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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

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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

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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,

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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

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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

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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.