Activities Background cases (C) PINNACLE ACADEMY - PowerPoint PPT Presentation

Dutiability of Site related Activities Background cases (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Parts required for manufacture of paper making Machine (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Motor used for Rollers Raw Pulp extractor Belts rolling Paper making and Paper Pulvarizer Waste Misc. parts designing plate ejector (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

The paper making machine (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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 (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

+ Alternator Steam Turbine = Turbo alternator (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

An alternator is an What is Turbo electromechanical device that Alternator 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 turbo- alternators. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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 . (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Quality Steel Tubes P. Ltd. V. CCE (1995) Tube Mill Welding Head (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

(C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Cement Plant V. Component in cement plant Plant, as such being Components like kiln immovable. So not goods are dutiable under excise (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Air conditioning plant V. Air conditioning unit Plant as a whole cannot be Air conditioning units are considered as good, but each considered as goods and are component is dutiable. dutiable (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Permanent V. Temporary lifts Lifts permanently fitted into Lifts temporarily installed at civil structure are not goods construction site are goods (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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 (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Larsen & Toubro Limited v. UOI 2009 (Bom. HC) Whether the fabrication, assembly and erection of waste water treatment plant amounts to manufacture? (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. Water treatment plant which will be an immovable Civil construction is also done structure (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

 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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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? (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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 (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

Soildmec Equipments Soild & Correct Supplies Ltd. (Marketing components Engg. Works company) manufactures Asphalt Drum/ Hot mix plants at the sites of purchasers of such plants (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

CCE v. Solid & Correct Engineering Works and Ors 2010 (SC) Department’s Assessee’s Contention: Contention: Such plants (Asphalt  Department issued the show cause  Drum/Hot Mix) have to be notice alleged that the process of permanently embedded in assembly of the parts and earth as it required to be components at the site provided by fixed to a foundation that is 1 the customer was tantamount to and ½ ft. deep for the sake of stability of the plant which manufacture of Asphalt Batch Mix, causes heavy vibrations Drum Mix/Hot Mix plants as a while in operation. distinct product with a new name, quality, usage and character Thus, the setting up of the plant  emerged out of the said process. is result into immovable property and not subject to excise duty. Thus Asphalt Drum/Hot Mix Plants  became exigible to Central Excise duty. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)

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. (C) PINNACLE ACADEMY (www.pinnacleacademy.co)