Commnr. of
Central Excise, Ahmadabad Vs. Solid & Correct Engg. Works & Ors. [2010]
INSC 265 (8 April 2010)
Judgment
CIVIL
APPELLATE JURISDICITION CIVIL APPEAL NOS.960-966 OF 2003 Commissioner of
Central Excise, Ahmedabad ...Appellant Versus Solid & Correct Engineering
Works & Ors. ...Respondents (With C.A. Nos. 5461-5462 of 2003)
T.S.
THAKUR, J.
1. These
appeals under Section 35L(b) of the Central Excise Act, 1944 arise out of
orders dated 19th August, 2002 and 8th April, 2003 passed by the Customs Excise
and Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai, whereby the
Tribunal has set aside the order passed by the 2 Commissioner of Customs &
Central Excise, Ahmadabad, confirming the duty demanded from the respondents as
also levying penalties upon them under different provisions of the Central
Excise Act, 1944. The controversy in the appeals lies in narrow compass, but
before we formulate the precise questions that fall for our determination, it
is necessary to briefly set out the factual backdrop in which the same arises.
2. M/s
Solid and Correct Engineering Works, M/s Solid Steel Plant Manufacturers and
M/s Solmec Earthmovers Equipment are partnership concerns engaged in the
manufacture of parts and components for road and civil construction machinery
and equipments like Asphalt Drum/Hot Mix Plants and Asphalt Paver Machine etc.
M/s Solex Electronics Equipments is, however, a proprietary concern engaged in
the manufacture of Electronic Control Panels Boards. It is not in dispute that
the three partnership concerns mentioned above are registered with Central
Excise Department nor is it disputed that the proprietary concern is a small
scale industrial unit that is availing exemption from 3 payment of duty in
terms of the relevant exemption notification. M/s Solidmec Equipments Ltd.
(hereinafter referred to as `Solidmec' for short) the fifth unit with which we
are concerned in the present appeals is a marketing company engaged in the
manufacture of Asphalt Drum/Hot Mix Plants at the sites provided by the
purchasers of such plants. It is common ground that Solidmec advertises its
product and undertakes contracts for supplying, erection, commissioning and
after sale services relating thereto. It is also admitted that all the five
concerns referred to above are closely held by Shri Hasmukhbhai his brothers
and the members of their families.
3. An
inspection of the factories of the respondents by a team of officers from
Central Excise, Preventing Wing, Headquarters, Ahmadabad, led to the issue of a
notice dated 30th November 1999 to the four manufacturing units as well as to
Solidmec calling upon them to show cause why the amounts mentioned in the said
notice be not recovered from them towards central excise duty. The notice
accused the 4 four manufacturing units of having wrongly declared and
classified parts and components being manufactured by them as complete
plants/systems, even when they were merely parts and components and not
machines or plants functional by themselves. The erroneous classification and
declaration was, according to the notice, intended to avoid payment of higher
rate of duty applicable to parts of such plants and machinery at the material
point of time. The notice also pointed out that the units manufacturing parts
and components of the plants had availed benefit of exemption wrongly and in
breach of the provisions of Rules 9(1) and 173F and other rules regulating the
grant of such benefit.
4. In so
far as Solidmec marketing company was concerned, the show cause notice alleged
that Solidmec was engaged in the manufacturing of Asphalt Batch Mix, Drum
Mix/Hot Mix Plant by assembling and installing the parts and components
manufactured by the manufacturing units of the group. According to the notice
the process of assembly of 5 the parts and components at the site provided by
the purchasers of such plants was tantamount to manufacture of such plants as a
distinct product with a new name, quality, usage and character emerged out of
the said process. Resultantly the end-product; namely, Asphalt Drum/Hot Mix
Plants became exigible to Central Excise duty, which duty Solidmec had
successfully avoided. The notice also proposed to levy penalties upon all the
five concerns under appropriate provisions of the Central Excise Act.
