Durall Systems India (P.) Ltd. vs Commissioner of Central Excise

Rule returnable forthwith. By consent of the Counsel for the parties appeal is taken up for final hearing. This appeal u/s 35G of the Central Excise Act, 1944 ("the Act") challenges the order dated 13 September 2012 passed by the Customs Excise and Service Tax Appellate Tribunal ("the Tribunal"), directing the appellant to deposit a further sum of Rs. 50 lacs over and above Rs. 28,43,326/- already deposited out of total duty demand of Rs. 4.48 crores along with interest and equivalent penalty. The aforesaid deposit is directed under the proviso to Section 35F of the Act for the purpose of hearing the appellant''s appeal from the order dated 8 December 2011 of Commissioner of Central Excise, on merits.

The appellant is inter alia engaged in the activity of Aluminum Assembly of glazing of glass system (system). The revenue contends that it is an activity of manufacture. The appellant contends that the system comes into existence as an immovable property at site and therefore not goods. Thus not liable to excise duty. However, by an order dated 8 December 2011 the Commissioner of Central Excise negatived the appellant''s contention and held that system is chargeable to excise duty. Consequently, a duty demand of Rs. 4.48 crores along with interest and equivalent penalty therein was confirmed for the period 2004-05 to 2009-10.

Being aggrieved, the appellant filed an appeal to the Tribunal and also application under the proviso to Section 35F of the Act for dispensing with pre-deposit of the duty, interest and penalty for the purpose of its appeal being heard on merits. By the impugned order dated 13 September 2012 the Tribunal took a prima facie view that in the present facts the extended period of limitation would not be applicable. Thus, holding that the requirement to deposit the amounts attributable to demand beyond the normal period of limitation does not arise. However, out of the demand for the normal period of limitation which came to Rs. 1.23 crores, the impugned order after taking into account that an amount of Rs. 28.43 lacs already has been deposited directed a further deposit of Rs. 50 lacs for the purpose of the appeal being heard and disposed of on merits.

Mr. Shreedharan, learned Counsel appearing for the appellant submits that the system which is sold by the appellant comes into existence at site only as immovable property. Therefore, no duty can be demanded on the system as it is not goods. It was also submitted that the aforesaid activity of making the system is done at site and the appellant had already paid service tax as works contract service. In view of the above the appellant had not taken any credit in respect of the duly paid on material used in the making of the system which comes into existence at site as immovable property. Further attention was drawn to the decisions of this Court in Gannon Dunkerley and Co. Ltd., K.L. Morarka, A.D. Chaudhari, C.P. Mehta, A.C. Burman, L.K. Pandey and G.M. Mehta Vs. Union of India (UOI), The Collector of Central Excise and Customs and The Attorney General of India, , Simplex Concretes Piles (India) Ltd. Vs. Union of India (UOI), and Shapoorji Pallonji and Co. and K.B. Captain Vs. Union of India (UOI), The Collector of Central Excise and Customs, The Additional Collector of Central Excise and Customs and The Superintendent of Central Excise, wherein it has been held that immovable property erected at site by using angles, beams and sections and cutting them to size so as to use it in making an immovable property cannot be subjected to tax. In view of the above, particularly the decisions of this Court, it is submitted that the requirement of deposit be dispensed with completely and the appeal be heard on merits.

As against the above, Mr. Mishra learned Counsel appearing for the revenue invited our attention to the adjudication order wherein a finding has been recorded that a system is manufactured by the appellant and is removed in a disassembled condition to site so as to get it fixed at site as an immovable property. The adjudication order relies upon Rule 2(a) of Rules of Interpretation to the Tariff Act, 1985 to conclude that time when the glazed glass is removed from the factory it has the essential character of system and therefore taxable.

We have considered the rival submissions. We find that the Tribunal has excluded a demand for the period from 2005-06 to 2008-09 on the ground of limitation. The amount payable within the normal period of limitation is only Rs. 1.23 crores as excise duty. The decisions relied upon by the appellant of this Court prima facie do not seems to apply to the facts of the present case. For the reason that in this case the revenue contends that the goods were manufactured in the appellant''s factory and are removed in a disassembled condition. Therefore, chargeable to tax. The three decisions of this Court relied upon by the appellant did not deal with the situation as existing in this case, therefore, the applicability of the decisions relied upon by the appellant would have to be considered at the time of final hearing to determine to the extent to which the same is applicable to the appellant''s case. Besides, the extent to which the finding of the adjudication authority is factually sustainable would also be appropriately gone into at the stage of final hearing.

The appellant also submitted that in any case credit to the extent of an amount of Rs. 28.42 lacs which they could have taken in respect of duty paid on the inputs but not taken as according to them the system was not excisable goods. In view of the above, in any event, it was submitted that the deposit should be reduced by the above amounts of Rs. 28.42 lacs. During the hearing on a specific query we were informed that the amount of Rs. 28.42 lacs paid on inputs has not been taken as cenvat credit. This was to avail benefit of a composition scheme in respect of service tax payable on works contract has as one of its conditions not to take cenvat credit on inputs. Therefore, permitting the appellant to take cenvat credit would mean they are disentitled to the benefit of service tax composition scheme which has already been availed. Therefore, the credit of Rs. 28.42 lacs cannot at this stage be taken into consideration for the purposes of determining the amounts to be deposited for the purpose of pre deposit. All these issues would be gone into at the final hearing of the appeal.

Therefore, taking over all facts into account we see no reason at this stage to interfere with the impugned order dated 13 September 2012 of the Tribunal. However, the time to deposit the further sum of Rs. 50 lacs as directed by the impugned order for the purpose of hearing the appellant''s appeal on merits is extended upto 30 March 2014. Accordingly, the appeal is dismissed with no order as to costs.