2001 (6) TMI 142 - AT - Central Excise

Summary

Issues Involved:
1. Classification of lifts and their components for excise duty purposes.
2. Inclusion of proportionate escalation charges in the assessable value.

Summary:

Issue 1: Classification of Lifts and Their Components for Excise Duty Purposes

The Revenue's appeal challenges the Order-in-Appeal No. 89/95(M), dated 9-5-1995, which held that the assessee's activity of installing and commissioning lifts at the buyer's site results in immovable property, not goods classifiable under Chapter Heading 84.28. The Commissioner (Appeals) concluded that only the component parts manufactured by the appellants could be subject to excise levy under Chapter Heading 84.31. The detailed findings in Paras 4 to 6 elaborate that the various parts and components removed from the factory do not constitute a lift as understood by a layman. The lift comes into existence only after installation at the customer's site, making it immovable property and not liable to Central Excise Duty.

The Revenue argued that Note 4 of Section XVI of Central Excise Tariff, which states that a machine consisting of individual components intended to contribute together to a clearly defined function should be classified under the appropriate heading, was not considered. However, the Commissioner (Appeals) found that the components become functional only after being erected at the site and thus are immovable property.

The Tribunal upheld the Commissioner (Appeals)'s findings, referencing various judgments, including Triveni Engg. Industries Ltd. v. CCE and Mittal Engineering Works (P) Ltd. v. CCE, which established that items becoming immovable property after assembly are not excisable goods. The Tribunal also referred to the Government of India's decision in Otis Elevator Company (India) Ltd., which held that elevators and escalators, once installed, become part of immovable property and are not assessable under Tariff Item 68 of Central Excise Tariff.

Issue 2: Inclusion of Proportionate Escalation Charges in the Assessable Value

The assessee's cross-appeal contended that once the item is held as immovable property, the question of adding proportionate escalation charges to the assessable value does not arise. The Tribunal found merit in this submission and held that for valuation purposes, the cost of construction and proportionate escalation charges cannot be added to the assessable value. Therefore, the order of the Commissioner (Appeals) to this extent was set aside.

Conclusion:

The Tribunal dismissed the Revenue's appeal and upheld the classification of lifts as immovable property, not subject to excise duty. The assessee's appeal was allowed, and the inclusion of proportionate escalation charges in the assessable value was deemed unsustainable. Both appeals were disposed of accordingly.