In Re: Precision Automation and Robotics India Limited
GST
2018 (9) TMI 1106 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (17) G. S. T. L. 90 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 13-6-2018
GST-ARA-39/2017-18/B-46
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as 'the CGST Act and the MGST Act”] by Precision Automation and Robotics India Limited, the applicant, seeking an advance ruling in respect of the following question :
Whether the activity of supply and installation of 'car parking system' would qualify as immovable property and thereby 'works contract' as defined in Section 2(119) of the CGST Act.
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e-Bangalore Highway, Mouje Dhangarwadi, Tal : Khandala, Dist Satara. 4128011[MS].
2. The applicant is engaged in providing goods and services which qualify as 'supply' as per provisions of the Central Goods and Service Tax Act, 2017 (“CGST Act”) and is duly registered thereunder bearing GSTIN 27AABCP2572Q1ZW.
3. The Company is engaged in the business of design, manufacturing, procurement, erection and installation of various types of car parking system. Supply and installation of car parking system involves several components, out of which certain components are manufactured by the Company and remaining are bought out items. The Company undertakes the activity qua the following types of car parking systems:
* Stacker type parking system:
* Puzzle type parking system:
* Multi-level parking system:
* RCC type Tower car parking system
* Structure type Tower car parking system:
* Level type Car parking system
* CART type parking system:
* Stacker type parking system:
*
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mer which contains the similar points. Relevant portion is reproduced below:
“Scope of work
1. Steel structure : Complete designing and fabrication & installation will be done by PARI
2. In Case of civil structure: It will be completely in client scope of work, PARI will provide the required foundation specifications to make sure the precise foundation work”
5. Along with RCC structure /foundation, various parts such as pallets, control panel, side sliding, suspension, operator panel, electrical systems are required. In order to ensure safe movement of the cars, safety equipment such as pallet overriding sensor, guiding sensor, car loading sensor are also required to be installed Car parking system cannot be made functional unless all the aforesaid steps have been completed and assembled at site. After installation and assembling of the parts, the Company is required to undertake testing of the car parking system at customer's premises to verify smooth and safe functioning of the
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, electrical system are installed in the RCC structure
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Safety features such as pallet overriding sensor, guiding sensor, car loading sensor and other safety equipments are installed
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Testing is undertaken by the Company
8. The Company generally executes a composite contract with the customer which inter alia includes supply of parts of car parking system as well as installation & commissioning services – which requires high technical skill, mechanical and mechatronics knowledge, compliance with engineering specifications, knowledge of safety requirements and other such regulations.
9. A new law has been implemented in India since July 1, 2017 – Goods and Services Tax (“GST”) wherein the definition of 'works contract' has been defined in Section 2 (119) of the CGST Act. In terms of the said definition, where supply of goods and services results into and immovable property is considered as works contract. Relevant extract of the same is reproduced below for your ready
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ction 2(119) of the CGST Act.
2. OUR SUBMISSION
2.1 The moot question for determination of the taxability of the underlying transaction from the GST perspective lies in the analysis of the fact that whether supply and installation of car parking system qualifies as immovable property (or movable) and would qualify as works contract under Section 2(1 19) of the CGST Act.
2.2 As far as the analysis of a transaction for its qualification as 'works contract' is concerned, it is relevant to note that the concept of *works contract' qua immovability has been subjected to intense judicial scrutiny over the years. Based on the past judicial precedents and relevant provisions; following determinative parameters have been derived for examining the nature of a transaction:
* Whether it is a permanent fixture attached to building/land or not;
* Whether dismantling of the parts is mandatory for movement or not;
* Whether the functionality of the system depends upon its installation or not
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ed. In this regard, reference can be made to the following rulings:
I. IN RE: OTIS Elevator Company (India) Limited [1981 (8) ELT 720 (G.O.I.)] = 1981 (7) TMI 70 – GOVERNMENT OF INDIA
“3. ………In their revision application and during the personal hearing, the following main contentions have been urged on behalf of the petitioners :-
“3. (i) They have contended that the contracts for erection and installation of elevators and escalators were indivisible Works contracts and do not constitute contracts for sale of goods. They have stated that all the parts manufactured by them or purchased from the open market for the installation of lifts had already discharged the burden of duty on such parts wherever leviable and further they have stated that the elevators and escalators do not come into existence until they are fully erected or installed, adjusted, tested and commissioned in a building and that on complete erection and installation the elevators and escalators become a part of
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ods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act.”
