ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Excisability of Plant and Machinery

A recent decision of the Supreme Court has reopened the discussion on whether the erection of a plant, such as a power plant or paper mill should be considered to be an act of manufacture and therefore be charged excise duty, even though the component parts have already attracted such duty.

The question as to whether erection of a plant and machinery such as a power plant or a paper plant constitutes an act of manufacture and therefore attracts excise duty once again (though duty has already been paid on the parts) has been subject of immense controversy in recent times. This was a settled issue for a long time until the subject received a jolt from a judgment given by the apex court itself. However the judiciary has acted with alacrity to restore the situation as it was before. This needs elaboration.

The basic issue is that in order to attract excise duty the goods must be manufactured which means some new and identifiably different products must come to being and they must be marketable. If they are intermediate products, which are not marketable, or if they are embedded on earth like immovable property, they are not marketable. There are so many other situations when they are not marketable. Then they do not have to pay excise duty. Plants such as paper plants or power plants were regarded as immovable property and so not marketable being embedded on earth. All the judgments of Tribunal and even Supreme Court were along this line. A chemical plant embedded on earth was held to be immovable property and thus not excisable (Gujarat Machinery vs CCE, 1983 ELT 825(T) and Chemical Vessels Fabricators 1982ELT 92). Mono vertical crystallisers attached to the earth were also adjudged as immovable property by the Supreme Court (Mittal Engineering Works, 1996(88) 622SC). Mechanical plants and machinery were held as immovable property (Tata Robins Fraser vs CCEm 1990(46) ELT 562(T)). Steel tube mill was held as goods attached to earth and so immovable property by the Supreme Court (Quality Steel Tubes vs CCE, 1995(75) 17SC). There are similar judgments about Dal Mill (1993 ELT 2390(T)), lifts, elevators, escalators, weighing machine, overhead travelling cranes and many others where the Tribunal and Courts had invariably taken the view that the plants and machinery being fixed on the ground are nothing but immovable property and are not marketable and so not excisable. This was the settled law.

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