Property Law

Triveni Engineering & Industries Ltd. v. Commissioner of Central Excise

(2000) 7 SCC 29

Facts

Triveni Engineering dealt in turbo alternators.
A turbo alternator consisted of:
a steam turbine manufactured by Triveni; and
an alternator purchased from another manufacturer.
Both components were transported separately to the customer’s site.
A specially constructed platform and foundation were prepared there.
The turbine and alternator were placed upon the platform, fastened through foundation bolts, coupled and carefully aligned.
Only after this process did the combined unit become a functioning turbo alternator.
The dispute concerned whether the completed turbo alternator was movable “goods” or immovable property.
The Tribunal considered it movable because it could be removed by undoing the foundation bolts and separating the two components.

Whether a turbo alternator assembled and installed upon a specially constructed foundation was movable property.
Whether the possibility of separating its components was sufficient to establish mobility.

Whether machinery has become immovable property depends upon:
the fact and degree of fastening; and
the intention behind fastening.
The relevant test is not merely whether nuts and bolts can physically be removed.
The court must ask whether the article, in the same identity in which it exists, can be taken to the market and sold.
If removal requires dismantling the article into separate components so that the finished product ceases to exist, the finished product lacks mobility and marketability.
Machinery permanently installed as part of the land or structure is immovable property.

A turbo alternator did not exist as a complete commercial product merely because the turbine and alternator existed separately.
The new product came into existence only when:
both components were brought to the site;
fixed upon the specially prepared platform;
coupled;
aligned; and
connected for effective operation.
The foundation was required to control vibration, maintain alignment and make the combined unit functional.
The Tribunal reasoned that removal involved only undoing bolts and uncoupling the units.
The Supreme Court rejected this approach because after removal, what remained were two separate items:
the steam turbine; and
the alternator.
The article known commercially as the “turbo alternator” no longer existed.
Therefore, the finished unit could not be removed and sold in its existing identity.
The marketability test had to be applied to the turbo alternator as a whole, not to its detachable components.
The specially constructed concrete foundation could not itself be treated as a portable common base.
The unit’s identity and functionality were tied to its erection upon the site.
Consequently, despite the theoretical possibility of undoing the bolts, the completed turbo alternator possessed the character of immovable property.

Assembly of the components resulted in a new product, but the completed turbo alternator was immovable property.
It could not be taken to the market and sold as a turbo alternator without first losing its identity through separation.
It was therefore not movable excisable goods.
The Tribunal’s order was set aside and Triveni’s appeals were allowed.