5. The
respondents filed their responses to the show cause notice, which were duly
considered by the Commissioner who confirmed the duty demanded in the show
cause notice and levied suitable penalties upon each one of the units.
Aggrieved by the order passed by the Commissioner the respondents preferred
appeals before the Customs, Excise and Gold (Control) Appellate Tribunal (for
short `CEGAT') which were partly allowed by the Tribunal by its order dated
19th August, 2002. Relying upon the material on record and the depositions of
the partners comprising the 6 concerns, the Tribunal held that Solidmec had
supplied all the components at the buyer's site some of which had been
manufactured by the manufacturing units of the group while others were
purchased from the market. The cost of erection, commissioning etc. was also
charged by Solidmec from the buyers. Solidmec was, therefore, engaged in the
manufacture of the plants in question declared the Tribunal in the following
words:
"The
sum total of the aforesaid evidence is that M/s Solidmec supplied all the
essential components to make a hot mix plant at the buyer's site. Some of the
components were manufactured by the manufacturing units and the other
components were purchased from the market. These were erected and commissioned
by Solidmec and the cost of erection, commissioning, etc., were charged from
the buyers. In these circumstances they deserve to be termed as
manufacturers."
6. The
Tribunal next examined the question whether the plants so manufactured could be
termed as "goods". Relying upon the decision of this Court in Triveni
Engineering & 7 Industries Ltd. & Anr. V. Commissioner of Central
Excise 2000 (120) ELT 273 (SC) the Tribunal held that since the dimensions of
the plant were substantial comprising three main components namely, 4 bin
feeder, the conveyor and dryer unit and since the said components had to be
separately embedded in earth on a foundation 1.5 feet deep what was
manufactured could not be said to be "goods" especially when the same
could not be dismantled and re-assembled without undertaking the necessary
civil works. The duty demand raised against Solidmec was on that basis set
aside leaving open certain other related issues including the question of
jurisdiction of the Commissioner. The Tribunal further held that the
manufacturing units were entitled to the benefit of exemption under
Notification 1/93. The use of brand name "Solidmec" for the plants or
their components manufactured by the sister concerns did not, according to the
Tribunal, disentitle the said units to the benefit of exemption having regard
to the fact that the size of the stickers giving the 8 brand name of the
manufacturing units was bigger than that of Solidmec the marketing company. The
plea of limitation raised by the respondents was, however, left undecided by
the Tribunal keeping in view the fact that the erection of plants by Solidmec
did not in the opinion of the Tribunal amount to manufacture of exigible goods.
In the ultimate analysis the Tribunal upheld the demand of Rs.1,97,875/-
against M/s Solmec Earthmovers Equipments and Rs.2,16,347/- against M/s Solid
and Correct Engineering Works but reduced the penalty levied upon them to Rs.2
lakhs each. The penalty levied upon the partners was, however, remitted. The order
of confiscation of the plant, land and building was in consequence of the
findings recorded by the Tribunal set aside.
7. An
application seeking rectification of the above order was then filed before the
Tribunal by the respondents. It was argued that the Tribunal had upheld the
duty and penalties levied upon the respondents-applicants on the premise that
the respondents had not contested the 9 classification of the products under
Sub-heading 8474.90 as parts and components in place of Sub-heading 8474.10
applicable to complete machines. It was urged that although the applicants had
not questioned the classification determined by the Department in the order
passed by the Commissioner it had specifically pleaded that the entire demand
for duty was barred by limitation. The Tribunal accepted that argument and
accordingly by its order dated 8th April, 2003 modified its earlier order and
deleted the demand of duty as also the penalty in too. The subsequent order
deleting the duty and penalty in toto has been questioned in CA
Nos.5461-5462/2003.
8. We
have heard Mr. P.P. Malhotra, learned Additional Solicitor General for the
appellants and Mr. S.K. Bagaria, learned senior counsel for the respondents at
length. Two questions in our opinion arise for our determination:
(1)
Whether setting up of an Asphalt Drum Mix Plant by using duty paid components
tantamounts to 1 manufacture of excisable goods within the meaning of Section
2(d) of the Central Excise Act, 1944? and (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? 9. We shall take up the
questions ad seriatim.
