2007 (5) TMI 6 - SC - Central Excise

Supreme Court Orders Reconsideration of Excise Duty on Assembled Machinery at Sites.

The Supreme Court remitted the matter back to the Customs Excise and Gold (Control) Appellate Tribunal for fresh consideration regarding the excisability ... Excisability – Department contended that appellant activity of fabrication of plants out of duty paid bought items not amount to manufacture but assessee can’t agree with it – Authority remit the matter for fresh consideration. Issues involved:Challenge to final order passed by Customs Excise and Gold (Control) Appellate Tribunal regarding excisability of plants and machinery assembled at site.Analysis:The appeals involved in the judgment raise questions regarding the excisability of plants and machinery assembled at site. The central issue is whether the erection of various components and parts to create immovable property triggers excise duty. The Customs Excise and Gold (Control) Appellate Tribunal (CEGAT) held that no excise duty is leviable on such plants, considering them as systems comprising of components rather than machines as a whole. The appellant argued that the fabrication of these plants amounts to the manufacture of a new marketable commodity, thus attracting excise duty. This dispute aligns with previous judgments on similar matters, prompting the government to issue Circular No. 58/1/2002-CX to clarify the excisability of plant and machinery assembled at site.The Circular emphasizes that for goods to be dutiable, they must possess a new identity, character, and use distinct from their components, be specified in the Central Excise Tariff, and be marketable. It distinguishes between goods that change identity before assimilation into immovable property, which are dutiable, and those that become part of immovable property during construction, exempt from excise duty. The Circular also addresses scenarios where assembly of components results in systems rather than individual machines, clarifying that such systems may not be considered excisable goods. Specific examples like refrigeration/air conditioning plants are analyzed to illustrate this distinction.Considering the lack of consideration of factual aspects by CEGAT, the Supreme Court decides to remit the matter for fresh consideration in light of a specific judgment and the Circular. The judgment in Commissioner of Central Excise v. Virdi Brothers and Ors. is referenced to highlight relevant aspects. Ultimately, the appeals are disposed of without costs, emphasizing the need for a thorough review based on the provided guidance and legal precedents.