2013 (11) TMI 1347 - AT - Central Excise

Failure to declare the value of components Bought out items received at site - Escapement of tax - Waiver of pre-deposit - The Petitioner claimed that the bought-out items are inseparably attached to the concrete foundation during assembly of the cooling towers and therefore constitute immovable property outside the ambit of excise duty Held that - Following CCE,Aurangabad vs. LIPI Boilers Industries Ltd. 2010 (9) TMI 392 - CESTAT, MUMBAI - incorporation of bought-out items to an assembly which involves embedding of the several components at the user s site is an incident of operational requirements, but would not thereby transform a moveable complex of products into immovable property. The issue whether bought-out items ought to be considered to have transformed into immovable property prior to the process of assembly of large size cooling towers and whether the taxable event had occurred before such impregnation in the earth and whether such fixture is temporal or permanent, is a mixed question of fact and law Assessee directed to pre-deposit 50% of the assessed service tax liability and interest upon such submission rest of the duty to be stayed till the disposal partial stay granted.

Summary

Issues:
Interpretation of whether 'bought-out' items embedded in concrete foundations for assembly of large cooling towers constitute immovable property under excise duty liability.

Analysis:
The Appeals were filed against an Adjudication Order confirming a Central Excise demand, Education Cess, interest, and penalties imposed on the Petitioner Company, a manufacturer of cooling towers. The dispute centered around the treatment of certain components of large cooling towers under Tariff Entry 848940. The Revenue alleged that the Petitioner failed to declare the value of these components, leading to tax evasion. The Petitioner argued that certain items were 'bought-out' and embedded in concrete foundations during assembly, thus forming part of immovable property not subject to excise duty.

The Adjudicating Authority rejected the Petitioner's contention and included the value of 'bought-out' items in the tax net, levying excise duty, interest, and penalties. The Petitioner cited various decisions and circulars to support their claim that large cooling towers should be considered immovable property, while Revenue relied on a Supreme Court judgment regarding generating sets assembled on-site.

The Tribunal considered the conflicting precedents and concluded that the issue of whether 'bought-out' items transform into immovable property during assembly is a mixed question of fact and law. Balancing the interests of the Petitioner and Revenue, the Tribunal directed the Petitioner to predeposit 50% of the assessed excise duty liability and interest to stay further proceedings. Failure to comply would result in the rejection of the Appeals.

In summary, the judgment addressed the classification of 'bought-out' items in the context of large cooling towers as immovable property for excise duty purposes. The Tribunal's decision to grant a waiver of predeposit while imposing conditions on the Petitioner reflects a nuanced approach to resolving the dispute and ensuring compliance with tax obligations.