Re:
Question No.1
10.
Section 3 of the Central Excise Act, 1944, inter alia, sanctions what was
during the relevant period called `central excise duty' on all "excisable
goods" produced or manufactured in India at the rates set forth in First
Schedule to the Central
Excise Tariff Act, 1985. The term "excisable
goods" appearing in Section 3 has been defined under 1 Section 2(d) of the
said Central Excise Act which reads as under:
"2(d):
"excisable goods" means goods specified in the First Schedule and the
Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a
duty of excise and includes salt.
Explanation:
For the purposes of this clause, "goods" includes any article,
material or substance which is capable of being bought and sold for a
consideration and such goods shall be deemed to be marketable."
11. Entry
8474 in the First Schedule to the Central Excise and Tariff Act, 1985
stipulates the rate at which excise was payable on machinery of the kind
enumerated in that Entry which reads:
"Machinery
for sorting, screening, separating, washing, crushing, grinding, mixing or
kneading earth, stone, ores or other mineral substances, in solid (including
powder or paste) form; machinery for agglomerating, shaping or moulding solid
mineral fuels, ceramic paste, unhardened cements, plastering materials or other
mineral products in powder or paste form; machines for forming foundry moulds
of sand."
12. It is
evident from the above that any machinery which is used for mixing is dutiable.
That Asphalt Drum/Hot Mix Plant is a machinery meant for mixing etc. was not
disputed before us. It was fairly conceded by Mr. Bagaria that assembling,
installation and commissioning of Asphalt Drum/Hot Mix Plants amounted to
manufacture inasmuch as the plant that eventually came into existence was a new
product with a distinct name, character and use different from what went into
its manufacture. Super added to the above is the fact that Section 2(f) of the
Central Excise Act does not define the term "manufacture"
exhaustively. The definition is inclusive in nature and has been understood to
mean bringing into existence a new product with a distinct name, character and
use. (See (i) Union of India V. Delhi Cloth and General Mills Co. Ltd. (1977) 1
ELT 199, (ii) BPL India Ltd. V. CCE (2002) 5 SCC 167, (iii) Sirpur Paper Mills
Ltd. V. Collector of Central Excise, Hyderabad (1998 (1) SCC 400).
13. Mr.
Bagaria strenuously argued that even when the setting up of the plant has been
held to be tantamount to manufacture of a plant and even when the plant may be
machinery covered by Entry 8474 of the First Schedule to the Central Excise Act,
the same would not necessarily amount to manufacture of `exigible goods'
keeping in view the fact that such plants have to be permanently embedded in
earth. Reliance in support was placed by Mr. Bagaria upon the finding recorded
by the Tribunal that the plant is required to be fixed to a foundation that is
1 and = ft. deep for the sake of stability of the plant which causes heavy
vibrations while in operation. The following passage from the Tribunal's order
was in particular relied upon by Mr. Bagaria in support of his submission that
the size and nature of the plant was such as made its fixing to the ground
essential:
"The
individual element such as feeder bins, conveyor, rotary mixing drum, asphalt
tank, fuel tanks, etc. have to be separately embedded into the earth. This is
done on a civil foundation of 1.5 deep. This is because 1 the weight of the
material as well as the vibrations caused by the movement thereof is very
substantial. The drier at one time holds 40MT of raw material."
14. Relying
upon certain decisions of this Court, Mr. Bagaria argued that the plants in
question did not satisfy the test of marketability and moveability. According
to Mr. Bagaria, the setting up of the plant was no more than an
accretion/annexation to immovable property which was far from manufacture of
goods exigible to excise duty. We shall presently refer to the decisions relied
upon by Mr. Bagaria, but before we do so we may briefly refer to the relevant
statutory provisions to examine, what would constitute moveable or immoveable
property.