2.5 On cumulative reading of the above, it is evident that immovable property means a property that is attached to land and is a part and parcel of land itself. In the present facts, the car parking system is installed either in the building or vacant land. One of the essential requirement of the car parking system is specific foundation and steel structure/civil structure which is erected in the building or on land Thus, after installation, the said car parking system would form part of the building.
2.6 In this regard, we would like to highlight that in terms of the Supreme Court Ruling in the m
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ncy Certificate is also granted by the Municipal Corporation after installation of the car parking system.
2.7. In view of the discussion above, it is submitted that the car parking system is an integral part of the building and accordingly, the car parking system results in immovable property. This can further be corroborated by the fact that, at the time of purchase of flat, stamp duty IS paid on the agreement value including the value of car parking system at the rate applicable on the immovable property.
Entire car parking system cannot be moved 'as it is' and necessarily has to be dismantled
2.8. Another important aspect with respect to immovable property is dismantling thereof in case of shifting or for the purpose of movement. Immovable properties cannot be moved in the same form as they are erected/installed on the land.
2.9. In this regard, we would like to refer to the Circular Issued by CBEC and rulings of the Supreme Court which have been discussed in the paragraphs be
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the original form and not whether it is actually dismantled or not, into its components. Each case will therefore have to be decided keeping in view the facts and circumstances, particularly whether it is practically possible (considering the size and nature of the goods, the existence of appropriate transport by air, water, land for such size, capability of goods to move on self propulsion -ships- etc.) to remove and sell the goods as they are, without dismantling into their components. If the goods are incapable of being sold, shifted and marketed without first being dismantled into component parts, the goods would be considered as immovable and therefore not excisable to duty.”
II. Municipal Corporation of Greater Bombay vs Indian Oil co. Ltd [AIR 1991 SC 686] = 1990 (11) TMI 407 – SUPREME COURT
“Permanency is the test. The chattel whether is 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 is yes to t
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ntling of the entire system/machinery is a pre-requisite for movement/transportation of the said system, then the said system can be considered as immovable in nature. However, if the equipment/system is dismantled for convenience then the same cannot be considered as immovable based upon the fact that the equipment is dismantled and transported in lots.
2.11. In the present facts, parts of the car parking system are transported in various lots. Even in case of small sized parking system such as the stacker parking system, the same cannot be transported 'as is' from the factory in case of shifting of car parking system from one place to another, it cannot be moved in 'as is' form but it requires to be excavated, re-laid and re-installed with necessary equipment's at such other place. It is not an equipment or machinery which can be effortlessly required to be dismantled into parts and components.
Car parking system cannot be functional unless it becomes permanent fixtures to land/bui
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se aspects have been elaborately discussed in Otis Elevator (supra) by the High Court of Bombay. Therefore, the installation of a lift in a building cannot be regarded as a transfer of a chattel or goods but a composite contract.”
2.14. Reference is also drawn from Hon'ble Supreme Court's decision in the case of Triveni Engineering & Industries Ltd. vs. CCE [2000 (120) ELT 273], = 2000 (8) TMI 86 – SUPREME COURT OF INDIA wherein installation of turbo alternator which included installing its constituent parts viz. 'steam turbine' and 'alternator' together in a permanent form was evaluated. It was observed that turbo alternator comes into existence only when steam turbine and alternator is fixed together permanently to earth. Based on such observation it was held that turbo alternator as it came into existence was in nature of immovable property.
