CP Meier vs Commissioner of Central Excise and Others

The petitioners herein are engaged in the manufacture of ''prefabricated structural components''. These are, admittedly, supplied to the Delhi Metro Rail Corporation Limited (''DMRC'' for short). There is a contract between petitioners and DMRC for design and construction of prefabricated components of different segments to be used in elevated viaducts or for manufacture of rings for the tunnel, launching girders and trusses in respect of a project of the DMRC. It is not in dispute that this production is unique in nature and utility thereof is restricted to the location for which they are designed and not at any other place.

Since the petitioners had supplied the said material (and has been supplying the same to DMRC) without registration certificate u/s 6 of the Central Excise Act, 1944 read with Rule 9 of the Central Excise Rules, 2002, (''the Rules'' for short), a show cause notice was issued to the petitioners as to how they were removing the aforesaid goods without payment of excise duty which was required to be paid under Rules 4 and 8 of the Rules and without the cover of any invoice as required under Rule 11 of the Rules. After eliciting reply from the petitioners, adjudicating authority passed the order holding that the petitioners were liable to pay the excise duty and in these circumstances the goods were seized with option to redeem the same on payment of redemption fine. Order of payment of duty was made and also interest as well as penalty imposed upon the petitioners. At this point of time, the petitioners preferred the instant petitions. They have sought quashing of the orders in original demanding duty as well as penalty imposed upon the petitioners. The petitioners have also challenged vires of part of Notification No. 21/2006 dated 1.3.2006 as ultra vires Section 5A of the Central Excise Act, 1944.

Since there is a remedy of appeal against the impugned orders in original passed by the respondent, we could have relegated the petitioners to avail the said remedy. However, these writ petitions were entertained because of the reason that vires of the aforesaid Notification were also challenged. However, it is not necessary to go into those vires or direct the petitioners to challenge the orders by filing appeals. It is because of certain developments taking place in some other matters which have clinched the issue.

In this behalf, it may be noted that certain other such manufacturers identically situated who had also supplied pre-fabricated structural components to DMCR were fastened with the same liability. Those manufacturers had filed appeal against the adjudication orders which were allowed by the CESTAT and against the order of CESTAT, appeals were preferred before this Court. Two such cases are CEAC Nos. 25/2011 and 26/2011. Order of the Tribunal was upheld in those appeals and appeals were dismissed by this Court vide order dated 5th September, 2011. The operative portion of the said order reads as under:

The Tribunal has, after recording the aforesaid facts, categorically said that there is no dispute that the components so manufactured by the respondents are intermediate products and duly manufactured at the specified yards and transferred to the site for utilization thereof in elevated viaduct or tunnel. It is also noted that there is no dispute that the same are utilized in the completion of the work. The Tribunal has, therefore, come to the conclusion, and rightly so, that the aforesaid Notification dated 17.02.2011 applies to the supplies in question and therefore no excise duty was required to be paid. Notification No. 01/2011-CE(N.T.) dated 17.02.2011 reads as under:

Whereas the Central Government is satisfied that a practice was generally prevalent regarding levy of duty of excise (including non-levy thereof) u/s 3 of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the said Act), on goods of the description given in the Table below, and that such goods were liable to duty of excise which was not being levied u/s 3 of the said Act according to the said practice, during the period as specified in the said Table, namely:-

Description Tariff sub-heading Period

(1) (2) (3)

Goods manufactured at the site of construction for use in construction work at such site. Sub-headings of Chapter 68 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) except sub-headings 6804, 6805, 6811, 6812 and 6813. 1st March , 2006 to 6th July, 2009 (both inclusive)

Now, therefore, in exercise of the powers conferred by section 11C of the said Act, the Central Government hereby directs that the whole of duty of excise leviable under the said Act on such goods falling under such tariff sub-headings as specified in the said Table but for the said practice, shall not be required to be paid for the period specified in column (3) of the said Table, subject to fulfillment of condition that the benefit under this notification shall not be admissible unless the unit claiming benefit in terms of this notification reverse the input credit, if any, taken in respect of inputs used in manufacture of such goods on which the said duty of excise was not levied during the aforesaid period in accordance with the said practice.

It is the contention of learned counsel for the Revenue, in these appeals preferred against the aforesaid orders of the CESTAT, that the Tribunal has not gone into the aspect as to whether goods are manufacture at site. He has drawn our attention to the description given in the aforesaid notification which stipulates ''goods manufactured at site of construction for use in construction work''. His contention is that in order to be eligible for exemption under the said Notification, two conditions are required to be satisfied namely (1) goods should be manufactured at site; and (2) they should be used in construction work at such site.

Insofar as second ingredient is concerned, there is no dispute that the goods supplied are used in construction work at site.

Insofar as first ingredient is concerned, his submission was that in the instant case goods are not manufactured at site and this aspect is not even gone into by the Tribunal. On the other hand learned counsel for the respondent has drawn our attention to Circular No. 456/22/99�CX dated 18.5.1999 where this aspect was clarified by the Central Board of Excise & Customs (CBEC). The aforesaid requires exercise of power as contained in section 37B of Central Excise Tariff Act which makes it clear that insofar as application of beams/girders is concerned, that may not be necessarily be at the site as that may cause many traffic problems etc. It was, thus, clarified that expression ''site'' should not be given restrictive meaning and would include any premises made available to the manufacturer of goods falling under the Central Excise Tariff Act. The said Circular reads as under:

Representation have been received from the trade regarding difficulties faced in availing of benefit of exemption applicable of goods manufactured at the site of construction for use in construction work at such site vide Notification No. 5/98-CE dated 2.6.98 (S.No.182). It has been stated that the beams/girders or other fabrication work are not presently manufactured at the site due to traffic problems it could cause (especially in case of flyovers at busy road junctions). Therefore, a separate off road site away from the main site is allotted to the construction company to carry out pre-casting (manufacturing) of beams and girders so that the traffic is not affected. The field formations are denying that exemption on the ground that the off road site, which is used for manufacture is not the site of construction.

The matter has been examined by the Board. It has been decided that the expression ''site'' may not be given a restrictive meaning and shall include any premises made available to the manufacturer of goods falling under heading No. 68.07 of the Schedule to the Central Excise Tariff Act, 1985 by way of a specific mention in the contract/agreement for such construction work, provided that the goods manufactured at such premises are solely used in the said construction work only.

This will apply mutatis mutandis to the sub heading No. 7308.50 of the Schedule to the Central Excise Tariff Act, 1985.

4.Receipt of this circular may be acknowledged.

5.Field formations and trade may be informed accordingly.

In view of the aforesaid, we are of the opinion that both the conditions stipulated in the Circular dated 17.2.2011 stand satisfied in the case of these respondents and the order of the Tribunal is without any blemish. The respondents, for the supplies made, were entitled to exemption under the said notification. No question of law arises in the instant cases. The appeals are accordingly dismissed.

Since the legal position already stands settled in favour of the petitioners, following the aforesaid orders, we set aside the adjudication order. In view thereof, it is not necessary to go into the validity of the Notification. These writ petitions are allowed in the aforesaid terms.