Important Point
For goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from inputs/components that have gone into its production.

Headnote:Central Excise Act,1944 – Section 37B - Plants and Machinery assembled at site – Excisability of – Erection of boiler at site by assembling various components and parts – CEGAT held that no excise duty was Leviable as plants being basically systems comprising of various components were in nature of systems and not machines as a whole – Appeals there against on plea that since fabrication of plants in question out of duty paid brought out items amounted to manufacture of a new marketable commodity, Hence was dutiable – Matter on examination by Board in consultation with Solicitor General of India was clarified in terms that for goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from inputs/components that have gone into its production – Again, such resultant goods should be specified in Central Excise Tariff as excisable goods besides being marketable - Where processing of inputs results in a new products with a distinct commercial name, identity and use, excise duty would be chargeable on such goods immediately upon their change of identity and prior to their assimilation in structure or other immovable property - Basic factual aspects not being considered by CEGAT, Matter remitted back to CEGAT for a fresh consideration in view of judgment in case of Commissioner of Central Excise, Indore V. M\s Virdi Brothers & Ors. – Appeals disposed of. (Paras 4,5,9)
       Facts of the case :
       Issue in consideration in present case was whether excise duty was leviable on erection of boiler at site by assembling various components and parts.
       Findings of the Court :
       Matter on examination by Board in consultation with Solicitor General of India was clarified in terms that for goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from inputs/components that have gone into its production. Again, such resultant goods should be specified in Central Excise Tariff as excisable goods besides being marketable. Where processing of inputs results in a new products with a distinct commercial name, identity and use, excise duty would be chargeable on such goods immediately upon their change of identity and prior to their assimilation in structure or other immovable property. Basic factual aspects not being considered by CEGAT, Matter remitted back to CEGAT for a fresh consideration in view of judgment in case of Commissioner of Central Excise, Indore V. M\s Virdi Brothers & Ors. Appeals were disposed of accordingly.

JUDGMENT

Dr. ARIJIT PASAYAT, J. —

1.All these appeals involve identical questions and are, therefore, taken up together for consideration.

2.In all these appeals challenge is to the final order passed by the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi (in short the ‘CEGAT’). The basic question is whether the erection of Boiler at site by assembling various components and parts has brought into existence immovable property or not that is the issue involved in Civil Appeal Nos. 5391-5393 of 2002, 4100 of 2003 and 3447 of 2006. In Civil Appeal Nos.6533-34 of 2002 the erection related to Membrane Cell Technology and Civil Appeal No.4156 relates to solvent extraction Plant. Stand of the appellant is that the fabrication of such plants out of duty paid bought out items amounts to manufacture of a new marketable commodity and therefore excise duty is payable.

3.The 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.

4.According 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.

5.The issue relating to excisability of plants and machinery assembled at site has been determined by this Court in several cases, e.g. Quality Steel Tubes Pvt. Ltd. v. CCE,1 (1995 (75) E.L.T. 17 (SC); Mittal Engineering Works Pvt. Ltd. v CCE, Meerut,2 (1996 (88) E.L.T. 622 (SC); Sirpur Paper Mills Ltd. v. CCE, Hyderabad,3 (1998 (97) E.L.T. 3 (SC); Silica Metallurgical Ltd. v. CCE, Cochin,4 (1999 (106) E.L.T. 439 (Tribunal); Duncan Industries Ltd. v. CCE, Mumbai,5 (2000 (88) ECR 19 (SC); Triveni Engineering & Industries Ltd. v. CCE,6 (2000 (120) E.L.T. 273 (SC) and CCE, Jaipur v. Man Structurals Ltd.,7 (2001 (130) E.L.T. 401 (S.C.)

6.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:

Government 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.

2.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.

3.A number of Apex Court judgments have been delivered on this issue in the recent past. Some of the important ones are mentioned below :

(i)Quality Steel Tubes Pvt. Ltd. v. CCE (1995 (75) E.L.T. 17 (S.C.);

(ii)Mittal Engineering Works Pvt. Ltd. v CCE, Meerut (1996 (88) E.L.T. 622 (S.C.);

(iii)Sirpur Paper Mills Ltd. v. CCE, Hyderabad (1998 (97) E.L.T. 3 (S.C.);

(iv)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.);

(v)Duncan Industries Ltd. v. CCE, Mumbai (2000 (88) ECR 19 (S.C.));

(vi)Triveni 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

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Judicial Analysis

SupremeToday

2007 Supreme(SC) 736

Important PointFor goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from inputs/components that have gone into its production.

Cases Referred (5)

Judicial Analysis

Important Point
For goods manufactured at site to be dutiable they should have a new identity, character and use, distinct from inputs/components that have gone into its production.