Appeal (Civil) 203214 of 2002

12th December 2006

Petitioner Counsel:
Respondent Counsel:

Cases Cited :

Paras 4, 5: Quality Steel Tubes Pvt. Ltd. Vs. CCE (1995 (75) E.L.T. 17 (SC)
Para 4: Mittal Engineering Works Pvt. Ltd. Vs CCE, Meerut (1996 (88) E.L.T. 622 (SC)
Paras 4, 5: Sirpur Paper Mills Ltd. Vs. CCE, Hyderabad (1998 (97) E.L.T. 3 (SC)
Paras 4, 5: Silica Metallurgical Ltd. Vs. CCE, Cochin (1999 (106) E.L.T. 439 (Tribunal)
Paras 4, 5: Duncan Industries Ltd. Vs. CCE, Mumbai (2000 (88) ECR 19 (SC)
Paras 4, 5: Triveni Engineering & Industries Ltd. Vs. CCE (2000 (120) E.L.T. 273 (SC)
Paras 4, 5: CCE, Jaipur Vs. Man Structurals Ltd. (2001 (130) E.L.T. 401 (S.C.)

JUDGEMENT

Dr. ARIJIT PASAYAT, J.:- In each of these appeals challenge is to the common final order passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (in short ’CEGAT’). The basic question in all these appeals is whether refrigeration plant/cold storage plant/Central air-conditioning plant/caustic soda plant can be subjected to duty under Central Excise Act, 1944 (in short the ’Act’). Stand of the appellant was that the fabrication of such plants out of duty paid bought out amounts to manufacture of a new marketable commodity and therefore, excise duty is payable.

2. The CEGAT held that no excise duty is leviable and thus these plants are not subject to excisability. It accepted stand of the respondents that these plants are basically systems comprising of various components and are thus in the nature of systems and are not machines as a whole. Accordingly, such systems as a whole cannot be considered to be excisable goods.

3. According to learned counsel for the appellant, the view taken by the CEGAT is untenable. The adjudicating authority was justified in holding that fabrication of the plants in question out of duty paid bought out items amounts to manufacture of a new marketable commodity and therefore dutiable.

4. The issue relating to excisability of plants and machinery assembled at site has been determined by this Court in several cases. For example Quality Steel Tubes Pvt. Ltd. v. CCE (1995 (75) E.L.T. 17 (SC); Mittal Engineering Works Pvt. Ltd. v CCE, Meerut (1996 (88) E.L.T. 622 (SC); Sirpur Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (SC); Silica Metallurgical Ltd. v. CCE, Cochin (1999 (106) E.L.T. 439 (Tribunal); Duncan Industries Ltd. v. CCE, Mumbai (2000 (88) ECR 19 (SC); Triveni Engineering & Industries Ltd. v. CCE (2000 (120) E.L.T. 273 (SC) and CCE, Jaipur v. Man Structurals Ltd. (2001 (130) E.L.T. 401 (S.C.)

5. As a matter of fact taking into account these decisions Circular No.58/1/2002-CX dated 15th January, 2002 has been issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, New Delhi. The Circular indicates that it was intended to clarify the question of excisability of plant and machinery assembled at site. The relevant portion of the Circular reads as follows:



"Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Sub: Excisability of plant and machinery

assembled at site-Regarding

In exercise of the power conferred under

Section 37B of the Central Excise Act, 1944, the

Central Board of Excise and Custom considers it

necessary, for the purpose of uniformity in

connection with classification of goods erected and

installed at site, to issue the following instructions.

2. Attention is invited to Section 37B Order

No.53/2/98-CX, dated 2.4.98 (F.No.154/4/98-

CD.4) (1998 (100 E.L.T.T9) regarding the

excisability of plant and machinery assembled at

site.

