Case: Sunflag Iron &amp; Steel Company Limited &amp; Another Vs. Additional Collector of Central Excise &amp; Others

fabrication and machining work in respect of which it used to sell steel structurals and also carry out job work. The operations carried out on structural steel plates and flats consisted of cutting to sizes, drilling holes to enable bolting, welding to facilitate further assembly at erection sites and applying shop paint to prevent rusting during storage. It was contended by the assessee that these processes and operations did not result in the manufacture of new goods, that the articles in question did not undergo any material change in commercial parlance and in the trade the articles in question continue to be the same even after the said operations. It was also contended that, as a result of the said operations, no different commercial article or commodity came into existence. After examining the material on record, the Tribunal found that the contract pertained to fabrication of structures according to drawings and specifications with one coat of shop paint and delivery of fabricated structures to the erection sites. In other words, the assessee was a company which carried out the work of fabrication and work in its factory and supplied them to its customer at the erection site by carrying out several processes on raw steel. The Tribunal pointed out that if the works carried out by the appellants were considered in isolation, one might be led into concluding that it does not constitute manufacture, but it has to be remembered that the work carried out by the appellants is of highly intricate, specialised and technical nature. After the processes were done by the appellants, the raw material consisting of beams, angles, etc. get such shape and character that they could be readily fitted into structures. The Tribunal drew an analogy with pre-fabricated houses, or a walking stick, or a toy made from wood and held that the identity of such articles must be held to be different from raw materials which have gone into their making; such activities would certainly be called manufacturing activities. In fact, this judgment was considered carefully by the CEGAT in the case of Aruna Industries (supra) and, in our view, rightly distinguished. 25. It was rightly pointed out in Aruna Industries (supra) that the CEGAT had considered the terms of contract in Bokaro (supra) and based its decision on the nature of work to be carried out. The terms of contract in Bokaro showed that raw materials were only cut to size, welded, fixed and fabricated according to drawings and thereafter assembled structures were delivered at the site. These facts do distinguish the judgment in Bokaro (supra). In our judgment, considering the peculiar nature of the terms of contract before it, the Tribunal rightly took the view in Bokaro that processes carried out on the raw steel for fabricating them into structurals, which were to be delivered at site, indicated that the assesses therein was carrying out manufacture of goods. Such is not the case before us. 26. The judgment rendered by the CEGAT in the case of Richardson & Cruddas Ltd. (supra) also does not carry the matter in favour of the Revenue. In fact the Tribunal observes that in Aruna Industries case the contracts comprised of construction and completion of works. There was a sale of raw materials by one party to the other; it was a composite contract for work and labour and not for sale of goods. It further says that the assessee had erected structures on the site allotted to them by VSP and that since the assessees were only erecting a construction and were fabricating the materials on the spot, the workers were merely "birds of passage" and, therefore, they cannot be considered as workers within a factory and the structures cannot be deemed to be fabricated in a "factory". In the case of the assessee before us, these are precisely the facts. The learned Counsel for the Revenue is not able to show us that, in the case of assessee before us, there is a contract for sale of goods or that the fabricated pre-structurals were carried out/manufactured at some factory and delivered at site of the petitioner. On the other hand, it was fairly conceded that the contracts in both the cases before us involved erection and construction of the shed and cold rolling steel mill for which purpose the contractor at site fabricated certain duty paid raw materials which were supplied by the assessee. These factors, in our judgment, did not exist in the case of Richardson & Cruddas (supra) and, therefore, the CEGAT had no difficulty holding against the assessee. In our view, even this judgment does not militate against view taken in Aruna Industries. 27. Having considered the matter from all these aspects, we are satisfied that the cases of the petitioners before us fall within the matrix exactly similar to the one in Aruna Industries and had the assessing authorities applied their minds carefully to the judgment in Aruna Industries case, there would not have been difficulty in arriving at the correct decision. Having not done so, there is an error. 