Dutiability of Site related Activities Background cases
Parts required for manufacture of paper making Machine
Motor used for rolling Rollers Raw Pulp extractor Belts Paper making and designing plate Paper Pulvarizer Waste ejector Misc. parts
The paper making machine
Departments contention Assembly of a paper making machine and its erection at site mainly from bought out components and by fabricating the rest of the parts at site, amounts to manufacture.
Assessee s contention The paper making machine after assembly at site is an immovable good. As immovable goods are not covered under excise, the said paper making machine does not amount to manufacture
Sirpur Paper Mills Ltd. v. CCE 1998 Decision by supreme court: The machine is good" under excise. It was only fixed to the ground for the purpose of wobble-free operation and the attachment was not critical to its functioning. The court opined that even when unattached to the ground, the paper making machine retained its characteristics and the embedding for better functioning does not make it immovable property. Further the court stated that paper making machine is not immovable property as something attached to the earth like a building or tree.
+ Steam Turbine Alternator = Turbo alternator
What is Turbo Alternator An alternator is an electromechanical device that converts mechanical energy to electrical energy in the form of alternating current. Most alternators use a rotating magnetic field but linear alternators are occasionally used. In principle, any AC electrical generator can be called an alternator, but usually the word refers to small rotating machines driven by automotive and other internal combustion engines. Alternators in power stations driven by steam turbines are called turboalternators.
Triveni Engineering & Industries Ltd. v. CCE 2000 Supreme courts decision: while fixing of steam turbine, alternator and coupling them to form a turbo alternator amounts to a manufacturing process, the resultant property being immovable the same cannot be brought to excise.
Quality Steel Tubes P. Ltd. V. CCE (1995) Tube Mill Welding Head
Quality Steel Tubes P. Ltd. V. CCE (1995) Supreme court held that tube mill and welding head erected and installed are not capable of being brought to the market for being sold. Therefore these are not goods under excise Goods erected and installed in the premises and embedded to earth cease to be goods and cannot held to be excisable goods.
Cement Plant V. Component in cement plant Plant, as such being immovable. So not goods under excise Components like kiln are dutiable
Air conditioning plant V. Air conditioning unit Plant as a whole cannot be considered as good, but each component is dutiable. Air conditioning units are considered as goods and are dutiable
Permanent V. Temporary lifts Lifts permanently fitted into civil structure are not goods Lifts temporarily installed at construction site are goods
Fuel storage tanks Tanks, though not embedded in the earth, are erected at site, stage by stage, and after completion they cannot be physically moved. On sale/disposal they have necessarily to be dismantled and sold as metal sheets/scrap. It is not possible to assemble the tank all over again. Such tanks are therefore not moveable and cannot be considered as excisable goods CCE Chandigarh V. Bhagwanpura Sugar Mills
Larsen & Toubro Limited v. UOI 2009 (Bom. HC) Whether the fabrication, assembly and erection of waste water treatment plant amounts to manufacture?
Engaged in the business of fabrication and erection of structures of various types on contract basis contract for fabrication, assembly and erection of waste water treatment plant. Activities Involved Procurement, supply, fabrication of various components Making of carbon steel tanks Various platforms walkways and ladders are fabricated at site by process of rolling, welding, grinding etc. Civil construction is also done Water treatment plant which will be an immovable structure
Department issued a notice to the assessee alleging that assessee had fabricated/manufactured the waste water treatment plant in the premises of BPCL and The waste water treatment plant falls under Chapter Heading No. 8419.00 on which excise duty was payable. Plant came into existence in unassembled form as per the drawings and designs approved by the BPCL before the same was installed and assembled to the ground with civil work. Thus excise duty was payable on the value of the plant excluding the value of the civil work The plant cannot function as such until it is wholly built including the civil construction.
Mere bringing of the duty paid parts in an unassembled form at one place, i.e. at the site does not amount to manufacture of a plant. Unless an excisable movable product (say a plant) comes into existence by assembly of such parts. In the present case, as the petitioner had stated that the waste water treatment plant did not come into existence unless all the parts were put together and embedded in the civil work. Waste water treatment plant did not become a plant until the process which included the civil work, was completed. Thus, the Court held that no commercial movable property came into existence until the assembling was completed by embedding different parts in the civil works.
CCE v. Solid & Correct Engineering Works and Ors 2010 (SC) Whether the machine which is not assimilated in permanent structure would be considered to be moveable so as to be dutiable under the Central Excise Act?
Solid & Engineering works, a company situated in Ahmedabad, engaged in manufacture of parts and components for road and civil construction machinery and equipments like Asphalt Drum/Hot Mix Plants and Asphalt Paver Machine etc. Asphalt Drum Hot mix plant Asphalt paver machine
Soild & Correct Engg. Works Supplies components Soildmec Equipments Ltd. (Marketing company) manufactures Asphalt Drum/ Hot mix plants at the sites of purchasers of such plants
CCE v. Solid & Correct Engineering Works and Ors 2010 (SC) Department s Contention: Department issued the show cause notice alleged that the process of assembly of the parts and components at the site provided by the customer was tantamount to manufacture of Asphalt Batch Mix, Drum Mix/Hot Mix plants as a distinct product with a new name, quality, usage and character emerged out of the said process. Thus Asphalt Drum/Hot Mix Plants became exigible to Central Excise duty. Assessee s Contention: Such plants (Asphalt Drum/Hot Mix) have to be permanently embedded in earth as it required to be fixed to a foundation that is 1 and ½ ft. deep for the sake of stability of the plant which causes heavy vibrations while in operation. Thus, the setting up of the plant is result into immovable property and not subject to excise duty.
Decision of supreme court: 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 permanently for the purpose of working (If removed the machine wont work) Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1½ feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify as attached to the earth under any one of the three clauses extracted above. Hence, the Supreme Court held that the plants in question were not immovable property so as to be immune from the levy of excise duty. Consequently, duty would be levied on them.