2009 (8) TMI 78 - HC - Central Excise

Manufacture - fabrication/manufacture of waste water treatment plant - On 13th September 1988, the petitioner entered into a turn key contract with Bharat Petroleum Corporation Ltd. (for short BPCL ) for fabrication, assembly and erection of waste water treatment plant. The activities involved in the contract were procurement, supply, fabrication, transportation of various components, making of civil construction and erection of waste water treatment plant and commissioning it. Held that - when factually there is no dispute that the waste water treatment plant when totally assembled becomes an immovable property. The very show cause notice also says that plant in an unassembled form was installed and affixed to the civil works. This shows that the plant on erection and installation becomes an immovable property which is not excisable to tax. SCN quashed.

Summary

Issues:
Challenge to notice for nonpayment of excise duty for fabrication of waste water treatment plant.

Analysis:
The petitioner challenged a notice issued for nonpayment of excise duty for fabricating a waste water treatment plant. The petitioner, engaged in fabrication and erection of structures, entered into a contract for the plant with Bharat Petroleum Corporation Ltd. The notice alleged nonpayment of excise duty on the plant valued at Rs.5,32,37,123. The petitioner explained the fabrication process, including civil work, and argued that the plant becomes functional only after complete assembly. The respondent contended that excise duty was payable as the plant existed in unassembled form before installation. The Court noted that excise duty is not payable on immovable property and held that the plant, when embedded in civil work, becomes immovable and not subject to excise duty. Mere collection of parts at the site does not constitute manufacture unless a new commercial product emerges. The Court distinguished a Supreme Court decision involving assembly of duty-paid components, emphasizing that the waste water treatment plant was immovable and not separately marketable. The Court quashed the show cause notice, ruling in favor of the petitioner due to the immovable nature of the plant upon complete assembly.