15. The
expression "moveable property" has been defined in Section 3(36) of
the General
Clauses Act, 1897 as under:
"Section
3(36) : "movable property" shall mean property of every description,
except immovable property."
1
16. From
the above it is manifest that the answer to the question whether the plants in
question are movable property, would depend upon whether the same are immovable
property. That is because anything that is not immovable property is by this
very definition extracted above "moveable" in nature.
17.
Section 3 of the Transfer
of Property Act, 1882 does not spell out an
exhaustive definition of the expression "immovable property". It
simply provides that unless there is something repugnant in the subject or
context `immovable property' under the Transfer of Property Act, 1882 does not include standing timber, growing crops or grass.
Section 3(26) of the General Clauses Act, 1897,
similarly does not provide an exhaustive definition of the said expression. It
reads:
"Section
3(26) : "immovable property" shall include land, benefits to arise
out of land, and things attached to the earth, or permanently fastened to
anything attached to the earth."
18. It is
not the case of the respondents that plants in question are per se immoveable
property. What is argued is that they become immovable as they are permanently
imbedded in earth in as much as they are fixed to a foundation imbedded in
earth no matter only 1= feet deep.
That
argument needs to be tested on the touch stone of the provisions referred to
above. Section 3(26) of the General Clauses Act includes within the definition
of the term "immovable property" things attached to the earth or
permanently fastened to anything attached to the earth.
The term
"attached to the earth" has not been defined in the General Clauses Act,
1897. Section 3 of the Transfer of Property Act,
however, gives the following meaning to the expression "attached to the
earth":
"(a)
rooted in the earth, as in the case of trees and shrubs;
(b)
imbedded in the earth, as in the case of walls and buildings;
1 (c)
attached to what is so imbedded for the permanent beneficial enjoyment of that
to which it is attached."
19. It is
evident from the above that the expression "attached to the earth"
has three distinct dimensions, viz.
(a)
rooted in the earth as in the case of trees and shrubs (b) imbedded in the
earth as in the case of walls or buildings or (c) attached to what is imbedded
for the permanent beneficial enjoyment of that to which it is attached.
Attachment
of the plant in question with the help of nuts and bolts to a foundation not
more than 1= feet deep intended to provide stability to the working of the
plant and prevent vibration/wobble free operation does not qualify for being
described as attached to the earth under any one of the three clauses extracted
above. That is because attachment of the plant to the foundation is not comparable
or synonymous to trees and shrubs rooted in earth. It is also not synonymous to
imbedding in earth of the plant as in the case of walls and buildings, for the
obvious reason that a building imbedded in the earth is permanent and cannot be
1 detached without demolition. Imbedding of a wall in the earth is also in no
way comparable to attachment of a plant to a foundation meant only to provide
stability to the plant especially because the attachment is not permanent and
what is attached can be easily detached from the foundation. So also the
attachment of the plant to the foundation at which it rests does not fall in
the third category, for an attachment to fall in that category it must be for
permanent beneficial enjoyment of that to which the plant is attached.
20. It is
nobody's case that the attachment of the plant to the foundation is meant for
permanent beneficial enjoyment of either the foundation or the land in which
the same is imbedded.
21. In
English law the general rule is that what is annexed to the freehold becomes
part of the realty under the maxim quidcquid plantatur solo, solocedit. This
maxim, however, has no application in India. Even so, the question whether a 1
chattel is imbedded in the earth so as to become immovable property is decided
on the same principles as those which determine what constitutes an annexation
to the land in English law. The English law has evolved the twin tests of
degree or mode of annexation and the object of annexation.
In Wake
V. Halt (1883) 8 App Cas 195 Lord Blackburn speaking for the Court of Appeal
observed:
"The
degree and nature of annexation is an important element for consideration; for
where a chattel is so annexed that it cannot be removed without great damage to
the land, it affords a strong ground for thinking that it was intended to be
annexed in perpetuity to the land."