2.15. Supreme Court ruling in the case of Kone Elevators (supra) has emphasized upon the functionality test i.e. lift cannot be functio
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ure of immovable property. While it is not the case of the Applicant that these activities are in toto that of installation of car parking system, however, prima facie look at the nature of the activities viz. installation of central air conditioning system, installation of transmission equipment as a part of telecommunication network etc. clearly reveals that in terms of the breadth and scope of the work involved (designing, installation, erection etc.) and the target or the work involved (wall, building, telecom network) viz. immovable property remains the same as that of car parking system.
2.18. Attention is invited to the following judgments wherein the aforesaid activities have been held as immovable in nature:
Judgment
Summery
CCE, Indore Vs. Virdi Brothers [2007 (207) ELT 321 SC] = 2006 (12) TMI 3 – SUPREME COURT OF INDIA
It has been held that assembling of central air conditioning system amounts to immovable property.
Craft Interiors Private Limited Vs CCE, Banga
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etc. the BTS would not be in a position to function as transmitting and receiving apparatus.
Shapoorji Pallonji & Co, Vs, Union of India [2005 (192) E.L.T. 92 (Bom,)] = 2005 (4) TMI 91 – BOMBAY HIGH COURT
The activity of erecting trusses, columns and purlins made by cutting/drilling/welding steel channels. angles, plates on concrete columns with nuts and bolts is treated as an Immovable property.
2.19. In view of the above, it is submitted that the installation of car parking system qualifies as immovable in nature and thus the underlying activity is squarely covered under the definition of 'works contract'.”
03. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reproduced verbatim, could be seen thus-
“RELEVANT PROVISIONS OF STATUTE AND OBSERVATIONS:
4. Basis the submission and records produced by the applicant it is crystal clear that the activity performed by the applicant in relation to supply and installation of car parking system, involves various step
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e entry of Chapter Heading/sub-heading 8428 is reproduced herein as under-
Chapter Heading/Sub-heading/Tariff Item
Description of Goods
8428
Other lifting, handling, loading or unloading machinery (For example, lifts, escalators, conveyors teleferics)
Further, it may be seen that the service portion of installation of said items i.e. lifts and escalators is covered under the Service Codes (Tariff) (SAC) NO. 995466 under Installation Services Group. The entry Of Group NO. 995466 is reproduced herein as under-
Group No.
Installation Services
995466
Lift and escalator installation services
4.3 From the above it is clear that under GST Regime the manufacturing of Car parking System is covered under HSN code 8428 and the installation and commissioning of the same is covered under SAC code 995466. In the instant matter It is obvious that the applicant generally receive composite order for manufacturing and installation of car parking system. Therefore, the same is to be considered
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supply and supply of car parking system is the principal supply. Therefore, the said supply is required to classified under HSN code 8428 as it was classified under existing regime and the similar classification was having been done by the applicant themselves.”
