of Central Excise, Indore Vs. M/S Virdi Brothers & Ors  Insc 942 (12 December 2006)
Arijit Pasayat & S.H. Kapadia
Civil Appeal Nos. 1374-1376/2002, 5863/2002 and 8337-8344/2002) Dr. ARIJIT
PASAYAT, J In each of these appeals challenge is to the common final order
passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi
(in short 'CEGAT'). The basic question in all these appeals is whether
refrigeration plant/cold storage plant/Central air-conditioning plant/caustic
soda plant can be subjected to duty under Central Excise Act, 1944 (in short
the 'Act'). Stand of the appellant was that the fabrication of such plants out
of duty paid bought out amounts to manufacture of a new marketable commodity
and therefore, excise duty is payable.
CEGAT held that no excise duty is leviable and thus these plants are not
subject to excisability. It accepted stand of the respondents that these plants
are basically systems comprising of various components and are thus in the nature
of systems and are not machines as a whole. Accordingly, such systems as a
whole cannot be considered to be excisable goods.
to learned counsel for the appellant, the view taken by the CEGAT is untenable.
The adjudicating authority was justified in holding that fabrication of the
plants in question out of duty paid bought out items amounts to manufacture of
a new marketable commodity and therefore dutiable.
issue relating to excisability of plants and machinery assembled at site has
been determined by this Court in several cases. For example Quality Steel Tubes
Pvt. Ltd. v. CCE (1995 (75) E.L.T. 17 (SC); Mittal Engineering Works Pvt. Ltd.
v CCE, Meerut (1996 (88) E.L.T. 622 (SC); Sirpur
Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (SC); Silica
Metallurgical Ltd. v. CCE, Cochin (1999
(106) E.L.T. 439 (Tribunal); Duncan Industries Ltd. v. CCE, Mumbai (2000 (88)
ECR 19 (SC);
Engineering & Industries Ltd. v. CCE (2000 (120) E.L.T. 273 (SC) and CCE, Jaipur
v. Man Structurals Ltd. (2001 (130) E.L.T. 401 (S.C.) As a matter of fact
taking into account these decisions Circular No.58/1/2002-CX dated 15th
January, 2002 has been issued by the Government of India, Ministry of Finance
(Department of Revenue), Central Board of Excise & Customs, New Delhi. The
Circular indicates that it was intended to clarify the question of excisability
of plant and machinery assembled at site. The relevant portion of the Circular
reads as follows:
of India Ministry of Finance (Department of Revenue) Central Board of Excise
& Customs, New Delhi Sub: Excisability of plant and machinery assembled at
site-Regarding In exercise of the power conferred under Section 37B of the
Central Excise Act, 1944, the Central Board of Excise and Custom considers it
necessary, for the purpose of uniformity in connection with classification of
goods erected and installed at site, to issue the following instructions.
Attention is invited to Section 37B Order No.53/2/98-CX, dated 2.4.98
(F.No.154/4/98- CD.4) (1998 (100 E.L.T.T9) regarding the excisability of plant
and machinery assembled at site.
number of Apex Court judgments have been delivered on
this issue in the recent past. Some of the important ones are mentioned below:
Quality Steel Tubes Pvt. Ltd. v. CCE (1995 (75) E.L.T. 17 (S.C.);
Engineering Works Pvt. Ltd. v CCE, Meerut (1996 (88) E.L.T. 622 (S.C.);
Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (S.C.);
Silica Metallurgical Ltd. v. CCE, Cochin (1999 (106) E.L.T. 439 (Tribunal) as confirmed by the Supreme Court
vide their order dated 22.2.99 (1999 (108) E.L.I. A58 (S.C.);
Duncan Industries Ltd. v. CCE, Mumbai (2000 (88) ECR 19 (S.C.));
Engineering & Industries Ltd. v. CCE (2000 (120) E.L.T. 273 (S.C.) (vii)
CCE, Jaipur v. Man Structurals Ltd. (2001 (130) E.L.T. 401 (S.C.)
plethora of such judgments appears to have created some confusion with the
assessing officers. The matter has been examined by the Board in consultation with
the Solicitor General of India and the matter is clarified as under:-
goods manufactured at site to be dutiable they should have a new identity,
character and use, distinct from the inputs/components that have gone into its
production. Further, such resultant goods should be specified in the Central
Excise Tariff as excisable goods besides being marketable i.e. they can be
taken to the market and sold (even if they are not actually sold). The goods
should not be immovable.
Where processing of inputs results in a new products with a distinct commercial
name, identity and use (prior to such product being assimilated in a structure
which would render them as a part of immovable property), excise duty would be
chargeable on such goods immediately upon their change of identity and prior to
their assimilation in the structure or other immovable property.
Where change of identity takes place in the course of construction or erection
of a structure which is an immovable property, then there would be no
manufacture of "goods" involved and no levy of excise duty.
Integrated plants/machines, as a whole, may or may not be 'goods'. For example,
plants for transportation of material (such as handling plants) are actually a
system or a net work of machines. The system comes into being upon assembly of
such a situation there is no manufacture of 'goods' as it is only a case of
assembly of manufactured goods into a system. This cannot be compared to a
fabrication where a group of machines themselves may be combined to constitute
a new machine which has its own identity/marketability and is dutiable (e.g. a
paper making machine assembled at site and fixed to the earth only for the
purpose of ensuring vibration free movement) e. If items assembled or erected
at site and attached by foundation to earth cannot be dismantled without
substantial damage to its components and thus cannot be reassembled, then the
items would not be considered as moveable and will, therefore, not be excisable
xx xx xx
Keeping the above factors in mind the position is clarified further in respect
of specific instances which have been brought to the notice of the Board.
xx xx xx
xx (iii) Refrigeration/air conditioning plants.
are basically systems comprising of compressors, ducting, pipings, insulators
and sometimes cooling towers etc. They are in the nature of systems and are not
machines as a whole. They come into existence only by assembly and connection
of various components and parts. Though each component is dutiable, the
refrigeration/air conditioning system as a whole cannot be considered to be
excisable goods. Air conditioning units, however, would continue to remain
dutiable as per the Central Excise Tariff.
Based on the above clarifications pending cases may be disposed of. Past
instructions, Circulars and Orders of the Board on this issue may be considered
as suitably modified.
Suitable Trade Notice may be issued for the information and guidance of the
Receipt of this order may please be acknowledged.
Hindi version will follow." In view of the above said Circular which has
been issued in exercise of power conferred under Section 37B of the Act, the
view of the CEGAT cannot be faulted.
appeals are accordingly dismissed with no order as to costs.