22. The
English law attaches greater importance to the object of annexation which is
determined by the circumstances of each case. One of the important
considerations is founded on the interest in the land wherein the person who
causes the annexation possesses articles that may be removed without structural
damage and even articles merely resting on their own weight are fixtures only 2
if they are attached with the intention of permanently improving the premises.
The Indian law has developed on similar lines and the mode of annexation and
object of annexation have been applied as relevant test in this country also.
There are cases where machinery installed by monthly tenant was held to be
moveable property as in cases where the lease itself contemplated the removal
of the machinery by the tenant at the end of the tenancy. The mode of
annexation has been similarly given considerable significance by the courts in
this country in order to be treated as fixture. Attachment to the earth must be
as defined in Section 3 of the Transfer of Property Act. For
instance a hut is an immovable property, even if it is sold with the option to
pull it down. A mortgage of the super structure of a house though expressed to
be exclusive of the land beneath, creates an interest in immovable property,
for it is permanently attached to the ground on which it is built.
23. The
courts in this country have applied the test whether the annexation is with the
object of permanent 2 beneficial enjoyment of the land or building. Machinery
for metal-shaping and electro-plating which was attached by bolts to special
concrete bases and could not be easily removed, was not treated to be a part of
structure or the soil beneath it, as the attachment was not for more beneficial
enjoyment of either the soil or concrete.
Attachment
in order to qualify the expression attached to the earth, must be for the
beneficial attachment of that to which it is attached. Doors, windows and
shutters of a house are attached to the house, which is imbedded in the earth.
They are
attached to the house which is imbedded in the earth for the beneficial
enjoyment of the house. They have no separate existence from the house.
Articles attached that do not form part of the house such as window blinds, and
sashes, and ornamental articles such as glasses and tapestry fixed by tenant,
are not affixtures.
24.
Applying the above tests to the case at hand, we have no difficulty in holding
that the manufacture of the plants in 2 question do not constitute annexation
hence cannot be termed as immovable property for the following reasons:
(i) The
plants in question are not per se immovable property.
(ii) Such
plants cannot be said to be "attached to the earth" within the
meaning of that expression as defined in Section 3 of the Transfer of Property
Act.
(iii) The
fixing of the plants to a foundation is meant only to give stability to the
plant and keep its operation vibration free.
(iv) The
setting up of the plant itself is not intended to be permanent at a given
place.
The plant
can be moved and is indeed moved after the road construction or repair project
for which it is set up is completed.
25. We
may, at this stage, refer to the decisions of this Court which were relied upon
by learned counsel for the parties in support of their respective cases.
26. In
Sirpur Paper Mills Ltd. (supra) this Court was dealing with a near similar
situation as in the present case.
The
question there was whether the paper machine 2 assembled at site mainly with
the help of components bought from the market was dutiable under the Central
Excise Act, 1944. The argument advanced on behalf of the assessee was that
since the machine was embedded in a concrete base the same was immovable property
even when the embedding was meant only to provide a wobble free operation of
the machine. Repelling that contention this Court held that just because the
machine was attached to earth for a more efficient working and operation the
same did not per se become immovable property. The Court observed:
"5.
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
householder 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 components
of the 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 2 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."
27. In
M/s Narne Tulaman Manufacturers Pvt. Ltd.