04. HEARING
The case was taken up for preliminary hearing on dt.10.04.2018 with respect to admission or rejection of the application. Sh. Rohit Jain, CFO and Sh. Sunil Sonawane, Functional Head, GST appeared and made contentions for admission of application as per their contentions made in the Advance Ruling application. None appeared on behalf of the jurisdictional officer,
The application was admitted and called for final hearing on dt.13.06.2018. Sh. Rohit Jain, and Sh. Sunil Sonawane attended alongwith Sh. Aditya Joshi, Corporate Head, Products, and made contentions and additional submissions. Sh. V. S. Reddy, Superintendent along with Sh. Vinod, Inspector, Kolhapur Commissionerate appeared and made written submissions
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cted to convince us about the activity of supply and installation of 'car parking system' being resulting into 'immovable property'. While we see that the jurisdictional officer has offered comments as to the activity being a “composite” supply as defined under clause (30) of section 2 of the GST Act, with the supply of car parking system being the principal supply, we feel inclined to answer the question in the affirmative. Our reasons follow thus –
At the cost of repetition, we reproduce the activities that go into supply and installation of 'car parking system' hereinbelow for immediate reference –
Drawing & design of the car parking system is prepared according to the requirement of the customer
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Manufacture, build, test, dismantle, packing and supply steps
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Buildings specific foundation (either in the basement of building or on land) as per the requirement of the car parking to be installed
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Steel structure frame work (and/or RCC support) according to the
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ried to be assembled and which require various steps of activities to be performed on these items and only after which it is possible that they can be assembled. Even without going into the activities that go into the making, we can infer that the impugned activity is such that the car parking system cannot be said to be supplied unless substantial work is carried out at the site where the same is to be installed. Rather whatever structure or item is brought to the site wouldn't serve any purpose unless the same is fitted, commissioned and made working. And for this, several activities are needed to be carried out at the site. The site would, of course, be an immovable property such as a building. Or it could be a standalone structure for car parking. Whatever be it, the system is to be aligned to the immovable structure by way of support system. Various electrical and electronic items play an important role to put the system in place. These would have to be integrated at the site. The
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onstruction building, the plans showing the location of the car parking system, the load-bearing, etc. would have to be got approved from the jurisdictional urban bodies or revenue authorities. Same would also apply to a car parking system to be set up on a vacant plot of land. Such systems have a longevity of existence in terms of the aspect that these are not set up and removed frequently, barring of course the moderations or alterations to it. We have mentioned above that the impugned activity does not involve a supply as a chattel.
And hence, it is not the case that in case it is desired to do away with it, one can remove the system and put it into place AS IT IS at another location. The removal would always involve a total dismantling which cannot be without loss or damage. The question in these set of facts is whether the impugned activity could be said to be one as resulting into immovable property. The term 'immovable property' has not been defined under the GST Act. However,
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Nos. 4 and 6 of the Bhilai Steel Plant. For this purpose, it imported several components and also manufactured some of the components at their factory in Marai Malai Nagar, Chennai. These components were transported to the site at Bhilai where the manufacture and commissioning of the aforesaid machines took place. It is undisputed that duty was paid in respect of the components manufactured at its workshop in Chennai, but no duty was paid on manufacture of the aforesaid Mudguns and Drilling Machines which were erected and commissioned on site.”
The judgment was delivered thus –
“8. In their reply to the show cause, the respondents explained the processes involved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further process
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d the furnace. The cast house floor is at a height of 25 feet above the ground level. On this platform concrete foundation intended for housing drilling machine and mudgun are erected. The concrete foundation itself is 5 feet high and it is grouted to earth by concrete foundation. The first step is to secure the base plate on the said concrete platform by means of foundation bolts. The base plate is 80 mm mild sheet of about 5 feet diameter. It is welded to the columns which are similar to huge pillars. This fabrication activity takes place in the cast house floor at 25 feet above ground level. After welding the columns, the base plate has to be secured to the concrete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base plate could be moved to the concrete platform and secured. The same trolley helps in the movement of various components to their determined position. The various components of the mudgun and drilling machine are mou
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le machines elsewhere in a fully assembled condition and thereafter erect or install the same at a height of 25 feet on the cast floor of the blast furnace. She found that even the Adjudicating Authority conceded the fact that the equipments have to be assembled/erected on the base frame projection of the furnace. She also accepted the submission urged on behalf of the appellant that if the machines are to be removed from the blast furnace, they have to be first dismantled into parts and brought down to the ground only by using cranes and trolley ways considering the size, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers Pvt. Ltd. (supra) and also noticed the
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hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above. Accordingly applying the test laid down by the Supreme Court we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon”.
18. The core question that still survives for consideration is whether the processes undertaken by the appellant at Bhilai for the erection of mudguns and drilling machines resulted in the emergence of goods leviable to excise duty or whether it resulted in erection of immovable property and not “goods”.
