1981 (7) TMI 70 - CGOVT - Central Excise

Tax Exemption for Elevator Installation as Immovable Property

The Government determined that elevators and escalators, once installed, are part of immovable property and not classified as goods under Tariff Item 68. ... Goods and immovable property distinction - works contract versus sale of goods - assessability under tariff item 68 of Central Excise Tariff - duty on component parts cleared from factory - no additional duty on on-site assembly where goods become part of immovable propertyGoods and immovable property distinction - works contract versus sale of goods - assessability under tariff item 68 of Central Excise Tariff - Elevators and escalators erected and installed in buildings by the petitioners are not goods assessable under tariff item 68 because they become part of immovable property. - HELD THAT: - The Government accepted the petitioners' contention-supported by the Bombay High Court decision in the sales tax reference-that the contracts for erection and installation are composite and indivisible works contracts and that the completed elevators and escalators, once firmly affixed, become part of immovable property and are not intended to be moved. On that basis the Government held that such installed elevators and escalators cannot be regarded as goods for the purpose of assessment under tariff item 68 and thus are not leviable to excise duty at that stage. The revision was disposed on this short point without addressing other contentions. [Paras 4]Installed elevators and escalators are part of immovable property and are not assessable as goods under tariff item 68.Duty on component parts cleared from factory - Component parts of elevators and escalators manufactured and cleared from the petitioners' factories are chargeable to duty at the appropriate rates. - HELD THAT: - Government clarified that while the completed installations are not goods for excise purposes, the individual component parts manufactured and cleared from the factories are liable to duty. This preserves the liability on factory clearances and distinguishes the treatment of parts cleared as goods from the treatment of the assembled installation when incorporated into immovable property. [Paras 4]Component parts cleared from factory premises are liable to excise duty at appropriate rates.No additional duty on on-site assembly where goods become part of immovable property - No further excise duty is chargeable upon assembly, erection and commissioning at site when the component parts become part of immovable property. - HELD THAT: - Government held that once the duty-applicable component parts have been cleared from the factory and subsequently assembled on site into an elevator or escalator which becomes part of the building, no additional duty can be imposed upon that on-site assembly or installation. The rationale is that at the stage of completed installation the subject is immovable and not a chargeable excisable good under the tariff entry relied upon. [Paras 4]Assembly, erection and commissioning at site do not attract further excise duty where the completed installation becomes part of immovable property.Final Conclusion: The revision was allowed on the short ground that elevators and escalators erected and installed by the petitioners become part of immovable property and are not assessable as goods under tariff item 68; component parts cleared from the factories remain liable to duty, but no additional duty is leviable on their on-site assembly into installations forming part of immovable property. Issues involved: Assessment of duty on elevators and escalators under Tariff Item 68 of Central Excise Tariff, consideration of elevators and escalators as goods, applicability of Notification No. 85/79 for exemption, exclusion of post-manufacturing expenses in determining assessable value.Assessment of duty on elevators and escalators: The petitioners, engaged in the business of erection and installation of elevators and escalators, challenged the Asstt. Collector's order levying duty on the manufactured elevators and escalators under Tariff Item 68. The Appellate Collector differentiated between assessing the lifts as goods and assessing the component parts used in manufacturing the lifts. As the petitioners failed to produce invoices for the component parts, the Appellate Collector determined the assessable value by considering the composite value of the entire product, excluding charges unrelated to lift manufacture.Consideration of elevators and escalators as goods: The petitioners argued that elevators and escalators, upon complete erection and installation, become part of immovable property and should not be classified as goods. Referring to a High Court judgment, they contended that the contracts for erection and installation were indivisible works contracts, not contracts for sale of goods. The Government agreed with this contention, stating that once installed in buildings, elevators and escalators are affixed and not intended to be moved, thus not meeting the definition of goods under Tariff Item 68.Applicability of Notification No. 85/79 for exemption: The petitioners claimed eligibility for exemption under Notification No. 85/79, which exempts goods falling under Tariff Item 68 and manufactured outside a factory. However, the Government's decision to not classify elevators and escalators as goods rendered this contention moot.Exclusion of post-manufacturing expenses in determining assessable value: In the event that elevators and escalators were considered goods, the petitioners sought the exclusion of post-manufacturing expenses while determining the assessable value. This argument was not addressed by the Government due to the decision regarding the classification of elevators and escalators as immovable property.The Government concluded that elevators and escalators, once erected and installed, become part of immovable property and are not to be considered goods under Tariff Item 68. Therefore, no duty is chargeable when component parts are assembled on-site to install the elevators and escalators. The revision application was disposed of based on this finding, without delving into the other contentions raised by the petitioners.