Turnkey project treated as immovable property, so terminal automation system was not excisable goods

A terminal automation system specially designed for the purchaser, involving substantial civil work and assembled, installed and embedded at site, was treated as an immovable turnkey project rather than excisable goods. The fact that computers were used did not change its character into a data processing machine, and the system could not be shifted or reused elsewhere without substantial damage. A board circular stating that turnkey projects involving assembly, installation and erection at site are not to be treated as excisable goods supported this view. On that basis, the demand for duty and the allied penalty, interest and confiscation did not survive.

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Issues: Whether the Terminal Automation System erected and commissioned under the contract was excisable goods liable to central excise duty, penalty, interest and confiscation, or whether it was a turnkey project constituting immovable property.

Analysis: The system was specifically designed for the purchaser, involved substantial civil work, was assembled and installed at site, and was embedded to earth. The system could not be shifted or used elsewhere without substantial damage. Its mere use of computers did not make it a data processing machine. The Board's circular clarifying that turnkey projects involving assembly, installation and erection at site are not to be treated as excisable goods supported this view. Since the subject matter was an immovable turnkey project and not marketable movable goods, the basis for duty demand and allied penalties did not survive.

Conclusion: The issue was decided in favour of the assessee. The Terminal Automation System was held not to be excisable goods, and the demand, penalty, interest and confiscation did not stand.

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