21. The appellant has placed considerable reliance on the principles enunciated and the test laid down by this Court in Muni
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ose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allowing the appeal this Court observed :- (SCC p. 33, para 32)
“32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is 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 is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. If the answer is yes to the latter it is attached to the earth.”
22. Applying the permanency test laid down in the aforesaid decision, counsel for the appellant contended tha
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ght on record as to the nature of processes employed in the erection of the machine, the manner in which it is installed and rendered functional, and other relevant facts which may lead one to conclude that what emerged as a result was not merely a machine but something which is in the nature of being immovable, and if required to be moved, cannot be moved without first dismantling it, and then re-erecting it at some other place. Some of the other decisions which we shall hereafter notice clarify the position further.
24. In Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA; the facts were that a tube mill and welding head were erected and installed by the appellant, a manufacturer of steel pipes and tubes by purchasing certain items of plant and machinery in market and embedding them to earth and installing them to form a part of the tube mill and purchasing certain components from the market and a
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t can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act.”
26. In Mittal Engineering Works Pvt. Ltd. v. CCE – 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 – SUPREME COURT OF INDIA; this Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. The material on record described the functions and manufacturing process. A mono vertical crystaliser is fixed on a solid RCC slab having a load bearing capacity of about 30 tons per square meter. It is assembled at site in different sections and consists of bottom plates, tanks, coils, drive frames, supports, plates etc. The aforesaid parts were cleared from the premi
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the material placed on the record it was held that the mono vertical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. This Court, therefore, concluded that mono vertical crystallisers are not “goods” within the meaning of the Act and, therefore, not exigible to excise duty. In Triveni Engineering & Indus. Ltd. v. CCE – 2000 (120) E.L.T. 273 = 2000 (8) TMI 86 – SUPREME COURT OF INDIA; a question arose regarding excisability of turbo alternator. In the facts of that case, it was held that installation or erection of turbo alternator on a 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 an excisable goods falling within the meaning of Heading 85.02. In reachin
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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 intentions 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.”
26. It was also held that the decision of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad – 1998 (97) E.L.T. 3 (S.C.). = 1997 (12) TMI 109 – SUPREME COURT OF INDIA] must be viewed in the light of the findings recorded by the CEGAT therein, 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 safety. 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.
2
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one cannot be described as “goods” within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts of the case in hand and the facts in Mittal Engineering Works Pvt. Ltd. v. CCE – 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 – SUPREME COURT OF INDIA and Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor it is practicable to shift them frequently. Counsel for the appellant submitted before us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their a
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v. Solid and Correct Engineering Works [(2010) 5 SCC 122]. = 2010 (4) TMI 15 – SUPREME COURT The facts in this case were thus –
“3. M/s Solid and Correct Engineering Works, M/s Solid Steel Plant Manufacturers and M/s Solmec Earthmovers Equipment are partnership concerns engaged in the manufacture of parts and components for road and civil construction machinery and equipments like Asphalt Drum/Hot Mix Plants and Asphalt Paver Machine etc. M/s Solex Electronics Equipments is, however, a proprietary concern engaged in the manufacture of Electronic Control Panels Boards. It is not in dispute that the three partnership concerns mentioned above are registered with Central Excise Department nor is it disputed that the proprietary concern is a small scale industrial unit that is availing exemption from payment of duty in terms of the relevant exemption notification.
4. M/s Solidmec Equipments Ltd. (hereinafter referred to as 'Solidmec' for short) the fifth unit with which we are c
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as complete plants/systems, even when they were merely parts and components and not machines or plants functional by themselves. The erroneous classification and declaration was, according to the notice, intended to avoid payment of higher rate of duty applicable to parts of such plants and machinery at the material point of time. The notice also pointed out that the units manufacturing parts and components of the plants had availed benefit of exemption wrongly and in breach of the provisions of Rules 9(1) and 173F and other rules regulating the grant of such benefit.
