PETITIONER: TRIVENI ENGINEERING & INDUSTRIES LTD. & ANR. Vs. RESPONDENT: COMMISSIONER OF CENTRAL EXCISE & ANR. DATE OF JUDGMENT: 08/08/2000 BENCH: Syed Shah Mohammad Quardri, J. & Shivaraj V. Patil, J. JUDGMENT:
SYED SHAH MOHAMMED QUADRI,J.
L….I……….T…….T…….T…….T…….T…….T..J
These statutory appeals arise from the common order of
the Customs, Excise and Gold (Control) Appellate Tribunal,
New Delhi (for short the CEGAT) in Appeal Nos.E/1759/95-A
and E/5555/92-A dated June 20, 1996. The appellants are the
assessees under the Central Excise Act, 1944 (for short,
the Act). The facts giving rise to these appeals are not
in dispute. The appellants deal in turbo alternators which
have two components : (i) steam turbine; and (ii) complete
alternator (also called Generator). Of them, the
appellants manufacture steam turbine in their factories at
Allahabad and Bangalore where excise duty is paid on them
under the Act. They purchase duty paid complete alternators
which are delivered at the site of the customer. On the
ground that the appellants failed to declare manufacture of
turbo alternators, show cause notices were issued to them by
the Collectors of Central Excise at Allahabad and Bangalore,
inter alia, stating that turbo alternators are liable to
excise duty under Heading 85.02 of the Central Excise Tariff
Act, 1985 (for short the CET Act). The appellants
resisted the claim on the ground that (i) a turbo alternator
set comes into existence on its being fixed permanently on
the land as such it is not an excisable good but an
immovable property and (ii) by the combination of steam
turbine and alternator, a turbo alternator emerges at the
site of the customers which does not involve any process of
manufacturing, therefore, they are not liable to excise
duty. On August 24, 1995, the Collector of Central Excise,
Allahabad and on August 28, 1992, the Collector of Central
Excise, Bangalore confirmed the demand raised in the show
cause notices. The assessees filed two appeals against the
orders of the said Collectors before the CEGAT. On the
question of levy of excise duty on turbo alternator, the
CEGAT, by the impugned order dated June 20, 1996, held that
turbo alternators were liable to excise duty.
Mr.V.Sridharan, learned counsel for the appellants, has
contended that (i) in combining steam turbine and
alternator, no manufacturing process is involved; (ii) the
process consists of combining and fixing of the two
components permanently on platform raised at the premises of
the customers and thus what emerges is not goods but an
immovable property; and (iii) in view of the Circular
No.17/89 dated April 21, 1989 issued by Central Board of
Excise & Customs, the case does not fall under Entry 85.02
of the CET Act. Mr.M. Gourishankar Murty, learned counsel
for the respondents, in support of the order of the Tribunal
argued that combining steam turbine and alternator amounted
to manufacturing process and that merely because the two
components were fixed to the platform for efficient
functioning of a turbo alternator, it could not be said that
it was an immovable property. In regard to Circular
No.17/89 (F.No.207/73/88-CX.6), he submitted that it did not
relate to electric generator and it was not issued under
Section 37-B of the Act and in any event the point was not
taken before the Tribunal. The short question that falls
for consideration is whether excise duty can be imposed on a
turbo alternator under the Act. Section 3 of the Act which
is the charging provision authorises levy and collection of
duties of excise on all excisable goods which are produced
or manufactured in India at the rates mentioned in the
Schedule to the CET Act. To attract exigibility of excise
duty, an article must satisfy the twin conditions of being:
(i) excisable goods; and (ii) produced or manufactured in
India. First, adverting to the second condition is any
process of manufacture involved in bringing into existence a
turbo alternator? The process is noted by the CEGAT. At
the site, platform is constructed in which pockets are
provided. The steam turbine from the assessees factory and
the alternator from other factories are transported to the
site. The steam turbine is placed on the platform which
works as the foundation and then, after levelling, it is
fastened with foundation bolts into the pocket. So also,
the alternator is placed and bolted to the steam turbine
through a high speed coupling between the steam turbine
outer-shaft and alternator shaft and they are aligned
properly. After ensuring that there is no movement of the
alternator pedestal, other accessories are installed at
their respective places. Having regard to this process, the
CEGAT held, and in our view rightly, that the assessees
manufactured turbo alternators. In State of Maharashtra vs.
The Central Provinces Manganese Ore Co.Ltd. (1977 (1) SCC
643), the question was whether mixing of manganese ores,
obtained from different mines, by a pre-determined mode of
unloading at the ports resulted in manufacture of a
conglomerate termed oriental mixture by the company. It
was held that the formation of the mixture by the mere
process of unloading did not involve any process of
manufacture. The term oriental mixture was employed by
the company to name a particular type of conglomerate which
the unloading at one place of various types of manganese ore
produced. What is to be determined is whether there has
been manufacture of a new product which has a separate
commercially current name in the market and that mere giving
of a new name by the seller to what is really the same
product is not the manufacture of a new product. Nearer to
the issue is the decision of this Court in Narne Tuleman
Manufacturers Pvt. Ltd.,Hyderabad vs. Collector of Central
Excise, Hyderabad (1989 (1) SCC 172). The assessee therein
carried on the activity of assembling the three components
of the weighbridge and bringing into existence the complete
weighbridge which has a distinctive name, character or use.
