- (1.) THIS writ petition under Article 226 of the Constitution of India seeks to challenge the order dated 26th October, 1989 passed by then Collector of Central Excise and Customs, Division Aurangabad. The 1st petitioner herein is a company limited by shares and is a civil contractor engaged in civil construction works at sites of various parties. The other petitioners are directors and/or shareholders of this company. The respondent No. 2 is the Collector of Central Excise whose order is challenged. The respondent No. 1 is Union of India. The Attorney General of India was also joined and notice was issued to him since a declaration is sought in one of the prayers with respect to unconstitutionality of Heading No. 7308 of Schedule to the Central Excise Tariff Act, 1985
(2.) MR. Kanade, learned Counsel, has appeared for the petitioners and Mr. Godhamgaonkar, Standing Counsel, has appeared for respondent Nos. 1 and 2.
(3.) THE facts leading to this petition are as follows: (a)An industrial estate has been developed at Waluj in District Aurangabad over the years. At the time when the factories of various companies were set up in this industrial estate, the petitioner No. 1 was entrusted with the works contract of setting up the factory shed of number of such companies. In the present petition, the dispute is with respect to the work carried on by the 1st petitioner for four companies, namely, Bajaj Auto Ltd. , Birla Erickson Tools Ltd. , Anurang Engineering Pvt. Ltd. , and Balkrishna Tyres Pvt. Ltd. The 1st petitioner erected the first factory shed for Bajaj Auto Ltd. from 1st January, 1984 to 25th June, 1988; for Birla Erickson from 1st April, 1987 to 28th February, 1988; for Anurang Engineering Pvt. Ltd. , from 1st April, 1985 to 28th February, 1986 and for Balkrishna Tyres Pvt. Ltd. , from 1st April, 1987 to 28th February, 1988. (b)It is the case of the petitioners that the 1st petitioner as per its constitution carries on only the work of setting up of such plant at the site of the concerned party. In the present case also, it is their case that these parties provided the site where the work was carried on in a sort of the site workshop on the land of the concerned parties where water and electricity was freely made available by him. The raw material and the various components required for erecting the factory shed were also supplied by these parties. It is thereafter that the petitioner/company executed the works contract as per the drawing, specifications and designs furnished by the customer. The raw material made available by the parties concerned was according dealt with. The companys activities consisted in preparing and tailoring the structural items to fit in such items into a particular position. Inasmuch as, this was setting up of a plant fastened to the earth, it was the case of the 1st petition, that no excise duty would be attracted on this works contract. (c)As against that, a little later i. e. in January, 1989, the Excise Department formed an opinion that the activities carried on by the 1st petitioner resulted into manufacture of excisable goods within the meaning of section 3 of the Central Excise Act, 1944 and, therefore, a common show cause notice dated 20th January, 1989 was given not merely to the 1st petitioner but to these four parties, namely, Bajaj Auto Ltd. , Birla Erickson Tools Ltd. , Anurang Engineering Pvt. Ltd. , and Balkrishna Tyres Pvt. Ltd. The notice alleged that the 1st petitioner had manufactured excisable goods, namely, structural steel items, such as, purlins, trusses, north-light, girders, gantry girders, windows, doors, glassers, etc. , which were covered by Item No. 68 of the erstwhile Central Excise Tariff prior to 1st March 1986 and were covered by Chapter Sub-Heading 7308. 90 with effect from 1st March, 1986 under the Central Excise Tariff Act, 1985. The notice, therefore, called upon the petitioner to pay a duty at the rate of 12% upto 28th February, 1986 and 15% from 1st March, 1986 on various items and special excise duty on certain items. The notice alleged that the 1st petitioner had manufactured excisable goods without obtaining the Central Excise Licence, cleared them without payment of duty and without accounting them in the statutory record, without a cover of Central Excise gate pass and without filing classification list, price list and without determining the duty. The petitioner and these four companies and their directors were called upon to explain as to why penal action under section 9-AA of the Act should not be initiated for various violations. The notice enclosed therewith firstly a table giving the total claim on the aforesaid counts which came to Rs. 1,39,79,193. 