TATA Iron and Steel Co Ltd had to battle with the Collector of Central Excise at the apex court recently on the meaning of the word `installed.' The company manufactured parts of rolling stock in its factory (Growth Shop) at Adityapur. It wanted to bring the same to its main steel works at Jamshedpur "for use in repair and maintenance of transport equipment used for moving the materials and products within the factory."
The compnay applied for permission under Rule 192 of the Central Excise Rules, to get parts of loco engine and rolling stock from Growth Shop without paying duty, claiming benefit under Notification No 281/86. This is about exemption for excisable products used for repairs and maintenance of machinery. But the Department said no, and issued show cause notices, alleging breach of the terms and conditions of the notification. The `crucial word' used in the notification was `installed,' averred the Department.
At the tribunal, the decision went against the company. Machines may have moving parts and they may move to make the machine functional, but such machines themselves do not have to move, was how the tribunal reasoned. Thus, locomotives and other items in the current case are moving items, used in the factory for moving or carrying materials, it said. Accordingly, the notification applied to machinery installed in the factory and not to the machinery used in the factory, decided the tribunal.
The aggrieved company took the case to the Supreme Court. There, the company's counsel, A.K. Ganguli, contended that the notification does not distinguish between "locomotive and any other machineries and the trucks and other transport equipment which undisputedly are covered by the expression `machinery'." He pointed out that the taxman did not dispute that trucks and other transport equipment were machinery; what the Revenue tried to project was that these were not meant for machinery, which was installed.
The term `installation' does not mean that it should be embedded to the earth only, but it is used in the sense of introduction or induction, said the company, emphasising that in essence what was meant was "to set up or fix in position for use or service." For the Department, it was Binu Tamta who argued that even in common parlance the word `installed' means embedded to the earth with no possibility of movement from one place to another.
Justice Arijit Pasayat and Justice S.H. Kapadia heard the case and dwelt on the meaning of `installed.' The judgment cites Black's Law Dictionary to explain the word `install' as "to place in a seat, give a place to; to set, place, or instate in an office, rank, or order, etc. To set up or fix in position for use or service."
T.P. Mukherjee's Law Lexicon, another source cited, states that `installed' has not been statutorily defined. "In view of the extended statutory definition of the word `plant' in Section 10(5) of the Income Tax Act, 1922, it seems clear that the word `installed' in relation to the machinery or plant, must be construed to mean such installation as that plant is capable of," it adds.
The court also looked at other references: "The meaning of the word `installed' as given in Webster's New International English Dictionary is `to set up or fix in position for use or service as to install a heating or lighting system."
The shorter Oxford Dictionary gives as one of the meanings `to place an apparatus, a system of lighting, heating, or the like in position for service or use'.
The same meaning is given in Fund and Wagnall's New Standard Dictionary: `to place in position for service or use as to install hot water system'."
The judgment drew input from Corpus Juris Secundum - that `install' means "generally, to place or set in a seat or give a place to; to set, place, or instate in an office, rank, or order; to establish one in a place or position." Another paragraph of the verdict refers to `builders' terminology' - that install is to set in place, to connect up, and fix ready for use. "Specifically applied to machinery, the word has a technical meaning, which is to set up or fix in position for use or service; to place machinery in that position where it will reasonably accomplish the purposes for which it is set up," said the court.
A 1960 case that the court cited was Commissioner of Income Tax vs Sri Rama Vilas Service (P) Ltd, where it had been held that `installed' means `to place an apparatus in position for service or use'. There the decision was that a bus or a lorry could be said to have been installed when put on the road. Another case was that of Commissioner of Income Tax v. Mir Mohammad Ali, where fixing an engine in a vehicle is to have it installed.
"The assumption that the expression `installed' must necessarily mean `fixed imposition' at the time when the plant is worked or used does not seem to be justified," observed the judges, and cited P. Ramanatha Aiyar's Law Lexicon, which said that `installed' did not necessarily mean `fixed in position', but was also used in the sense of `intended or introduced'.
Much would depend upon the context in which the expression is used in a particular statute and no generalisation can be done, stated the court. It drew attention to the fact that the wagon and trucks were quite heavy and were used in the factory premises on fixed rails. "When they were placed on rails they can be said to be placed in position. Merely because there is some movement it does not dilute the position that they have been installed," observed the court, directing the tribunal to reconsider the matter afresh.