Immovable property and excise valuation principles barred duty on erected turbo alternator sets and trading profit additions.

Turbo alternator sets erected and commissioned at customer sites, having been fixed to foundations and treated as immovable property, were held not to be marketable excisable goods, so central excise duty on that count could not be sustained. Profit earned on traded bought-out items, including items procured from third parties, was held not includible in the assessable value of the manufactured turbines because trading profit cannot be added to excise valuation of the manufactured product. Once the duty demands failed, the consequential penalties also could not survive. The duty demands and penalties were therefore set aside, with consequential relief to the assessee.

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Issues: (i) Whether the turbo alternator sets erected and commissioned at customer sites were excisable goods liable to central excise duty; (ii) whether profit earned on traded bought-out items could be added to the assessable value of the turbines; and (iii) whether penalties could survive when the duty demands were unsustainable.

Issue (i): Whether the turbo alternator sets erected and commissioned at customer sites were excisable goods liable to central excise duty.

Analysis: The erected and commissioned turbine-alternator combination, having been fixed to foundations on earth, was treated as immovable property and not as marketable excisable goods. On that basis, the duty demand raised on this count could not be sustained.

Conclusion: This issue was decided in favour of the assessee.

Issue (ii): Whether profit earned on traded bought-out items could be added to the assessable value of the turbines.

Analysis: The demand proceeded on the footing that profit made from sale of bought-out items, such as alternators procured from third parties, should enhance the value of the manufactured turbines. That approach was rejected as inconsistent with the governing law on excise valuation, and the trading profit was held not includible in the assessable value of the manufactured goods.

Conclusion: This issue was decided in favour of the assessee.

Issue (iii): Whether penalties could survive when the duty demands were unsustainable.

Analysis: Once the duty demands themselves were held unsustainable, the foundation for the penalties disappeared. The penalties imposed under the cited provisions could therefore not be maintained.

Conclusion: This issue was decided in favour of the assessee.

Final Conclusion: The duty demands and consequential penalties were set aside, and the appeals succeeded with consequential relief.

Ratio Decidendi: Goods that are erected and commissioned into immovable property are not excisable, and trading profit on separately purchased bought-out items cannot be added to the assessable value of the manufactured product for excise duty purposes.

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