Best Cotton Mills (P) Ltd. vs Commissioner Of C. Ex. on 24 January, 2000

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Customs, Excise and Gold Tribunal – Delhi
Best Cotton Mills (P) Ltd. vs Commissioner Of C. Ex. on 24 January, 2000
Equivalent citations: 2001 (130) ELT 766 Tri Del

ORDER

V.K. Agrawal, Member (T)

1. The issue involved in this appeal filed by M/s. Best Cotton Mills (P) Ltd. is whether the diesel generator set is an excisable goods and who is the manufacturer of the impugned diesel generator set.

2. Shri C. Govindaswami, learned Consultant, submitted that the impugned generator set is a 380 K.V.A. generating set consisting of engine with radiator, 38 KVA alternator with coupling device and other components, namely, batteries, base frame, fuel tank and control panel; that at site, civil engineering concrete basement is prepared; that base frame is fixed and attached to the bowels of the earth by base foundation bolts and thereafter engine and alternators are fixed by bolting, welding, drilling or punching holes and finally other components parts are bolted, welded and soldered; that 380 K.V.A. diesel generator set which thus comes into existence is not mobile and is an immovable property; that the activity undertaken does not amount to manufacture as per the decision in SAE India Ltd. v. C.C.E., 1988 (36) E.L.T. 613 & Elecon Engineering Co. Ltd v. CCE, 1999 (31) R.L.T. 5 (T). He further, submitted that marketability of a product is a prerequisite for levy of excise duty as held by the Supreme Court in Quality Steel Tubes (P) Ltd. v. CCE, 1995 (75) E.L.T. 178 (S.C.); Bhor Industries Ltd. v. CCE, 1989 (41) E.L.T. 280 (S.C.) and J.K. Spinning and Weaving Mills v. U.O.I., 1987 (32) E.L.T. 234 (S.C.). He pleaded that impugned diesel set is neither goods nor capable of mobility; that the Collector has observed in the impugned order that by a trade notice issued on November, 1990, it was clarified that generating sets assembled at site out of bought out components would be liable to duty; that law cannot be circumscribed by administrative instructions or trade notices as held by the Tribunal in Polyformalin (P) Ltd. v. CCE, 1985 (21) E.L.T. 145 (T); that, therefore reliance placed on the trade notice by the Collector is fallacious and as such nutility in the eye of law.

3. Alternatively, the learned Consultant submitted that as diesel generating set is quite different from the electric generator set, it will not be covered by Heading 85.02 which applies to ‘Electric Generator Set’; that further addition of 10% as notional profit in the value of impugned goods is not allowable as per decision of the Tribunal in C.C.E. v. Standard Metal Works, 1998 (98) E.L.T. 447 and S.V. Steel & Vessel v. C.C.E., Bombay, 1998 (97) E.L.T. 448 (T); that if excise duty is held to be chargeable on diesel generating set, they would be eligible for Modvat credit of the duty paid on inputs purchased from the market. Further, the learned consultant submitted that the generating set in question was assembled by M/s. Electro Control Devices; that as per the terms of the purchase order, dated 10-8-1990, the balance amount was payable after erection, installation, etc.; that it is settled law that raw material supplier is not the manufacturer. He placed reliance on the decision in the case of Fusion Polymers Ltd. v. CCE -1991 (56) E.L.T. 665 (T).

4. Countering the arguments, Shri Ashok Kumar, learned DR, submitted that the issue regarding excisability of generating set has been decided by the Appellate Tribunal in the case of Trivani Engg. Works Ltd. v. CCE, Allahabad, 1996 (88) E.L.T. 238 (T). It was held by the Tribunal that the “turbo generator set emerging as a result of appellants activity of assembling turbine manufactured by them with bought out items at site amounts to manufacture of a new commercial article specifically described under Heading 85.03 of Central Excise Tariff Act and is chargeable to duty thereunder.” He further submitted that excise duty will be payable as the appellants have not made the payment for generating set as such but for individual component parts and the generating set came into existence in their factory.

5. We have considered the submissions of both the side. The issue regarding excisability and classification of generating set has been settled by the Tribunal in Trivani Engg. Works case, supra, after considering the judgment of the Supreme Court in the case of Quality Steel Tubes (P) Ltd., supra. The Tribunal held as under :

“Thus it is seen that the turbine and the alternator are in fact taken to the site. Had they been immovable it would not have been possible to take them from place to place or to install them where the customers wished. Because the items are heavy and so have to be fixed in what appears to be a permanent position should not deceive us into holding that they are immovable. Fixing them is necessitated by the need to make them functionally effective to reduce vibration, and to minimise disturbance to the coupling arrangements and other connections with the related equipment. Careful and inflexible alignment and/or levelling are necessary for the operation of the unit of turbine/alternator. Many large machineries are fixed to the ground for the above reasons for optimum operation and to reduce other unwanted side effects that may arise during their operation. Stability alone demands a firm base and rigid placement. The argument that such machinery is immovable hence fails to carry conviction.

What is embedded to earth permanently is the platform on which the turbine and alternator are fixed with foundation bolts and removal of the machinery will not involve any dismantling of the turbine and alternator, in the sence of pulling them down or taking them to pieces, but only undoing the foundation bolts arrangements by which they are fixed to the platform and uncoupling of two units. The turbine and alternator or the generator set thus do not answer the test of permanency which is laid down by the Supreme Court in the case of Municipal Corporation of Greater Bombay v. Indian Oil Corporation -1991 Supp. (2) SCC 18 cited and relied upon by the learned Counsel before us.”

6. We, however, agree with the learned Consultant that the duty cannot be demanded from the appellants as they have not undertaken the assembly of diesel generating set. It has been assembled into a generating set by M/s. Electro Control Device. It is evident from the purchase order, dated 10-9-1990, that the appellants had placed a purchase order for the purpose of diesel generating set. They had also specified the make of engine and alternator in the purchase order. Merely because the generating set was brought into existence in their premises will not make them the manufacturer unless the Revenue is able to establish that M/s. Electro Control Device were their hired labour. No such evidence has been brought on record to prove this aspect. We observe that Collector has held the appellants as manufacturer as all the manufacturing activities were carried out in the licence premises of the appellants. As it has not been rebutted by the Revenue that the generating set was brought into existence by M/s. Electro Control Device, duty cannot be charged from them. Accordingly, no penalty would also be imposable on them.

7. We, accordingly, held that the diesel generating set is excisable goods classifiable under Heading No. 85.02 of the Schedule to the Central Excise Tariff Act. However demand of excise duty is not sustainable against the appellants and accordingly, we set aside the demand of duty and penalty.

8. The appeal is disposed of in above terms.

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