1. M/s. Sunrise Soaps & Chemicals Pvt. Ltd., Rajkot, had filed this appeal dated 14th July, 1982 to the Central Board of Excise & Customs which is directed against the Order-in-Original No. V. 68/15-12/OA/81 dated 25-2-82 passed by the Collector of Central Excise, Ahmedabad. The appellants are engaged in the manufacture of the following excisable goods in the factory; namely, Soap, Glycerine and Industrial hard oil.
For the purpose of manufacture of these products, they have the following plants installed in their factory, namely, Soap Plant, Glycerine Plant and Industrial Hard Oil Plant. For fabrication and erection/ installation of the said plants, they had entered into a contract with M/s. Achra Welding and Engg. Works, Jamnagar, according to which the latter were required to carry out fabrication and erection of new installations of the aforesaid plants from the materials supplied by the appellants and under their supervision. A Show Cause Notice was issued to them on 19-11-81 by the Collector of Central Excise, Ahmedabad, alleging that they had manufactured, fabricated and installed complete machinery in their factory in contravention of the provisions of the Central Excise Rules, 1944, and required them to pay duty on complete machinery/plant valued at Rs. 54,34,062. The Collector in his impugned Adjudication Order, however, held that the items like Steel structure, spray pond, boiler chimney and other fabricated structures totally valued at Rs. 11,69,651 could not be considered as "machinery". Accordingly, except for these items, the rest were treated as complete machinery manufactured/fabricated by or on behalf of the appellants within their factory for processing goods and, therefore, subjected to payment of excise duty under Notification No. 118/75-C.E., dated 30-4-75. The total value of such machinery was stated to be Rs. 42,64,401 and a demand for duty at appropriate rate under Item 68 CET was confirmed under Rule 9(2) of the Central Excise Rules, 1944. In their appeal, the appellants have stated that out of the said value of Rs. 42,64,401/-, components valued at Rs. 10,39,407/- consisted of the following:- The last item, namely, the Hydrogen Gas Cells, were got manufactured in the premises of another firm, namely, M/s. Kumtakar Industries, Jamnagar. Both the said units namely, M/s. Achra Engg. Works and M/s.
Kumtakar Industries were not 'factory' within the meaning of Section 2(m) of the Factories Act, 1948. Accordingly, all these items should be exempted under Notification No. 85/79 dated 1-3-79. The appellants have argued that the statement of Shri Kumtakar, partner of Messrs Achra Engg. Works was recorded on 12-9-80 wherein he has explained the facts which would qualify these goods for exemption from duty. The Collector of Customs and Central Excise, however, has not gone into this question at all and has wrongly assumed that these items were liable to payment of excise duty.
The equipment valued at Rs. 19,88,940 consisted of Storage tanks, Steam trap tanks, Asbestos/Magnesia Laggings Pipe and pipe fittings etc. for the different plants in the appellants' factory. These storage tanks etc. are eligible to exemption envisaged under Notification No. 118/75 dated 30-4-75, since these could not for any reason be considered as complete machinery having regard to the technical nomenclature and commercial parlance and could not be meant for producing or processing any goods.
The appellants have argued that at best the Collector of Customs and Central Excise could levy duty under Item 68 CET on the balance of the items valued at Rs. 12,36,054. They have, however, stated that the plant and machinery installed by the appellants are not "goods", since they are embedded to earth and are not movable. As such, they do not attract any duty at all. This issue has already been set at rest in the various decisions of the Tribunal, vide their Orders No. B-139, 143 and 144/83 dt. 18-3-83 reported in 1983 E.L.T. 825 and Order No. B-763/83 dated 17-8-83 reported in 1983 E.L.T. 2320. Regarding the excisability of components, the Tribunal has in their Order No. B-139, 143 and 144/83 ruled that the components used for assembling and erection of the pilot plant within the factory should not be subjected to excise duty since they cannot be regarded as complete machinery.
2. Shri N.C. Trivedi, Advocate for the appellants, while reiterating the above arguments at the hearing submitted that the excise duty could not be levied on the items valued at Rs. 10,39,407/- which were admittedly manufactured in premises which could not be considered as "factory" under the Factories Act, 1948. He, however, agreed that the necessary evidence to this effect had not been led and the CCE Ahemdabad has not given any finding on this aspect of the case. He vehemently argued that the storage tanks etc. which have been constructed and fabricated in connection with the aforesaid plants cannot be considered as "machinery" and, .accordingly the total value amounting to Rs. 19,88,9.40/- should be deducted" out of the total value of the machinery subjected to duty by the Collector. Shri Trivedi, however, after some arguments agreed that the excise duty could be charged only on the balance of the items totally valued at Rs. 12,36,054. Shri Lakshmi Kumaran, SDR, referred to the adjudication order passed by the Collector of Customs and Central Excise and stated that this was self-explanatory. He, however, agreed with the submission of the appellants, namely, that if it is established that the items valued at Rs. 10,39,407 are manufactured in the premises which are not "factory" under the Factories Act, these should be exempted from payment of duty. He, however, stated that this required further examination by the Collector. The items worth Rs. 19,88,940/-represent the value of the infrastructural facilities like storage tanks etc.
which have been constructed/ fabricated at site. These cannot be considered to be complete machinery. Shri Lakshmi Kumaran, however, feebly tried to argue that these could be considered as part and parcel of the main plant and then subjected to duty. Regarding the balance of the items valued at Rs. 12,36,054/-, he welcomed the concession made by the Advocate for the appellants that the excise duty be levied on these items.
3. We have examined the records and considered the submissions made by both the parties at the hearing. Regarding the items manufactured by Messrs Achra Welding and Engg. Works, Jamnagar, and Messrs Kumtakar Industries, Jamnagar, it is necessary for the Collector to investigate whether the concerns which fabricated these goods (valued at Rs. 10,39,407) were 'factory' under the Factories Act, 1948. The appellants will also have to lead evidence in support of their plea that these items were manufactured in premises which were not 'factory'. Regarding the other batch of items consisting of storage tanks, steam trap tanks, pipe and pipe fittings etc., totally valued at Rs. 19, 88,940/-, no excise duty is leviable on these since they could not be considered as complete machinery and, therefore, were eligible to exemption under Notfn. No. 118/75 dated 30-4-75. The balance of the items valued at Rs. 12,28,054 are admittedly liable to payment of excise duty and the appellants should pay duty at appropriate rate under Item 68 CET. We order accordingly and set aside the order passed by the Collector of Customs and Central Excise, Ahmedabad. The appeal is thus partly allowed.