By TIOL News Service

MUMBAI, FEB 16, 2014: A CE demand Rs.4,48,54,486/- along with interest and penalties was confirmed against the appellant by the CCE, Mumbai-II in respect of the Aluminum Sliding Windows, Aluminum Doors & Glazing Systems classifiable under Chapter 76 of the CETA, 1985.

Before the CESTAT, the appellant submitted that they are manufacturing and clearing Aluminum Sliding Windows, Aluminum Doors from the factory and the clearance of these items is within the limit prescribed under the small scale exemption notification. In respect of the Aluminum Assembly of Glazing Systems, the contention is that, the glazing is of glass which comes into existence at site and it is immovable property. Therefore, the glazing cannot be treated as goods liable to duty. The applicant also submitted that all the items were directly brought to the site where the structure was erected and glass was fixed therein. The contention is that nothing has been done in the factory in respect of glazing therefore the demand on the entire glass glazing is not sustainable.

It was further submitted thatthey had already paid the service tax in respect of the activity undertaken in respect of glass glazing and applicant has not availed any credit in respect of the duty paid on inputs used in the glass glazing; that if the credit on inputs are taken into consideration the applicant had already paid more than 50% of the Central Excise demand.

The appellant had also raised the bogey of the demand being hit by limitation inasmuch it was the LB decision in Mahindra & Mahindra Ltd. Vs. C.C.E., Aurangabad, Chandigarh (2005-TIOL-1215-CESTAT-DEL-LB) which decided the taxability of impugned goods.

The CESTAT found prima facie merit in the contention of the applicant that extended period of limitation is not invokable. Considering that the duty demand in respect of the Aluminium structure for the normal period comes to Rs.1,23,04,978/- and the fact that applicant had already paid an amount of Rs.28,43,836/- which had been appropriated in the order, and the availability of credit on the inputs, the Bench directed the applicant to make a further pre-deposit of Rs.50 lakhs within eight weeks and report compliance.

We reported this order as 2013-TIOL-62-CESTAT-MUM.

Against this order, the appellant filed an appeal before the Bombay High Court.

It is emphasized that the system which is sold by the appellant comes into existence at site only as immovable property and, therefore, no duty can be demanded on the system as it is not goods; that the appellant had already paid service tax as works contract service; that appellant had not taken any credit in respect of the duty paid on material used in the making of the system which comes into existence at site as immovable property.

Relying upon the decisions in GanonDunkerly& Co. vs. Union of India, (2003-TIOL-13-HC-MUM-CX), ShapoorjiPallonji Vs. Union of India (2005-TIOL-75-HC-MUM-CX), theappellant submitted that immovable property cannot be subjected to tax and, therefore, the requirement of deposit be dispensed with completely and the appeal be heard on merits.

The Counsel for the Revenue referred to Rule 2(a) of Rules of Interpretation to the Tariff Act 1985 to conclude that the time when the glazed glass is removed from the factory it has the essential character of system and, therefore,is taxable.

The High Court observed that the decisions relied upon by the appellant prima facie did not seem to apply to the facts of the case for the reason that as per the revenue the goods were manufactured in the appellant's factory and are removed in a disassembled condition and, therefore, chargeable to tax.

In the matter of the claim of the appellant that they are they were entitled to CENVAT credit to the extent of an amount of Rs.28.42 lakhs in respect of inputs used in manufacturing the Glazing systems and, therefore, the pre-deposit amount directed by the CESTAT should be reduced by the said factor, the High Court observed -

“…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.”

Holding that there is no reason to interfere with the order of the CESTAT directing pre-deposit of Rs.50 lakhs, the appeal was dismissed. However, the appellant was given further time till 30 th March, 2014 to deposit the amount.

(See 2014-TIOL-195-HC-MUM-CX)