17 paise. The notice enclosed therewith the break up of this amount into various annexures. The annexures are with respect to these various separate items allegedly manufactured and which were supposed to be excisable under section 3 of the Central Excise Act, 1944, such as, trusses, purlins, etc. It is, however, material to note that all these annexures specifically state that these items were manufactured and removed without payment of duty by the petitioner having their site at M/s. Bajaj Auto Ltd. , Waluj, and at the site of other respective customers. The notice, thereafter, had imputation of charges in Annexure B and then the supporting documents were listed in Annexure C. (d)In the aforesaid notice, principally reliance was placed on the statements of the officers of the 1st petitioner and those of their clients, such as, Bajaj Auto Ltd. and others. These officers had made statements on the enquiry of the Excise Department, that the items concerned were manufactured by the company and that they were goods and were distinctly different than the raw materials. They were completely manufactured and moveable from manufacturing yard. Respondent No. 2 hence claimed that the excise duty will be leviable on these items. (e)The 1st petitioner filed an exhaustive reply to this notice. This reply categorically stated that the 1st petitioner/company did not manufacture any goods. It was only a works contract. It was a civil construction company. It was stated that all basic material like iron and steel angles, channels, beams, sections, etc. were purchased by the client and brought to the adjacent manufacturing yard set up at customers site. It is at that place, the fabrication activity took place, namely, cutting of sections to required lengths, drilling of holes, joinder of pieces or angles and then preparing the basic material as per the specifications and designs. It was submitted that no new product or article came to be manufactured as a result of all this. It was also pointed out that the work was carried out as per the tender notices and the quotations floated by the particular client. The 1st petitioner was only executing the particular works contract as per the design submitted by their client. It was also stated in this reply that all the assembling effected by the 1st petitioner ultimately got embedded into soil, so that, finally the factory shed got erected. (f)After this reply was filed, the matter was heard by the respondent No. 2. Some additional statements and affidavits were filed on behalf of the 1st petitioner particularly of the officers concerned to explain as to what they meant in their statements which were recorded earlier during the course of investigation carried out by the Excise Department. The respondent No. 2 perused the reply, as also, the additional statement filed on behalf of the 1st petitioner. He heard the legal representatives appearing on behalf of the 1st petitioner and the other companies. He also went through the authorities which were cited on their behalf. It was argued before the respondent No. 2 that if the tests of manufacture or of marketability as laid down by the Supreme Court as being necessary for being excisable goods in some of the relevant judgments were applied, the alleged goods manufactured by the 1st petitioner could not be said to be marketable and, in fact, they were not goods. The respondent No. 2 made a distinction between goods captively consumed and for export and thereafter observed that criteria of marketability may depend upon as to how the assessee intends to clear the goods. Then observing, that inasmuch as, final product was becoming immoveable, he observed as follows: "it is also not correct to say that because the final product is immoveable property and purlins, trusses, etc. coming into existence only when they are fixed to a particular case and becoming part of immoveable property they are not goods. Immoveable goods are also excisable goods but because of the taxing scheme the levy is deferred to the point of removal. What is to be seen in such cases is that before acquiring the immoveable nature whether the items had the character of movability to call them as goods and in this case I find that this criteria was satisfied. " (g)The 2nd respondent also noted that as far as steel doors and wooden doors are concerned, they were purchased from outside, but no evidence was produced to substantiate this claim. (h)A plea was raised under section 11-A of the Central Excise Act by the 1st petitioner, that the notice itself was beyond the period of 6 months, as stipulated therein. This was turned down by the respondent No. 2. Lastly, the officer observed amongst other statements: "when the company is paying sales tax on the goods manufactured, they are supposed to know their obligations under Central Excise Law. " this observation was on obtaining information from the officers of the 1st petitioner, that on the items manufactured by the 1st petitioner, sales tax has been paid prior to them being fitted to finally erect the factory shed. The 2nd respondent, therefore, concluded that there was a manufacture of excisable goods prior to the erection of the shed and, therefore, the 1st petitioner was liable to pay the excise duty. He, therefore, passed the order upholding the demand for Rs. 1,39,79,193. 17 paise. He also imposed a penalty of Rs. 10 lakhs, as far as 1st petitioner is concerned and penalty of Rs. 2 lakhs on each of the directors of the 1st petitioner. Similar penalties were issued on the four contracting parties also. It is this order of the 2nd respondent which is under challenge in this petition. ;