6. In so far as Solidmec marketing company was concerned, the show cause notice alleged that Solidmec was engaged in the manufacturing of Asphalt Batch Mix, Drum Mix/Hot Mix Plant by assembling and installing the parts and components manufactured by the manufacturing units of the group. According to the notice the process of assembly of the parts and components at the site provided by the purchasers of such plants was t
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ression. It reads:
“Section 3(26): “immovable property” shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.”
23. It is not the case of the respondents that plants in question are per se immoveable property. What is argued is that they become immovable as they are permanently imbedded in earth in as much as they are fixed to a foundation imbedded in earth no matter only 1½ feet deep. That argument needs to be tested on the touch stone of the provisions referred to above.
24. Section 3(26) of the General Clauses Act includes within the definition of the term “immovable property” things attached to the earth or permanently fastened to anything attached to the earth. The term “attached to the earth” has not been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression “attached to the earth”:
“(a) rooted
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trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. It is nobody's case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of either the foundation or the land in which the same is imbedded.
26. In English law the general rule is that what is annexed
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ant considerations is founded on the interest in the land wherein the person who causes the annexation possesses articles that may be removed without structural damage and even articles merely resting on their own weight are fixtures only if they are attached with the intention of permanently improving the premises.
29. The Indian law has developed on similar lines and the mode of annexation and object of annexation have been applied as relevant test in this country also. There are cases where machinery installed by monthly tenant was held to be moveable property as in cases where the lease itself contemplated the removal of the machinery by the tenant at the end of the tenancy. The mode of annexation has been similarly given considerable significance by the courts in this country in order to be treated as fixture. Attachment to the earth must be as defined in Section 3 of the Transfer of Property Act. For instance a hut is an immovable property, even if it is sold with the option to
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the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures.
31. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons:
(i) The plants in question are not per se immovable property.
(ii) Such plants cannot be said to be “attached to the earth” within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.
(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.
(iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair projec
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to distinguish and record with approval earlier decisions on the issue of 'immovable property'. We may have a look at the same, too.
33 In [Sirpur Paper Mills Ltd. Case [(1998) 1 SCC 400] = 1997 (12) TMI 109 – SUPREME COURT OF INDIA,]this Court was dealing with a near similar situation as in the present case. The question there was whether the paper machine assembled at site mainly with the help of components bought from the market was dutiable under the Central Excise Act, 1944. The argument advanced on behalf of the assessee was that since the machine was embedded in a concrete base the same was immovable property even when the embedding was meant only to provide a wobble free operation of the machine. Repelling that contention this Court held that just because the machine was attached to earth for a more efficient working and operation the same did not per se become immovable property.
34. The Court observed: (Sirpur Paper Mills Ltd. Case [(1998) 1 SCC 400] = 1997 (12) TMI 109 –
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immovable property.”
38. Reliance was placed by Mr. Bagaria upon the decision of this Court in Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA and Mittal Engineering Works Pvt. Ltd. v. CCE – 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 – SUPREME COURT OF INDIA. In Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA this Court was examining whether “the tube mill and welding head” erected and installed by the assessee for manufacture of tubes and pipes out of duty-paid raw material was assessable to duty under residuary Tariff Item 68 of the Schedule being excisable goods. Answering the question in negative this Court held that tube mill and welding head erected and installed in the premises and embedded to earth ceased to be goods within the meaning of Section 3 of the Act as the same no longer remained movable
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vertical crystallisers erected and attached by a foundation to the earth at the site of the sugar factory could be treated as goods within the meaning of the Central Excise Act, 1944. This Court on facts noted that mono vertical crystallisers are fixed on a solid RCC slab having a load bearing capacity of about 30 tonnes per square metre and are assembled at sire with bottom plates, tanks, coils, drive frames, supports, plates. distance places, cullers, cutter supports, lank ribs, distance plate angles, water tanks, coil extension pipes, loose bend angles, coil supports, railing stands, intermediate platforms, drive frame railings and flats, oil trough, worm wheels, shafts, housing stirrer arms and support channels, pipes, floats, heaters. ladders, platforms. etc. The Court noted that the mono vertical crystallisers have to be assembled. erected and attached to the earth on a foundation at the Site of the sugar factory and are incapable of being sold to the consumers in the market as i
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Engg. Works (P) Ltd. case [(1997) 1 SCC 203 : (1996) 88 EL T 622] = 1996 (11) TMI 66 – SUPREME COURT OF INDIA]. The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts in order to provide stability from vibrations during the operation.
