Property Law

Commissioner of Central Excise v. Solid & Correct Engineering Works

(2010) 5 SCC 122

Facts

Solid & Correct Engineering Works and related concerns manufactured components for road-construction machinery.
A related marketing company assembled Asphalt Drum Mix and Hot Mix Plants at purchasers’ project sites.
The plants included feeder bins, conveyors, dryers, mixing drums and storage tanks.
The components were fixed with nuts and bolts to foundations approximately one-and-a-half feet deep.
The foundations provided stability because the plants produced substantial vibration during operation.
The Tribunal treated the completed plants as immovable property because of their size and attachment to the foundations.
The Revenue challenged this conclusion, arguing that the plants were movable machinery and therefore goods.

Whether fixing an asphalt plant to a shallow foundation for stability made it immovable property.
Whether the physical fact of attachment was sufficient without an intention of permanent annexation.

Under Section 3 TPA, “attached to the earth” includes:
things rooted in the earth;
things embedded in the earth; and
things attached to what is embedded for its permanent beneficial enjoyment.
Two principal tests determine whether machinery has become a fixture:
the degree or mode of annexation; and
the object or purpose of annexation.
The object of annexation is particularly important.
Machinery does not become immovable merely because it is bolted to a foundation.
Attachment for operational stability is different from attachment intended to make the machinery a permanent part of the land or structure.

The plant was not rooted or embedded in the earth like a tree, wall or building.
It stood above ground and was attached to a shallow foundation through nuts and bolts.
The plant could be detached without demolishing either the plant or the land.
The foundation was required only to:
prevent vibration;
avoid wobbling; and
ensure safe and efficient operation.
The attachment was not for the permanent beneficial enjoyment of the land or foundation.
Instead, the foundation served the beneficial operation of the machine.
The asphalt plants were erected at particular road-construction or repair sites for the duration of those projects.
Once the project was completed, the plant could be dismantled, moved and erected at another site.
This showed that the commercial and practical intention was temporary installation, not permanent assimilation into the land.
The Court distinguished machinery that:
is custom-built into a permanent factory structure;
cannot function independently of that structure; or
loses its commercial identity when dismantled.
In Triveni Engineering, the turbo alternator existed only after permanent onsite combination and ceased to remain a turbo alternator when separated.
Here, the asphalt plant remained machinery capable of being detached and relocated for the same use.
The Court therefore refused to treat every machine requiring a stable base as immovable property.

The asphalt plants were movable property.
Fixing them to shallow foundations for vibration-free operation did not make them fixtures.
There was no intention to permanently fasten or assimilate them into the land.
They could therefore be treated as manufactured goods.
The Tribunal’s contrary conclusion was set aside and the matter was remanded on the remaining issues.