LARSEN AND TOUBRO LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) BY this petition, the petitioner challenges the notice dated 26th June 1990 issued to it to show cause why excise duty should not be levied and action be not taken against it for non-payment of excise duty for fabrication/manufacture of waste water treatment plant.

(2.) THE petitioner is engaged, amongst others, in the business of fabrication and erection of structures of various types on contract basis. 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. By that plant, water polluted with oil, bacteria and chemicals and deficient in oxygen was required to be treated to remove oil, neutralize bacteria and harmful chemicals and supply oxygen to the water and treat it before it was discharged in the pipeline. On 26th June 1990, the Superintendent of Central Excise (the respondent no.4 herein) issued a notice to the petitioner alleging contravention of provisions of Rule 9(i) read with Rules 52A, 173-B, 173-C, 173-F, 173-G of the Central Excise Rules. In the notice, it was alleged that the petitioner had fabricated/manufactured the waste water treatment plant in the premises of BPCL valued at Rs.5,32,37,123/- without payment of central excise duty thereon. The notice further alleged that the waste water treatment plant fell under chapter heading no.8419.00 on which excise duty was payable. The notice further alleged the plant came into existence in unassembled form as per the drawings and designs approved by the BPCL before the same was installed and assembled to the ground with civil work. According to the notice, the excise duty was payable on the value of the plant excluding the value of the civil work. That notice is impugned in this petition.

(3.) IT need not be stated that the excise duty is not payable in respect of an immovable property. The plant when erected by embedding in the civil work becomes an immovable property and would not therefore attract any excise duty. The contention of the respondents, however, is that the plant came into existence in an unassembled form at site and became operational after it was embedded in the civil work. Though the civil work did not attract excise duty, excise duty was payable on the plant in an unassembled form. The relevant wording in the show cause notice in that regard is quoted below:-