Section 37B Order No. 58/1/2002 - CX,
F.NO. 154/26/99 - CX4
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
15th January, 2002
37B Order No. 58/1/2002 - CX
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
Attention is invited to Section 37B Order No. 53/2/98-CX dt.2.4.98
(F.No.154/4/98-CX4) regarding the excisability of plant and machinery assembled
A 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.
Vs. CCE [1995(75)ELT17(SC)]
|| Mittal Engineering Works
Pvt. Ltd. Vs. CCE Meerut [1996(88)ELT622(SC)]
|| Sirpur Paper Mills Limited
Vs CCE, Hyderabad [1998(97)ELT3(SC)]
|| Silica Metallurgical
Ltd. Vs. CCE Cochin [(1999(106)ELT 439(Tribunal)] as confirmed by the Supreme
Court vide their order dated 22.2.99 [1999(108)ELT 58A(SC)]
|| Duncan Industries Ltd.
Vs. CCE Mumbai [2000(88)ECR 19(SC)
|| Triveni Engineering &
Industries Ltd. Vs. CCE [2000(120)ELT273(SC)]
|| CCE Jaipur Vs. Man
Structurals Ltd. [2001(130)ELT401(SC)]
The plethora of such judgments
appear 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:-
|| For 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 product 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 its component
. In 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)
|| 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
|| If any goods installed at
site (example paper making machine) are capable of being sold or shifted
as such after removal from the base and without dismantling into its
components/parts, the goods would be considered to be movable and thus
excisable. The mere fact that the goods, though being capable of being
sold or shifted without dismantling, are actually dismantled into their
components/parts for ease of transportation etc., they will not cease to be
dutiable merely because they are transported in dismantled condition. Rule2(a)
of the Rules for the Interpretation of Central Excise Tariff will be attracted
as the guiding factor is capability of being marketed in the original form
and not whether it is actually dismantled or not, into its components. Each case
will therefore have to be decided keeping in view the facts and circumstances,
particularly whether it is practically possible (considering the size and nature
of the goods, the existence of appropriate transport by air, water, land for
such size, capability of goods to move on self propulsion -ships- etc.) to
remove and sell the goods as they are, without dismantling into their
components. If the goods are incapable of being sold, shifted and marketed
without first being dismantled into component parts, the goods would be
considered as immovable and therefore not excisable to duty.
|| When the final product is
considered as immovable and hence not excisable goods, the same product in CKD
or unassembled form will also not be dutiable as a whole by applying Rule 2(a)
of the Rules of Interpretation of the Central Excise Tariff . However,
components, inputs and parts which are specified excisable products will remain
dutiable as such identifiable goods at the time of their clearance from the
factory or warehouse.
|| The intention of the party
is also a factor to be taken into consideration to ascertain whether the
embedment of a machinery in the earth was to be temporary or permanent. This, in
case of doubt, may help determine whether the goods are moveable or immovable.
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.
|| Turn key projects like
Steel Plants, Cement plants, Power plants etc. involving supply of large
number of components, machinery, equipments, pipes and tubes etc. for their
assembly / installation / erection / integration / inter-connectivity on
foundation/civil structure etc. at site, will not be considered as excisable
goods for imposition of central excise duty - the components, however, would
be dutiable in the normal course.
|| Huge tanks made of metal
for storage of petroleum products in oil refineries or installations. These
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[ Reference para 15 of
Triveni judgement supra and the case of CCE Chandigarh vs Bhagwanpura Sugar
Mills reported in 2001(47)RLT409(CEGAT-Del)]
conditioning plants . These 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.
Lifts and escalators. (a)Though lifts and escalators are specifically mentioned in sub heading
8428.10, those which are installed in buildings and permanently fitted into the
civil structure, cannot be considered to be excisable goods. Such lifts and
escalators have also been held to be non-excisable by the Govt. of India in the
case of Otis Elevators India Co Ltd reported in 1981 ELT 720 (GOI).
Further, this aspect was also a subject matter of C&AG's Audit Para
No.7.1(b)/98-99 [ DAP NO 186] which has since been settled by the C&AG
accepting the Board's view that such lifts and escalators are not excisable
goods. Also refer CCE vs Kone Elevators
India Ltd reported in 2001(45)RLT 676 (CEGAT- Chen)
There may, however, be
instances of fabrication of complete lifts and escalators which are movable in
nature as a whole and can be temporarily installed at construction sites or
exhibitions for carrying men or material. Such cases alone would be liable to
duty under sub-heading 8428.10 of 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 trade.
Receipt of this order may
please be acknowledged.
Hindi version will follow.
Under Secretary to the Govt of
Tel No. 3016829