By TIOL News Service

MUMBAI, APRIL 18, 2018: THIS is a Revenue appeal filed in the year 2010 against the order passed by the CCE, Nagpur.

The facts are that the respondent had been assigned work for the manufacturing, supplying, transporting, laying, jointing, guniting, painting and testing 1600 mm diameter MS pipes including excavation, preparation of bedding and special anchor blocks, valves and chamber trenching and back filling including dewatering etc. complete for interconnection between existing 1600 mm MS pipeline for stage I and II and inlet chamber of one day reservoir including necessary civil works for stage-III 2 x 500 MW unit 5 and 6 of Chandrapur Thermal Power Station by the office of the Chief Engineer, Maharashtra State Electricity Board.

The case of the department is that in the execution of the turnkey project, the respondent has manufactured the MS pipes of 1600 mm diameter on which no excise duty was paid.

The adjudicating authority dropped the proceedings on the ground that the pipe used for erection, installation and laying of pipeline is not marketable and it is immovable, hence not dutiable. The AA also took a stand that since the exercise is revenue neutral, no duty demand can be made.

Revenue is before the CESTAT.

The AR, while reiterating the grounds of appeal that the order is illegal,submitted that admittedly the pipe being a movable goods is manufactured and comes into existence and thereafter it is shifted to the site, therefore, the pipe manufactured by the respondent is excisable and liable for duty. As regards the benefit of CENVAT credit and revenue neutrality mentioned by the adjudicating authority, it is submitted that no verification of facts was carried out in the matter and moreover, since MSEB is neither paying any service tax or excise duty, the plea of revenue neutrality cannot sustain.

The respondent is absent.

After considering the submissions, the CESTAT inter alia observed -

++ we find that the activity of manufacturing of pipe cannot be said that the same is immovable for the simple reason that the activity of manufacturing of pipe is totally different from laying of pipe. First the pipe is manufactured which is movable, hence marketable and subsequent to the manufacture, it is taken to the site where the pipe has to be laid down and that the laying process is carried out. Therefore, prima facie we are of the view that the respondent has carried out the manufacturing of pipes which is excisable.

++ the issue of revenue neutrality on the ground that if any duty is payable on the pipe is available as CENVAT credit to MSEB does not appear to be convincing for the reason that in normal course, MSEB is neither a service provider nor manufacturer. Therefore, the duty payable, if any, by the respondent cannot be taken as cenvat credit by MSEB. However, this fact has not been verified before coming to the conclusion on the aspect of revenue neutrality.

In fine, the matter was remanded to the adjudicating authority.

(See 2018-TIOL-1225-CESTAT-MUM)