1997 (12) TMI 109 - SC - Central Excise

Excise duty upheld on assembled paper-making machine as movable, new marketable commodity under Section 3 Central Excise Act

SC held excise duty is leviable on the paper-making machine assembled and erected by the appellant. The Court found the machine was not immovable property ... Excisable goods - movability and marketability - immovable property versus movable plant and machinery - manufacture - emergence of a new marketable commodity - attachment to earth for operational efficiency does not confer immovabilityExcisable goods - movability and marketability - immovable property versus movable plant and machinery - attachment to earth for operational efficiency does not confer immovability - Whether the paper making machine assembled and permanently fixed at the factory site was outside the charging provision as immovable property and therefore not excisable - HELD THAT: - The Tribunal found as a fact that the machine was attached to a concrete base for operational efficiency and safety but could be dismantled and sold in parts; attachment to the earth was purposive (to prevent wobbling and secure efficiency) and did not convert the machine into immovable property. The Court accepted the Tribunal's factual findings and held that mere embedding or fixation for better functioning does not automatically make plant and machinery immovable; the decisive test is movability and marketability. Illustrative examples (such as pumps fixed on a base) were used to show that permanent attachment for operational reasons does not change the character of movable goods. Because the Tribunal's finding that the machine was saleable and could be removed was a factual conclusion, there was no scope for interference. [Paras 3, 4, 5, 6, 8]The machinery assembled and fixed at the factory is not immovable property and is liable as excisable goods because it is movable and marketable despite being attached to the earth for operational efficiency.Manufacture - emergence of a new marketable commodity - excisable goods - movability and marketability - Whether the appellant's activity in assembling purchased and fabricated components resulted in manufacture of a paper making machine that is a new marketable commodity liable to excise duty - HELD THAT: - The Court accepted the Tribunal's implicit finding that the final product (the paper making machine) was distinct from the components used to produce it. Although many components were purchased and some parts fabricated on site, the assembled machine constituted a new, marketable commodity. The character of the end product, not merely the origin of its components, determines whether manufacture has occurred for excise purposes. Marketability being a question of fact, the Tribunal's finding on this aspect was held to be unimpeachable and not perverse. [Paras 7, 8]The appellant's assembly of components resulted in manufacture of a new marketable commodity (the paper making machine) and therefore attracted excise duty.Final Conclusion: The Tribunal's factual findings that the paper making machine was saleable and removable, and that assembly produced a new marketable commodity, were upheld; the machine is not to be treated as immovable property and is liable to excise duty. The appeal is dismissed. Issues:Leviability of excise duty on paper making machine assembled using duty paid components and fabricated parts in the factory.Detailed Analysis:1. The appellant contended that the paper making machine, assembled using duty paid components and fabricated parts in their factory, should not be subject to excise duty as it was immovable property and not marketable under the Central Excise Act. The appellant argued that the machine's components had to be put together at the site where it was erected, making it immovable and not falling under the Act's charging section.2. The appellant's counsel argued that the machine was permanently attached to the ground, essential for its operation, and could not be sold in the market due to its nature. It was further emphasized that the machine was erected on a turnkey basis at the site, embedded in a concrete base to become a permanent fixture.3. The Tribunal rejected these contentions, stating that the machine's attachment to the earth was for operational efficiency and safety, preventing wobbling. The Tribunal also found that the paper making machine was saleable, as it could be dismantled and sold in parts if someone wished to purchase it.4. The Tribunal's findings indicated that the machine was not immovable property like a building or tree but a movable item attached to earth for operational efficiency. It was highlighted that the appellant could remove the machine from its base and sell it if desired, indicating marketability.5. The argument that anything embedded in earth should be treated as immovable property was refuted, using the example of a water pump fixed on a cement base. The Tribunal's finding that the paper making machine could be sold in the market negated the appellant's claim of it being immovable property due to being fixed for better functioning.6. The appellant's argument that the entire machinery could not be bought and sold without dismantling was countered by the Tribunal, pointing out that the appellant had purchased components, fabricated parts, and assembled the machine on-site. The Tribunal's reasoning on this aspect was deemed sound.7. Lastly, the contention that the paper making machine was not truly manufactured by the appellant was dismissed. It was clarified that despite purchasing components and fabricating parts, the final product, the paper making machine, was distinct and marketable, emerging as a new commodity through the appellant's manufacturing activity.8. The issue of marketability, being a question of fact, led to the dismissal of the appeal by the Tribunal. It was concluded that there was no basis for interference with the Tribunal's decision, as it was not based on any material fact omission or perversity.9. The appeal was ultimately dismissed with no order as to costs, upholding the Tribunal's decision on the leviability of excise duty on the paper making machine assembled by the appellant.