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

SC held that asphalt drum/hot-mix plants bolted to foundations for stable operation were not permanently assimilated into earth and thus retained movable ... Manufacture - excisable goods - moveability and marketability - attachment to the earth / immovable property - mode and object of annexation - intention behind permanent fastening - benefit of exemption notification - remand for fresh considerationManufacture - excisable goods - moveability and marketability - attachment to the earth / immovable property - mode and object of annexation - intention behind permanent fastening - Whether setting up of Asphalt Drum/Hot Mix Plants by assembling, erecting and commissioning using duty-paid components amounts to manufacture of excisable goods liable to central excise duty. - HELD THAT: - The Court held that assembling, installation and commissioning which bring into existence a new product with a distinct name, character and use constitute 'manufacture' within Section 2(f) and attract central excise duty where the product falls under the Tariff (Entry 8474). The determinative question was whether such plants became immovable and hence non-excisable by reason of being fixed to foundations. Applying the tests of mode of annexation and the object of annexation, and the definitions in the General Clauses Act and Transfer of Property Act, the Court observed that mere attachment to a shallow foundation by bolts to secure wobble-free operation does not amount to being 'attached to the earth' or permanently fastened for beneficial enjoyment of the land or structure. Prior authorities were examined and distinguished on facts where machinery was custom-embedded or assimilated into permanent structures; by contrast the hot mix plants here were over-ground, intended to be movable after the project, and not permanently assimilated into any structure. On these grounds the setting up of the plants amounted to manufacture of marketable goods exigible to excise duty. [Paras 21, 24, 29, 33, 34]Assembling, erecting and commissioning the Asphalt Drum/Hot Mix Plants constituted manufacture of excisable goods and were not rendered non-excisable by their temporary fixing to shallow foundations.Benefit of exemption notification - remand for fresh consideration - Whether the manufacturing units were entitled to the benefit of Notification No.1/93-CE and related Tribunal findings on brand-stickers. - HELD THAT: - The Tribunal's conclusion that the manufacturing units were entitled to exemption based on the relative size of brand stickers was held to be legally unsustainable. The Court found that the Tribunal had not considered alternative contentions (including limitation) raised by the units. Since the Tribunal's reasoning on exemption was inadequate, the matter was set aside and remitted to the Tribunal for fresh disposal so that it may examine and decide the alternative defences and contentions on merits. [Paras 35, 36]Tribunal's view on entitlement to exemption set aside; issue remitted to the Tribunal for fresh adjudication on the alternative contentions raised by the manufacturing units.Final Conclusion: Appeals allowed in part: the Court held that erection and commissioning of the hot mix plants amounted to manufacture of excisable goods and are dutiable; the Tribunal's grant of exemption to the manufacturing units based on sticker-size was set aside and the matter remanded to the Tribunal for fresh decision on the alternative contentions. Costs awarded to appellants. 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.