2006 (12) TMI 3 - SC - Central Excise

Supreme Court Rules Cold Storage & Air-Conditioning Plants Not Taxable Under Excise Law.

The Supreme Court dismissed the appeals challenging the final order by CEGAT, affirming that the refrigeration plant, cold storage plant, central ... Central Excise – Refrigeration plant/Cold storage plant/Central air conditioning plant/caustic soda plant, such plants were in nature of systems comprising of various components and systems as a whole cannot be considered to be excisable goods Issues involved:Challenge to final order by CEGAT on excisability of refrigeration plant, cold storage plant, central air-conditioning plant, and caustic soda plant under Central Excise Act, 1944.Detailed Analysis:1. Excisability of Plants:The main issue in the appeals was whether refrigeration plant, cold storage plant, central air-conditioning plant, and caustic soda plant can be subjected to duty under the Central Excise Act, 1944. The appellant argued that fabricating these plants amounts to manufacturing a new marketable commodity, thus attracting excise duty. However, CEGAT held that no excise duty is leviable on these plants as they are systems comprising various components and not machines as a whole. Therefore, such systems cannot be considered excisable goods.2. Legal Precedents and Circulars:Several legal precedents were cited to determine the excisability of plants and machinery assembled at the site. The Circular No.581/2002 -CX issued by the Government of India provided further clarification on the excisability of plant and machinery assembled at the site. The Circular emphasized that for goods to be dutiable, they should have a new identity, character, and use distinct from their components, be specified in the Central Excise Tariff, and be marketable. It differentiated between goods that can be dismantled without substantial damage and those that cannot, stating the former are excisable while the latter are not.3. Impact of Circular on CEGAT's Decision:The Circular issued under Section 37B of the Act clarified the criteria for excisability of goods assembled at the site. Based on this Circular, the view taken by CEGAT that no excise duty is leviable on the mentioned plants was deemed correct. The Circular's guidelines aligned with CEGAT's decision that these plants, being systems of components, are not excisable goods as a whole.4. Dismissal of Appeals:Considering the Circular and legal precedents, the appeals challenging CEGAT's final order were dismissed by the Supreme Court with no order as to costs. The Court upheld CEGAT's decision that the refrigeration plant, cold storage plant, central air-conditioning plant, and caustic soda plant are not subject to excisability under the Central Excise Act, 1944.In conclusion, the Supreme Court's judgment affirmed the position that the mentioned plants are not excisable goods under the Central Excise Act, 1944, based on the Circular's guidelines and legal precedents. The decision highlighted the distinction between goods that qualify for excise duty and those that do not, emphasizing the need for a new identity, marketability, and distinct use for goods to be considered excisable.