http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 2

PETITIONER:

SIRPUR PAPER MILLS LTD.

Vs.

RESPONDENT:

THE COLLECTOR OF CENTRAL EXCISE, HYDERABAD

DATE OF JUDGMENT: 11/12/1997

BENCH:

SUHAS C. SEN, K.T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

SEN,J.

The dispute in this case is about the leviability of

excise duty on paper making machine which was erected by the

appellant-company by using duty paid components purchased

from the market and also by fabricating certain parts of the

machinery in their factory. The duty paid components

purchased from the market worked out to about 90% of the

parts required for the machine. In respect of the parts

fabricated inside the factory of the appellant, no duty was

leviable under Notification No. 118/75 dated April 30, 1975

issued by the Government. The case of the appellant is that

the excise authority erroneously imposed duty on the parer

making machine installed in the factory of the appellant

because the Central Excise Act imposes a duty on "all

excisable goods produced or manufactured in India". It is

well - settled that the "goods" contemplated by Section 3

which is the charging section of the Act must be movable and

marketable. The case of the appellant is that the various

components of the paper making machine purchased by the

appellant had to be put together at the site where the

machine was erected ant embedded in the ground. Certain

components were also to be fabricated at site. This machine

was really immovable property and did not come within

mischief of the charging section of the Central Excise Act.

Mr. Jaideep Gupta, appearing on behalf of the

appellant, has contended that the machine was permanently

attached to the ground. In fact the machine cannot be worked

until and unless the same was attached to the earth as a

permanent fixture. It was further argued that the machine

cannot ordinarily be sold in the market. The nature of the

machine is such that it cannot be transferred offered for

sale to any other party. An argument was also advanced that

the machine was erected on turn key basis at the very place

where the machine was ultimately embedded in a concrete base

to make it a permanent fixture.

The Tribunal, however, rejected these contentions

advanced before it on the basis of some findings of fact.

The Tribunal held that the machine was attached to earth for

operational efficiency. The whole purpose behind attaching

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 2

the machine to a concrete base was to prevent wobbling of

the machine and to secure maximum operational efficiency and

also for safety. The Tribunal further held that the parer

making was saleable and observed "if somebody to purchase,

the whole machinery could be dismantled and sold to him in

parts".

In view of this finding of fact, it is 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

tribunal has pointed out that it was for the operational

efficiency of the machine that it was attached to earth. If

the appellant wanted to sell the paper making machine it

could always remove it from its base and sell it.

Apart from this finding of fact made by the Tribunal,

the point advanced on behalf of the appellant, that whatever

is embedded in earth must be treated as immovable property

is basically not sound. For example, a factory owner or a

house-holder may purchase a water pump and fix it on a

cement base for operational efficiency and also for

security. That will not make the water pump an item of

immovable property. Some of the component of water pump may

even be assembled on site. That too will not make any

difference to the principle. The test is whether the paper

making machine can be sold in the market. The Tribunal has

found as a fact that it can be sold. In view of that

finding, we are unable to uphold the contention of the

appellant that the machine must be treated as a part of the

immovable property of the company. Just because a plant and

machinery are fixed in the earth for better functioning, it

does not automatically become an immovable property.

A further argument was made that the entire machinery

as it is cannot be bought and sold because the machinery

will have to be dismantled before being sold. The Tribunal

has pointed out that the appellant had himself bought

several items and completed the machinery. It had purchased

a large number of components and fabricated a few and

manufactured the paper making machine at site. If it is sold

it has to be dismantled and reassembled at another site. We

do not find any fault with the reasoning of the Tribunal on

this aspect of the matter.

Lastly, it was contended that the paper making machine

was not really manufactured by the appellant. Various

components and parts were purchased and a few of the parts

were fabricated at the factory and the assesses ultimately

assembled various parts of the machine. We are unable to

uphold this argument also because it has to be seen whether

a final product is something distinct and apart from the

components that have gone into its production. What the

appellant has erected in its factory is a paper making

machine. It may have purchased various components to make

the machine but nonetheless what has been produced is

something quite different from the components that had been

purchased. A new marketable commodity has emerged as a

result of the manufacturing activity of the appellant.

Marketability being a question of fact, we are of the

view there is no scope for interference with the order

passed by the Tribunal. It cannot be said that the Tribunal

has overlooked any material fact or its decision is

perverse.

The appeal fails and is dismissed. No order as to

costs.