42. So also in T.T.G. Industries Ltd. v. CCE [(2004) 4 SCC 751 : (2004) 167 ELT 501], = 2004 (5) TMI 77 – SUPREME COURT OF INDIA the machinery was erected at the site by the assessee on a specially made concrete platform at a level of 25 ft height. Considering the weight and volume of the machine and the processes involved in Its erection and installation, this Court held that the same was immovable property which could not be shifted without dismantling the same.
43. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of tim
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ent footing.
44. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. Our answer to Question 1 is accordingly in the affirmative.”
Thus, we see how the Hon. Courts have evolved the term 'immovable property' when faced with the question of what constitutes movable and immovable property. Though not issued for the purposes of the GST Act, we may as well menti
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e following observations in paragraphs 7 to 9 held that the towers being not moveable, saleable and marketable, they would not be subject to excise duty. Paragraphs 7 to 9 reads as under:-
“7. It is, therefore, clear that the goods must be excisable or that the goods covered having the attributes of excisable goods as understood in Excise Law which includes marketability. The real question, therefore, that arises is whether, the Transmission Apparatus is goods and secondly if even so whether they are marketable. The Commissioner noting the various equipments held that the transmission apparatus meets the test of manufacture. The Commissioner further noted the various equipments installed at the BTS site room. The following equipments / apparatus were found to be installed in BTS site room:-
a) Microwave Antennas
b) Base station controller / Base Transreceiver station
c) Microwave Terminal.
d) GSM Antennas
e) Power supplement with rechargeable battery back up.
f) Air condi
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chapter 8525 of Central Excise Tariff and the same is distinct and separate from the various equipments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property.
8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS, & BSCs) which are networked with the operation support subsystem (constitued MSCs) which networked wit
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ined which invariably is user specific and site specific, meaning thereby if one wishes to sell the site to another user, it is not permissible under law, as the approval granted by the aforesaid authority for the frequency allocation and the site is for the user only and the purchaser would have to reapply for the license for that site. It cannot be sold / purchased marketed unattended and be equated to marketable goods. BTS/BSC site, therefore, are neither marketable nor capable of being marketed. The learned Tribunal also held that the appellants are not manufacturers and they are engaged in providing cellular mobile services by virtue of a license granted by the Government of India under the provisions of section 4 of the Indian Telegraph Act, 1885. Thus, their activity is purely service oriented. The Tribunal held that in such circumstances, the activity of installing and commissioning cell site cannot be an activity of either manufacture and no marketable goods arise. For the afo
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unal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different. Further, from the statement of Narayan as set out in the order of the Commissioner, it may be noted that he had stated that regarding installation of BTS the designing
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s case. In our opinion, therefore, though a new product comes into existence, yet as it is not movable, saleable and marketable, it would not be subject to excise duty.”
The principles laid down in the judgments discussed above stand good under all statues unless any specific definition is available under the statute. What we want to say is that these principles cannot be circumscribed to any particular statute. An elaborate reproduction of the principles as laid down in the judgments along with their facts has made things clearer for us.
The principles when seen in the light of the facts of the present case help us see thus –
* The impugned car parking system, be it installed on a vacant plot of land or in a building, does not result into supply as chattel. In fact, before installation, there can be no goods as such which could be called a 'car parking system'
* The system requires substantial work to be done at the site to be called a 'car parking system'.
* Once made operati
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