Sirpur
Paper Mills Ltd. Vs. The Collector of Central Excise, Hyderabad [1997] INSC 929 (11 December 1997)
SUHAS
C. SEN, K.T. THOMAS
ACT:
HEADNOTE:
SEN,J.
The
dispute in this case is about the leviability of excise duty on paper making
machine which was erected by the appellant-company by using duty paid
components purchased from the market and also by fabricating certain parts of
the machinery in their factory. The duty paid components purchased from the
market worked out to about 90% of the parts required for the machine. In
respect of the parts fabricated inside the factory of the appellant, no duty
was leviable under Notification No. 118/75 dated April 30, 1975 issued by the Government. The case of the appellant is that
the excise authority erroneously imposed duty on the parer making machine
installed in the factory of the appellant because the Central Excise Act
imposes a duty on "all excisable goods produced or manufactured in India". It is well - settled that
the "goods" contemplated by Section 3 which is the charging section
of the Act must be movable and marketable. The case of the appellant is that
the various components of the paper making machine purchased by the appellant
had to be put together at the site where the machine was erected ant embedded
in the ground. Certain components were also to be fabricated at site. This
machine was really immovable property and did not come within mischief of the
charging section of the Central Excise Act.
Mr. Jaideep
Gupta, appearing on behalf of the appellant, has contended that the machine was
permanently attached to the ground. In fact the machine cannot be worked until
and unless the same was attached to the earth as a permanent fixture. It was
further argued that the machine cannot ordinarily be sold in the market. The
nature of the machine is such that it cannot be transferred offered for sale to
any other party. An argument was also advanced that the machine was erected on
turn key basis at the very place where the machine was ultimately embedded in a
concrete base to make it a permanent fixture.
The
Tribunal, however, rejected these contentions advanced before it on the basis
of some findings of fact.
The
Tribunal held that the machine was attached to earth for operational
efficiency. The whole purpose behind attaching the machine to a concrete base
was to prevent wobbling of the machine and to secure maximum operational
efficiency and also for safety. The Tribunal further held that the parer making
was saleable and observed "if somebody to purchase, the whole machinery
could be dismantled and sold to him in parts".
In
view of this finding of fact, it is not possible to hold that the machinery
assembled and erected by the appellant at its factory site was immovable
property as something attached to earth like a building or a tree. The tribunal
has pointed out that it was for the operational efficiency of the machine that
it was attached to earth. If the appellant wanted to sell the paper making
machine it could always remove it from its base and sell it.
Apart
from this finding of fact made by the Tribunal, the point advanced on behalf of
the appellant, that whatever is embedded in earth must be treated as immovable
property is basically not sound. For example, a factory owner or a house-holder
may purchase a water pump and fix it on a cement base for operational
efficiency and also for security. That will not make the water pump an item of
immovable property. Some of the component of water pump may even be assembled
on site. That too will not make any difference to the principle. The test is
whether the paper making machine can be sold in the market. The Tribunal has
found as a fact that it can be sold. In view of that finding, we are unable to
uphold the contention of the appellant that the machine must be treated as a
part of the immovable property of the company. Just because a plant and
machinery are fixed in the earth for better functioning, it does not
automatically become an immovable property.
A
further argument was made that the entire machinery as it is cannot be bought
and sold because the machinery will have to be dismantled before being sold.
The Tribunal has pointed out that the appellant had himself bought several
items and completed the machinery. It had purchased a large number of
components and fabricated a few and manufactured the paper making machine at
site. If it is sold it has to be dismantled and reassembled at another site. We
do not find any fault with the reasoning of the Tribunal on this aspect of the
matter.
Lastly,
it was contended that the paper making machine was not really manufactured by
the appellant. Various components and parts were purchased and a few of the
parts were fabricated at the factory and the assesses ultimately assembled
various parts of the machine. We are unable to uphold this argument also
because it has to be seen whether a final product is something distinct and
apart from the components that have gone into its production. What the
appellant has erected in its factory is a paper making machine. It may have purchased
various components to make the machine but nonetheless what has been produced
is something quite different from the components that had been purchased. A new
marketable commodity has emerged as a result of the manufacturing activity of
the appellant.
Marketability
being a question of fact, we are of the view there is no scope for interference
with the order passed by the Tribunal. It cannot be said that the Tribunal has
overlooked any material fact or its decision is perverse.
The
appeal fails and is dismissed. No order as to costs.
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