There also, the assessee contended that out of the three
components, only one, indicator system of the machine, was
being manufactured by it which had already suffered excise
duty and the other components, which were also duty paid
components, were purchased from others. It was held that
the activity of fitting and assembling the three components
resulted in bringing into being complete weighbridge which
has a distinctive name, character or use. Therefore, it
would amount to manufacture of that product which is liable
to excise duty. Thus, where an activity results in
emergence of a new marketable commodity with a distinctive
name, character or use, it cannot but be manufacturing
process. (See : Union of India vs. Delhi Cloth & General
Mills [1963 Suppl. (1) SCR 586]) In the instant case, the
appellants were, according to specified designs, combining
steam turbine and alternator by fixing them on a platform
and aligning them. As a result of this activity of the
appellants, a new product, turbo alternator, came into
existence which has a distinctive name and use different
from its components. Indeed, the Tribunal referred to the
orders placed for purchase of turbo alternator to point out
that a new commodity emerges. On these facts, we have no
hesitation in holding that the process involved in fixing
steam turbine and alternator and in coupling and aligning
them in a specified manner to form a turbo alternator, a new
commodity, is nothing but a manufacturing process. Now
reverting to the first condition, the expression excisable
goods is defined in clause (d) of Section 2 of the Act to
mean goods specified in the Schedule to the CET Act as being
subject to a duty of excise including salt. It is thus
clear that the goods which are sought to be subjected to the
excise duty must find a place in the Schedule to the CET
Act. Impost on a turbo alternator is levied under Entry
85.02 in the said Schedule, which reads as under :
————————————————————————–
Heading No. Sub-Heading Description of Rate of Duty No.
Goods
—————————————————————————
(1) (2) (3) (4)
—————————————————————————
85.02 ELECTRIC GENERA- TING SETS AND ROTARY CONVERTERS
8502.10 Diesel generating Nil sets assembled, at site
of installation, from duty paid engine and generator
8502.90 Other 13%
————————————————————————–
A perusal of the Entry shows that a turbo alternator
does not find a place therein eo nomine. The question then
will be whether a turbo alternator falls within the
meaning of electric generating set. To bring a turbo
alternator under that heading it must be shown to have the
attributes of excisable goods as understood in the Excise
Law. They are mobility and marketability. The article in
question should be capable of being brought and sold in the
market a test which is too well established by series of
decisions of this Court to be elaborated here. 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 require 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. In Municipal
Corporation of Greater Bombay & Ors. Vs. Indian Oil
Corporation Ltd. (1991 Suppl. (2) SCC 18), one of the
questions this Court considered was whether a petrol tank,
resting on earth on its own weight without being fixed with
nuts and bolts, had been erected permanently without being
shifted from place to place. It was pointed out that the
test was one of permanency; if the chattel was movable to
another place of use in the same position or liable to be
dismantled and re-erected at the later place, if the answer
to the former is in the positive it must be a movable
property but if the answer to the latter part is in the
positive then it would be treated as permanently attached to
the earth. In Quality Steel Tubes (P) Ltd. vs. Collector
of Central Excise, U.P. (1995 (2) SCC 372), this Court had
to consider the question whether the tube mill and welding
head erected and installed by the appellant for the
manufacture of tubes and pipes out of duty-paid raw material
were assessable to duty under residuary Tariff Item No.68 of
the Schedule, being excisable goods within the meaning of
Central Excise Act. While re-stating the test, namely,
first the article must be goods and secondly that it should
be marketable or capable of being brought to market, it was
held that goods which are attached to the earth and thus
become immovable did not satisfy the test of being goods
within the meaning of the Central Excise Act nor can be said
to be capable of being brought to the market for being sold.
In that case, it was found that both the tests were not
satisfied and, therefore, the tube mill and welding head
erected by the appellant were not exigible to excise duty.
It was held that erection and installation of a plant could
not be held to be excisable goods and if such wide meaning
was assigned, it would result in bringing in its ambit
structures, erections and installations which would surely
not be in consonance with accepted meaning of excisable
goods and its exigibility to duty. The question whether
mono vertical crystallisers answer the meaning of goods
fell for consideration of this Court in Mittal Engineering
Works (P) Ltd. vs. Collector of Central Excise, Meerut
(1997 (1) SCC 203). Mono vertical crystallisers are used in
sugar factories to exhaust molasses of sugar. The component
parts of mono vertical crystallisers were cleared on payment
of excise duty from the premises of the appellants therein
and they were then assembled, erected and attached to the
earth at the site of the customers sugar factory. The
process involved welding and gas cutting. The CEGAT held
that the mono vertical crystalliser was complete when it
left the factory and upheld the demand of excise duty on
clearance thereof. This Court pointed out that the mono
vertical crystalliser, had to be assembled, erected and
attached to the earth by a foundation at the site of the
sugar factory and it was not capable of being sold as it is,
without anything more. Bharucha,J., speaking for the Court,
observed : The erection and installation of a plant is not
excisable and to so hold would, impermissibly, bring into
the net of excise duty all manner of plants and
installations.
