confirmation of demands and penalty in respect of `crush stones’, for longer period, I am of the opinion that the issue is also required to be remanded for de novo consideration, on this point only, as there is no evidence placed by appellant on bona fide belief. Therefore, in the interest of justice, the appellants be given opportunity to place their evidence, on both the aspects and argue their matter before the concerned authorities.
15. Ordered accordingly.
16. [Order per : Shiben K. Dhar, Member (T)]. - I agree with the Order of ld. Member (T), Shri K. Sankararaman.
FINAL ORDER
17. In view of the majority opinion, the impugned orders are set aside and the appeals are allowed.
| Sd/- (S.K. Dhar) Member (T) | Sd/- (S.L. Peeran) Member (J) | Sd/- (K. Sankararaman) Member (T) |