Otis Elevator Company (India) ... vs Superintendent Of Central Excise ...
2002 Latest Caselaw 872 Bom

JUDGMENT

V.C. Daga, J.

1. The petitioner is a company engaged in the manufacture of lifts and in the business of erection and installation of elevators and escalators ("lifts" for short).

2. The petition is directed against the communication dated 20th August 1987 passed by the Superintendent of Central Excise, respondent No. 1 seeking to assess excise duty on the basis of contract value recovered by petitioner from their customers.

3. The aforesaid order is subject matter of challenge being contrary to and wholly irreconcilable with the earlier order of the Collector of Central Excise

(Appeals) in petitioner's own case and another order in revision passed by the Government of India again, in the case of petitioner itself. It is further contended that the said order of the Superintendent is also contrary to the judgment of this Court in the case of Otis Elevator v. State of Maharashtra, 24 STC 525.

4. The petitioner, as already stated above, carries on business of erection and installation of lifts in the buildings and maintenance thereof on the basis of lump sum contract price. The contracts entered into by the petitioner with its customers for the aforesaid purpose are indivisible works contracts. Such contracts have been judicially examined, considered and regarded as indivisible contracts by the Division Bench of this Court in case of Otis Elevator v. State of Maharashtra (supra) holding that the works contracts involve high technical skill, knowledge and experience of mechanical and electrical as well civil engineering including preparation of designs, drawings and compliance with engineering specifications and knowledge of lift codes, standards and safety requirements and other regulations prescribed by the Government and other authorities in this behalf. According to the petitioner, a large number of components are required to be put in the erection of lifts in addition to certain components which are manufactured in their factory. According to the petitioner, these several components by no stretch of imagination can be considered to be unfinished lift having essential character of a complete or finished lift.

5. The petitioners further contended that erection of lift cannot be carried out at the factory of the petitioner. The same can be done only inside the building structure as an integral part of the building in which the lift is to be installed. The erection and installation process commence first time in the building site and is continued and completed within and into the building itself. Such work is a prolonged work extending over several months and sometimes for even more than a year. The erection of a lift involves elaborate work and has to be correlated with and tailored, to meet the needs and requirements of a particular building. It is therefore contended on behalf of the petitioner that the lift cannot be a ready-made assembled unit and its erection cannot be done in a routine manner. In their submission, the erection of a lift inside and into the building is neither an extension of the manufacturing activity at the premises of the customer nor is it a matter of merely assembling the components at the site. Once the lift is installed and commissioned in the building, it becomes integral part of the immovable property. The lift when installed in the building makes the building fit for occupation and becomes a permanent fixture of the building itself and, consequently, it cannot be regarded as goods as contemplated under excise legislation, consequently, it cannot be within the sweep of Tariff Item No. 68 of the Excise Tariff Act.

6. The learned counsel appearing for the petitioner brought to our notice that the issue as to whether or not lift fitted in the building forms part and parcel of the building and cannot be treated as the goods is fully covered by the judgment of the Apex Court in Triveni Engg. Industries Ltd. v. C.C.E., 2000(40) RLT 1 (SC) = 2000 (120) ELT 273, wherein, the Apex Court clearly laid down that after assembling, if the item continues to be goods, only then it can be held

to be excisable goods. However, on completion of process of erection, if the item becomes a part of the building or an immovable property, then, it is not an excisable item.

7. The learned counsel for the petitioner also relied on the judgment in Mittal Engineering Works (P) Ltd. v. C.C.E., Meerut, , wherein, while considering the aspect of excisability, it has been clearly laid down by the Apex Court that once the erection is attached to the foundation to the Earth it would not make the item marketable and would not fall within the definition of 'goods' as defined in the Act and will not be a marketable commodity. He further relied upon judgment of Quality Steel Tubes (P) Ltd. v. C.C.E., U.P. wherein the plant and machinery embedded to Earth, structures, erections and installations were held to be immovable property. The contention, therefore, sought to be advanced is that no excise duty can be levied on the composite contract involving erection and maintenance of the lifts forming part of the immovable property.

8. Per contra, the learned counsel appearing for the revenue tried to distinguish the aforesaid judgment cited by the petitioner, but could not take his submissions to the logical end.

9. Having heard the rival contentions and having examined all the citations referred to hereinabove, we are clearly of the opinion that the same shall apply to the facts of this case in full force and item in question being immovable property cannot be subjected to excise under the tariff heading claimed by the Revenue. The case sought to be made out by the petitioner is also covered by the decision of the Government of India in reference, Otis Elevator Company (India) Ltd., 1981 (3) ELT 720 (GOI), wherein it was clearly held that if an article does not come into existence until it is fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation of such article when it becomes part of immovable property, it cannot be described as goods attracting levy of any excise duty. Thus applying the ratio of all the above judgments including the order of the Government of India referred to hereinabove, the case sought to be made out by the petitioner has to be upheld. The contention sought to be advanced by the petitioner has a lot of merits in their submission and the issue is squarely covered against the Revenue that once the item has been held to be an immovable property then, for the purpose of valuation the cost of construction and proportionate escalation charges cannot be added in the assessable value, as such, the impugned communication dated 20th August 1987 of the respondent No. 1 is quashed and set aside and it is declared that the erection of lift is not excisable under Tariff Item No. 68 of the First Schedule to the said Act. It is made clear that in this petition we have held that the erection of a lift as a whole is not excisable and we have not dealt with the issue of excisability of the manufacture of parts of the lifts under Tariff Item 84.28 or Tariff Item 84.31 of the Central Excise Tariff. Therefore, seeking particulars of commissioning and erection charges received by the petitioners from their customers does not arise at all. If there is any dispute regarding the excisability of the parts of the lifts under Tariff Item 84.28 or 84.31, the

respondents may proceed in the matter in accordance with law as this aspect of the matter will need investigation and adjudication based on questions of fact for which writ jurisdiction cannot be allowed to be invoked.

In the result, petition is partly allowed. Accordingly, rule is made absolute with no order as to costs.