The case of Narne Tulaman Manufacturers (P) Ltd.
(supra) was distinguished on the ground that in that case
the contention that weighbridge was not goods within the
meaning of the Act, was not raised and no evidence in that
behalf was brought on record. It was observed : We cannot
assume that weighbridges stand on the same footing as mono
vertical crystallisers in that regard and hold that because
weighbridges were held to be exigible to excise duty so must
mono vertical vertical crystallisers. Here, the decision
of this Court in Sirpur Paper Mills Ltd. vs. Collector of
Central Excise, Hyderabad (1998 (1) SCC 400), which is
relied on by the learned counsel for the Revenue, needs to
be referred to. In that case, the question was whether
paper-making machine which was assembled and erected by the
appellant by using duty paid components and by fabricating
certain parts in their factory, was liable to excise duty.
The CEGAT recorded the finding that 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. This court held that in
view of those findings it was 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 test, it was noted,
would be whether the paper-making machine could be sold in
the market and as the Tribunal had found as a fact that it
could be sold, so the machine was held to be not a part of
that the aforementioned two cases — Mittal Engineering
immovable property of the company. It appears Works (P)
Ltd. and Quality Steel Tubes (P) Ltd. (supra), — were not
referred to in Sirpur Paper Mills Ltd.s case. Further, in
the instant case, it is a common ground that a turbo
alternator comes into existence only when a steam turbine
and alternator with all their accessories are fixed at the
site and only then it is known by a name different from the
names of its components in the market. The Tribunal
recorded the finding that fixing of steam turbine and the
alternator is necessitated by the need to make them
functionally effective to reduce vibration and to minimise
disturbance to the coupling arrangements and other
connections with the related equipments. It also noted that
removal of the machinery does not involve any dismantling of
the turbine and alternator in the sense of pulling them down
or taking them to pieces but only undoing the foundation
bolts arrangement by which they are fixed to the platform
and uncoupling of the two units and, therefore, the turbo
alternator did not answer the test of permanency laid down
by this Court in the case of Municipal Corporation of
Greater Bombay (supra). In our view, the findings recorded
do not justify the conclusion of the Tribunal inasmuch as on
removal a turbo alternator gets dismantled into its
components steam turbine and alternator. It appears that
the Tribunal did not keep in mind the distinction between a
turbo alternator and its components. Thus, in our view, the
test of permanency fails. The marketability test requires
that the goods as such should be in a position to be taken
to the market and sold and from the above findings it
follows that to take it to the market the turbo alternator
has to be separated into its components — turbine and the
other alternator — but then it would not remain turbo
alternator, therefore, the test is incorrectly applied.
Though, there is no finding that without fixing to the
platform such turbo alternator would not be functional, it
is obvious that when without fixing, it does not come into
being, it can hardly be functional. It will be useful to
refer to the Explanatory Note issued by the Harmonized
System of Nomenclature (HSN) to which Mr.Sridharan invited
out attention. We also note that HSN received the approval
of this Court in CCE vs. Woodcraft (1995 (3) SCC 454),
which explained the scope of Heading 85.02 as under :
..Generating sets consisting of the generator and its
prime mover which are mounted (or designed to be mounted)
together as one unit or on a common base (see the General
Explanatory Note to Section XVI), are classified here
provided they are presented together (even if packed
separately for convenience of transport). The Explanatory
Note further contained : Floors, concrete bases, walls,
partitions, ceilings, etc., even if specially fitted out to
accommodate machines or appliances, should not be regarded
as a common base joining such machines or appliances to form
a whole. From a perusal of the above Explanatory Notes, it
is clear that when generating sets consisting of the
generator and its prime base mover are mounted together as
one unit on a common base they are classified under the
Heading 85.02; in this connection floors, concrete bases,
walls, partitions, ceilings etc., even if specially fitted
out to accommodate machines or appliances, cannot be
regarded as a common base joining such machines or
appliances to form a whole. On a combined reading of the
Explanatory Notes, extracted above, there can be no
difficulty in inferring that installation or erection of
turbo alternator on the concrete base specially constructed
on the land cannot be treated as a common base and,
therefore, it follows that installation or erection of turbo
alternator on the platform constructed on the land would be
immovable property, as such it cannot be excisable goods
falling within the meaning of Heading 85.02. For these
reasons, we are of the view that the Tribunal is not correct
in coming to the conclusion that the turbo alternator is
excisable goods. We, therefore, set aside the order under
appeal and allow these appeals with costs.
