2010 (4) TMI 15 - SC - Central Excise

Asphalt drum and hot-mix plants bolted to foundations remain movable, not permanently assimilated; Notification No.1/93 exemption rejected

Commissioner of Central Excise, Ahmedabad Versus Solid & Correct Engineering Works & Ors.

SC held that asphalt drum/hot-mix plants bolted to foundations for stable operation were not permanently assimilated into earth and thus retained movable ... Levy of excise duty - entitlement to the benefit of exemption under Notification No.1/93 - Classification - wrong classification to evade duty - (1) Whether setting up of an Asphalt Drum Mix Plant by using duty paid components tantamounts to manufacture of excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944? (2) Whether the respondents engaged in the manufacture of parts and components used for setting up of Asphalt Drum/Hot Mix Plant were entitled to the benefit of Notification No.1/93-CE, dated 28th February, 1993 issued under sub-section (1) of Section 5A of the Central Excise Act, 1944 as amended from time to time? Held that:- The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain moveable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as moveable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. Since the manufacturing units had also raised some other defences including one on the ground of limitation, even if the order passed by the Tribunal was set aside, the matter may have to go back to the Tribunal to enable it to examine the said alternative contentions. Mr. Malhotra did not have any serious objection to this course being followed. He urged and, in our opinion rightly so, that since the Tribunal's view on the question of exemption was unsustainable the order passed by the Tribunal has to be set aside and the matter remitted back for a fresh disposal qua the said units by reference to the other contentions urged on behalf of the units which the Tribunal has not examined. In that view of the matter our answer to question No.2 is in the negative. In the result we allow these appeals, set aside. Issues Involved:1. Whether setting up of an Asphalt Drum Mix Plant by using duty-paid components tantamounts to manufacture of excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944.2. Whether the respondents engaged in the manufacture of parts and components used for setting up of Asphalt Drum/Hot Mix Plant were entitled to the benefit of Notification No.1/93-CE, dated 28th February, 1993 issued under sub-section (1) of Section 5A of the Central Excise Act, 1944 as amended from time to time.Issue-wise Detailed Analysis:Re: Question No.11. Legal Framework: Section 3 of the Central Excise Act, 1944, imposes central excise duty on 'excisable goods' produced or manufactured in India. 'Excisable goods' are defined under Section 2(d) as goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985, and include any article capable of being bought and sold.2. Tribunal's Findings: The Tribunal held that assembling, installation, and commissioning of Asphalt Drum/Hot Mix Plants amounted to manufacture since the plant that came into existence was a new product with a distinct name, character, and use. The Tribunal, however, ruled that the plants were not 'goods' as they were substantially large, embedded in the earth, and could not be dismantled and reassembled without civil works.3. Supreme Court's Analysis:- Moveability and Marketability: The Court emphasized that the attachment of the plant to the foundation with nuts and bolts for stability does not make it immovable property. The plant can be moved after the project is completed, indicating its moveability.- Relevant Case Law: The Court referred to several cases, including *Sirpur Paper Mills Ltd.*, *Narne Tulaman Manufacturers Pvt. Ltd.*, and *Triveni Engineering & Industries Ltd.*, to support the view that machinery fixed for operational efficiency does not become immovable property.- Conclusion: The Supreme Court concluded that the plants do not constitute immovable property and are, therefore, exigible to excise duty. The answer to question no.1 is in the affirmative.Re: Question No.21. Tribunal's Findings: The Tribunal granted the benefit of exemption under Notification No.1/93 to the manufacturing units, reasoning that the use of the brand name 'Solidmec' did not disentitle them from the exemption due to the size of the stickers indicating the brand names.2. Supreme Court's Analysis:- Legal Sustainability: The Court found the Tribunal's reasoning based on the size of the stickers to be legally unsustainable.- Alternative Contentions: The respondents had raised other defenses, including one on the ground of limitation, which the Tribunal had not examined.- Remand for Fresh Consideration: The Supreme Court remanded the matter back to the Tribunal to consider these alternative contentions.3. Conclusion: The answer to question no.2 is in the negative. The Tribunal's orders dated 19th August 2002 and 8th April 2003 were set aside, and the matter was remanded for fresh consideration.Final Order:The Supreme Court allowed the appeals, set aside the Tribunal's orders, and remanded the matter back to the Tribunal for fresh orders, taking into account the alternative contentions of the respondents. The appellants were awarded costs assessed at Rs.25,000/-.This summary comprehensively covers the issues involved, the Tribunal's findings, the Supreme Court's detailed analysis, and the final order, preserving the original legal terminology and significant phrases from the judgment.