28. We are, therefore, of the view that in both the cases, fabrication of structurals at the site of the principal by using raw materials supplied by the principal did not amount to "manufacture", nor was it done at "factory", nor were the goods saleable or capable of being brought to the market for being bought or sold. We further notice that in both the cases the fabrication was with the immediate purpose of using in the factory shed or steel cold rolling mill which were being constructed and there was never an intention to sell it in the market. These facts, in our judgment, make it amply clear that the materials fabricated at the site by the contractors in both the cases were not exigible to excise duty under section 3 of the Act. Hence, the orders in both the cases need to be set aside in exercise of writ jurisdiction.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Considering the total absence of reference to judgment of the CEGAT in the case of M/s. Aruna Industries (supra), which is pat on the point (as we shall presently see), we are inclined to agree with the learned Counsel for the petitioners. Though not articulated in words, in substance and spirit both the impugned orders appear to follow the CBEC guidelines by ignoring the binding judgment of the CEGAT.The circular issued by the CBEC is made binding on the Excise authorities by reason of sectionof the Act. Sectionprovides that in its discretion, the CBEC may, for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit and that such officers and all others persons employed in the execution of the Act shall observe and follow such orders, instructions and directions of the CBEC.9. Turning then to the binding nature of the judgments of the CEGAT, we find that the proposition has never been doubted that the judgments of the CEGAT are binding on the revenue authorities. In the case of (Morarji Gokuldas Spinning Weaving Co. Ltd. and another v. Union of India and others)7, reported in 1981 E.L.T. 429(Bom.), it was pointed out by a learned Single Judge of this Court that an order passed by the Central Government in exercise of its revisional powers (under the law as it stood when no appeal was provided) was binding on the excise authorities. In the case of (Collector of Central Excise,v. Pharmaceutial Capsules Laboratories, Bombay)8, reported in 1986(25) E.L.T. 211, which was a case after the CEGAT was established, the CEGAT itself took a view that judgments of the CEGAT are binding on the revenue authorities and even the fact that they had merely filed an appeal against a particular judgment did not detract from its bindingCirculars/Orders or trade notices are not binding on the assesses at all and their efficacy and legality is always open for challenge at the instance of them. As far as the judgments rendered by the CEGAT are concerned, they are equally binding on the assesses as well as the Department. In a contest, therefore, the Circulars/guidelines/orders or trade notices issued under sectionmust necessarily yield. Thus, we hold that all officers functioning under the Act are bound by the judgments rendered by the CEGAT as long as such judgments are not stayed or reversed by a superior forum i.e. the High Court or the Supreme Court. We also hold that if at all there is a situation of conflict between a circular/guideline/order or trade notice issued under sectionof the Act and a binding judgment of the CEGAT, it is the binding judgment of the CEGAT which has to be followed by the authorities under the Act. The observations of the Division Bench of this Court in the case of (Yashwant Sahakari Sakhar Karkhane Ltd. v. Union of India and others)16, reported in 1986(26) E.L.T. 904(Bom.) fully support the view which we are inclined to take. It is an elementary proposition that an administrative circular issued by an authority, however high, can never override a binding judgment of judicial or quasi judicial authority. This is the quintessence of rule of law.In the facts and circumstances of the case, therefore, we are inclined to agree with the contentions of Mr. Thakur that driving the petitioners to the appellate authorities would be of no use. Faced with the circulars/guidelines/orders or trade notices under sectionof the Act, which have already taken a view in the matter, the assessee would have little chance to persuade the departmental authorities to take a contrary view. Mr. Thakur is right when he contends that there is no equally efficacious alternate remedy. Hence, we are of the view that these writ petitions need to be entertained.Having considered the matter from all these aspects, we are satisfied that the cases of the petitioners before us fall within the matrix exactly similar to the one in Aruna Industries and had the assessing authorities applied their minds carefully to the judgment in Aruna Industries case, there would not have been difficulty in arriving at the correct decision. Having not done so, there is an error.We are, therefore, of the view that in both the cases, fabrication of structurals at the site of the principal by using raw materials supplied by the principal did not amount to "manufacture", nor was it done at "factory", nor were the goods saleable or capable of being brought to the market for being bought or sold. We further notice that in both the cases the fabrication was with the immediate purpose of using in the factory shed or steel cold rolling mill which were being constructed and there was never an intention to sell it in the market. These facts, in our judgment, make it amply clear that the materials fabricated at the site by the contractors in both the cases were not exigible to excise duty under section 3 of the Act. Hence, the orders in both the cases need to be set aside in exercise of writ jurisdiction.