Hyderabad
V. Collector of Central Excise, Hyderabad (1989 (1) SCC 172), this Court was
examining whether the assembly of parts of machine by an assessee to bring into
existence a weighbridge as a complete machine amounted to manufacture hence
liable to duty even when its parts are separately taxable. Answering the
question in the affirmative this Court held that the assembling of the
components of the weighbridge brought into existence a complete weighbridge
which had a distinctive name, character and use hence exigible to duty. The
fact that the assessee was himself manufacturing only one part of the component
used in the erection of a weighbridge did not mean that the complete machine
28. In
Triveni Engineering's case (supra), the question that fell for consideration
was whether a turbo alternator comprising two components (i) steam turbine and
(ii) complete alternator and fixing the same on a platform brought about a new
dutiable product. The Court held that the process of fixing the same on a
platform and aligning them in a specified manner that turbine was nothing but a
manufacturing process and a new commodity come into existence in the said
process. The machine so manufactured was, however, erected on a platform
specially constructed for that purpose which made the machine immovable in
character. The Court declared that while determining whether an article is permanently
fastened to anything attached to the earth both the intention as well as the
factum of fastening has to be ascertained from the facts and circumstances of
each case. The following passage is apposite in this regard:
2
"There can be no doubt that if an article is an immovable property, it
cannot be termed as "excisable goods" for purposes of the Act.
From a
combined reading of the definition of "immovable property" in Section
3 of the Transfer
of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is
neither mobility nor marketability as understood in the excise law. Whether an
article is permanently fastened to anything attached to the earth requires
determination of both the intention as well as the factum of fastening to
anything attached to the earth. And this has to be ascertained from the facts
and circumstances of each case."
(emphasis
supplied)
29.
Applying the above test to the case at hand, the plants in question were
neither attached to earth within the meaning of Section 3(26) of the General Clauses Act nor was there any intention of permanently fastening the
same to anything attached to the earth.
30.
Reliance was placed by Mr. Bagaria upon the decision of this Court in Quality
Steel Tubes (P) Ltd. V. CCE, U.P.
1995 (75)
ELT 17 (SC) and Mittal Engineering Works (P) Ltd. V. CCE, Meerut 1996 (88) ELT
622 (SC). In Quality Steel Tubes case (supra) this Court was examining whether
`the tube mill and welding head' erected and 2 installed by the assessee for
manufacture of tubes and pipes out of duty paid raw material was assessable to
duty under residuary Tariff Item No.68 of the Schedule being excisable goods.
Answering the question in negative this Court held that tube mill and welding
head erected and installed in the premises and embedded to earth ceased to be
goods within the meaning of Section 3 of the Act as the same no longer remained
moveable goods that could be brought to market for being bought and sold. We do
not see any comparison between the erection and installation of a tube mill
which involved a comprehensive process of installing slitting line, tube
rolling plant, welding plant, testing equipment and galvanizing etc., referred
to in the decision of this Court with the setting up of a hot mix plant as in
this case. As observed by this Court in Triveni Engineering & Industries
case (supra), the facts and circumstances of each case shall have to be
examined for determining not only the factum of fastening/attachment to the
earth but also the intention behind the same.
31. In
Mittal Engineering Works case (supra), this Court was examining whether the
mono vertical crystallisers erected and attached by a foundation to the earth
on the site of the sugar factory could be treated as goods within the meaning
of Central Excise Act, 1944. This Court on facts noted that mono vertical
crystallisers are fixed on a solid RCC slab having a load bearing capacity of
about 30 tonnes per sq. mt. and are assembled at site with bottom plates, tank
coils, drive frames, supports, plates, distance places, cutters, cutter
supports, tank ribs, distance plate angles, water tanks, coil extension pipes,
loose bend angles, coil supports, railing stands, intermediate platforms, drive
frame railings and flats, oil trough, worm wheels, shafts, housing, stirrer
arms and support channels, pipes, floats, heaters, ladders, platforms, etc. The
Court noted that the mono vertical crystallisers have to be assembled, erected
and attached to the earth on a foundation at the site of the sugar factory and
are incapable of being sold to consumers in the 2 market as it is without
anything more. Relying upon the decision of this Court in Quality Steel Tubes case
(supra), the erection and installation of mono vertical crystallisers was held
not dutiable under the Excise Act. This Court observed that the Tribunal ought
to have remembered that mono vertical crystallisers had, apart from assembly,
to be erected and attached by foundation to the earth and, therefore, were not,
in any event marketable as they were.
