Commissioner of Central Excise, Indore v. Mis Cethar Vessels Ltd. and Ors.

A COMMISSIONER OF CENTRAL EXCISE, INDORE v. MIS. CETHAR VESSELS LTD. AND ORS. MAY 15, 2007 [DR. ARIJITPASAYAT ANDS.H. KAPADIA,JJ.) B _Central Excises Act, 1944:_ _s.3-Erection/fabrication of Boiler/Membrane Cell Technology/Solvent extraction plant by assembling various components and parts-Liability to_ C _pay excise duty orr-Held: Issue relating to excisability of plants and machinery assembled at site has been clarified in Circular No. 58/J/2002-CX dated 15th January, 2002-As the factual aspect was not considered by CEGAT, matter is remitted to it for fresh consideration in the light of Virdi Brothers_ =~~~~ D D The question for consideration in the present Appeal is whether erection/fabrication of Boiler/Membrane Cell Technology/Solvent extraction plant at site by assembling various components and parts, brings into existence immovable property or whether it amounts to manufacture of new marketing commodity liable to excise duty. E Disposing of the Appeal, the Court HELD: 1.1. 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 F indicates that it was intended to clarify the question of excisability of plant and machinery assembled at site. (Para 6] (704-B] 1.2. The matter is clarified as following: (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 G 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 H 701 702 SUPREME COURT REPORTS [2007] 6 S.C.R. A[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 B be no manufacture of "goods" involved and no levy of excise duty. (d) Integrated plantvmachines, 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 c 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) Ifitems 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 D[considered ][as ][moveable ][and ][will, ][therefore, ][not ][be ][excisable ][goods. ] **==> picture [11 x 8] intentionally omitted <==** **----- Start of picture text -----**<br> ,;..<br>**----- End of picture text -----**<br> " .o( (Para 6) (705-B-H; 706-A) _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_ E _[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; _CCE, Jaipur_ v. _Man Structurals Ltd.,_ (2001) 130 E.L.T. 401 and _Commissioner o/Centrai Excise, Indore_ v. _Mis Virdi Brothers and Ors.,*_ (2006) 14 SCALE 115, relied on. F 8. As the basic factual aspects were not considered by the CEGAT. This Court deems it proper to remit the matter to it for a fresh consideration in the light of the judgment in _*Virdi Brothers and Ors._ case and Circular. (Para 8] (706-G) ... ., ..., CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5391-5393 of G[2002. ] From the Final Order No. 100-102/2002 dated 28.01.2002 of the Customs, Excise & Gold (Control) Appellate Tribunal, South Zonal Bench, at Chennai in Appeal Nos. E/469, 470 & 1047 of2001. H WITH COMMNR OF CENTRAL EXCISE, INDORE _v._ CETHAR VESSELS LTD. [PASA YAT, J.l 703 C.A. Nos. 6533-6534 of2002, 4100 of 2003 and D.344 7 of2006. Dr. R.G. Padia, Sr. Adv., Navin Prakash, Ajay Shanna, Vikram Gulati and B. Krishna Prasad for the Appellant. M.P. Devanath, Sudhir Kumar Gupta, Shobha and Rajesh Kumar for the Respondents B The Judgment of the Court was delivered by **DR. ARIJIT P** ASA **YAT, J.** 1. All these appeals involve identical questions and are, therefore, taken up together for consideration. c 2. In all these appeals challenge is to the final order passed by the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi (in short the 'CEGAT'). The basic question is whether the erection of Boiler at site by assembling various components and parts has brought into existence immovable property or not that is the issue involved in Civil Appeal Nos. 5391-5393 of2002, 4100 of2003 and 3447 of2006. In Civil Appeal Nos.6533- D 34 of2002 the erection related to Membrane Cell Technology and Civil Appeal No.4156 relates to solvent extraction Plant. Stand of the appellant is that the fabrication of such plants out of duty paid bought out items amounts to manufacture of a new marketable commodity and therefore excise duty is ~~ E E 3. 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. F 4. 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. G 5. The issue relating to excisability of plants and machinery assembled at site has been determined by this Court in several cases, e.g. _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,_ H 704 SUPREME COURT REPORTS [2007) 6 S.C.R. - - A (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.) 6. As a matter of fact taking into account these decisions Circular B 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: ## c ## "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 ## D In exercise of the power conferred under Section 3 7B 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. E 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. F 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.; G (ii) _Mittal Engineering Works Pvt. Ltd._ v. _CCE, Meerut,_ (1996) 88 E.L.T. 622 (S.C.); (fu) _Sirpur Paper Mills Ltd._ v. _CCE, Hyderabad,_ (1998) 97 E.L.T. 3 (S.C.); H (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.); COMMNR OF CENTRAL EXCISE, !NDORE _v._ CETHAR VESSELS LTD. (PASA YAT, J.] 705 (v) _Duncan Industries Ltd_ v. _CCE, Mumbai,_ (2000) 88 ECR 19 (S.C.)); A (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[B ] confusion with the a<sessing 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 c 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. D 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 E 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. F 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 G 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) H 706 [2007] 6 S.C.R. ~ ~ ## SUPREME COURT REPORTS A 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 B 5. Keeping the above factors in mind the po~ition is clarified further in respect of specific instances which have been brought to the notice of the Board. ## xx xx xx c (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 D 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 E 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. F 9. Hindi version will follow." 7. These aspects were highlighted in _Commissioner of Central Excise, Indore_ v. _Mis Virdi Brothers and Ors.,_ (2006) 14 SCALE 115]. G 8. As the: basic factual aspects were not considered by the CEGA T we deem it proper to remit the matter to it for a fresh consideration in the light of the judgment in _Virdi Brothers and Ors._ case (supra) and Circular referred to above. 9. The appeals are accordingly disposed of with no orders as to costs. H D.G. Appeals disposed of.