3. A number of Apex Court judgments have been

delivered on this issue in the recent past. Some of

the important ones are mentioned below:

(i) Quality Steel Tubes Pvt. Ltd. v. CCE

(1995 (75) E.L.T. 17 (S.C.);

(ii) Mittal Engineering Works Pvt. Ltd. v CCE,

Meerut (1996 (88) E.L.T. 622 (S.C.);

(iii) Sirpur Paper Mills Ltd. v. CCE,

Hyderabad (1998 (97) E.L.T. 3 (S.C.);

(iv) Silica Metallurgical Ltd. v. CCE,

Cochin (1999 (106) E.L.T. 439 (Tribunal) as

confirmed by the Supreme Court vide their

order dated 22.2.99 (1999 (108) E.L.I. A58

(S.C.);

(v) Duncan Industries Ltd. v. CCE, Mumbai

(2000 (88) ECR 19 (S.C.));

(vi) Triveni Engineering & Industries

Ltd. v. CCE (2000 (120) E.L.T. 273 (S.C.)

(vii) CCE, Jaipur v. Man Structurals

Ltd. (2001 (130) E.L.T. 401 (S.C.)

4. The plethora of such judgments appears to

have created some confusion with the assessing

officers. The matter has been examined by the

Board in consultation with the Solicitor General of

India and the matter is clarified as under:-

a. For goods manufactured at site to be

dutiable they should have a new

identity, character and use, distinct

from the inputs/components that have

gone into its production. Further, such

resultant goods should be specified in

the Central Excise Tariff as excisable

goods besides being marketable i.e.

they can be taken to the market and

sold (even if they are not actually sold).

The goods should not be immovable.

b. Where processing of inputs results in a

new products with a distinct

commercial name, identity and use

(prior to such product being

assimilated in a structure which would

render them as a part of immovable

property), excise duty would be

chargeable on such goods immediately

upon their change of identity and prior

to their assimilation in the structure or

other immovable property.

c. Where change of identity takes place in

the course of construction or erection

of a structure which is an immovable

property, then there would be no

manufacture of "goods" involved and

no levy of excise duty.

d. Integrated plants/machines, as a

whole, may or may not be ’goods’. For

example, plants for transportation of

material (such as handling plants) are

actually a system or a net work of

machines. The system comes into

being upon assembly of its component.

In such a situation there is no

manufacture of ’goods’ as it is only a

case of assembly of manufactured

goods into a system. This cannot be

compared to a fabrication where a

group of machines themselves may be

combined to constitute a new machine

which has its own

identity/marketability and is dutiable

(e.g. a paper making machine

assembled at site and fixed to the

earth only for the purpose of ensuring

vibration free movement)

e. If items assembled or erected at site

and attached by foundation to earth

cannot be dismantled without

substantial damage to its components

and thus cannot be reassembled, then

the items would not be considered as

moveable and will, therefore, not be

excisable goods.

xx xx xx xx

5. Keeping the above factors in mind the position

is clarified further in respect of specific instances

which have been brought to the notice of the Board.

xx xx xx xx

(iii) Refrigeration/air conditioning plants.

These are basically systems comprising of

compressors, ducting, pipings, insulators

and sometimes cooling towers etc. They

are in the nature of systems and are not

machines as a whole. They come into

existence only by assembly and

connection of various components and

parts. Though each component is

dutiable, the refrigeration/air

conditioning system as a whole cannot be

considered to be excisable goods. Air

conditioning units, however, would

continue to remain dutiable as per the

Central Excise Tariff.

6. Based on the above clarifications pending

cases may be disposed of. Past instructions,

Circulars and Orders of the Board on this issue may

be considered as suitably modified.

7. Suitable Trade Notice may be issued for the

information and guidance of the trade.

8. Receipt of this order may please be

acknowledged.

9. Hindi version will follow."



6. In view of the above said Circular which has been issued in exercise of power conferred under Section 37B of the Act, the view of the CEGAT cannot be faulted.

7. The appeals are accordingly dismissed with no order as to costs.