This
decision also, in our opinion, does not lend any support to the case of the
assessee in these appeals as we are not dealing with the case of a machine like
mono vertical crystallisers which is permanently embedded in the structure of a
sugar factory as was the position in the Mittal Engineering Works case (supra).
The plants with which we are dealing are entirely over ground and are not
assimilated in any structure. They are simply fixed to the foundation with the
help of nuts and bolts in order to provide stability from vibrations during the
operation.
32. So
also in T.T.G. Industries Ltd. V. CCE, Raipur 2004 (167) ELT 501 (SC), the
machinery was erected at the site by the assessee on a specially made concrete
platform at a level of 25 ft. height. Considering the weight and volume of the
machine and the processes involved in its erection and installation, this Court
held that the same was immovable property which could not be shifted without
dismantling the same.
33. It is
noteworthy that in none of the cases relied upon by the assessee referred to
above was there any element of installation of the machine for a given period
of time as is the position in the instant case. The machines in question were
by their very nature intended to be fixed permanently to the structures which
were embedded in the earth. The structures were also custom made for the fixing
of such machines without which the same could not become functional. The
machines thus becoming a part and parcel of the structures in which they were
fitted were no longer 3 moveable goods. It was in those peculiar circumstances
that the installation and erection of machines at site were held to be by this
Court, to be immovable property that ceased to remain moveable or marketable as
they were at the time of their purchase. Once such a machine is fixed, embedded
or assimilated in a permanent structure, the movable character of the machine
becomes extinct. The same cannot thereafter be treated as moveable so as to be
dutiable under the Excise Act. But cases in which there is no assimilation of
the machine with the structure permanently, would stand on a different footing.
In the instant case all that has been said by the assessee is that the machine
is fixed by nuts and bolts to a foundation not because the intention was to
permanently attach it to the earth but because a foundation was necessary to
provide a wobble free operation to the machine. An attachment of this kind
without the necessary intent of making the same permanent cannot, in our
opinion, constitute permanent fixing, embedding or attachment in the sense that
would make the machine a 3 part and parcel of the earth permanently. In that view
of the matter we see no difficulty in holding that the plants in question were
not immovable property so as to be immune from the levy of excise duty.
34. Our
answer to question no.1 is accordingly in the affirmative.
Re:
Question No.2
35. The
Tribunal, as noticed in the earlier part of this order, has taken the view that
the respondents-manufacturing units were entitled to the benefit of exemption
under Notification No.1/93 as amended from time to time as the use of brand
name Solidmec for the plants or the components manufactured by such units did
not disentitle the said units from claiming the benefit of the exemption having
regard to the fact that the size of the sticker giving the brand name of the
manufacturing units was bigger than that of Solidmec, the marketing company.
Mr. Bagaria learned senior counsel for the respondent fairly conceded 3 that
the reasoning given by the Tribunal based on the size of the sticker was not
legally sustainable. He, however, urged that since the manufacturing units had
also raised some other defences including one on the ground of limitation, even
if the order passed by the Tribunal was set aside, the matter may have to go
back to the Tribunal to enable it to examine the said alternative contentions.
Mr. Malhotra did not have any serious objection to this course being followed.
He urged
and, in our opinion rightly so, that since the Tribunal's view on the question
of exemption was unsustainable the order passed by the Tribunal has to be set
aside and the matter remitted back for a fresh disposal qua the said units by
reference to the other contentions urged on behalf of the units which the
Tribunal has not examined. In that view of the matter our answer to question
No.2 is in the negative.
36. In
the result we allow these appeals, set aside orders dated 19th August 2002 and
8th April 2003 passed by the Tribunal and remand the matter back to the
Tribunal for 3 passing fresh orders on the subject appropriately dealing with
the alternative contentions which the respondents may urge keeping in view the
observations made hereinabove.
The
appellants shall also be entitled to one set of costs assessed at Rs.25,000/-
only.
.....................................J. (D.K. JAIN)
.....................................J. (T.S. THAKUR)
New Delhi:
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