2004 (9) TMI 511 - AT - Central Excise

Plant - Water plant - Mobile chilled water plant vis-a-vis heat exchanger - Manufacturer vis-a-vis hired labourer

Summary

Issues Involved:
1. Classification of the impugned goods.
2. Determination of whether the appellants are 'hired labourers' or 'manufacturers'.
3. Grant of Modvat Credit.
4. Claim for the benefit of reduction of duty on accessories supplied.

Issue-wise Analysis:

1. Classification of the Impugned Goods:
The Tribunal remanded the matter for re-examination of the classification of the impugned goods. The appellants contended that the item in question is a 'Mobile Chilled Water Plant' and not a 'Heat Exchanger'. They relied on technical literature, affidavits, and expert evidence to support their claim. The affidavit of Dr. M.R.S. Sathyanarayana, an expert in Mechanical Engineering, clearly distinguished between a 'Chilled Water Plant' and a 'Heat Exchanger'. The expert's evidence indicated that the essential function of the 'Chilled Water Plant' is to generate chilled water, whereas a 'Heat Exchanger' merely facilitates the transfer of temperature between two fluids. The Tribunal agreed with the appellants' contention and upheld the classification of the item as a 'Mobile Chilled Water Plant' under Heading 84.18 of the CET, 1985.

2. Determination of Whether the Appellants are 'Hired Labourers' or 'Manufacturers':
The Tribunal was directed to examine whether the appellants were 'hired labourers' or 'manufacturers'. Upon reviewing the contract between the appellants and the Director General of Naval Projects (DGNP), it was found that the appellants were responsible for manufacturing and supplying the Mobile Chilled Water Plant based on technical know-how and expertise. The contract was on a principal-to-principal basis, indicating that the appellants were manufacturers and not merely hired labourers. Consequently, the plea that the appellants were 'hired labourers' was rejected.

3. Grant of Modvat Credit:
The Tribunal considered the appellants' claim for Modvat credit. The appellants argued that they were entitled to Modvat credit, supported by various judgments. The Tribunal agreed that the appellants' claim for Modvat credit should be re-examined. The original authority was directed to re-compute the duty after granting the benefit of Modvat credit, if applicable.

4. Claim for the Benefit of Reduction of Duty on Accessories Supplied:
The appellants also claimed the benefit of a reduction in duty on accessories supplied. The Tribunal noted that the Commissioner had not considered this claim. Therefore, the matter was remanded to the original authority to re-examine the claim for the reduction of duty on accessories, if available, after granting an opportunity for a hearing.

Conclusion:
The Tribunal upheld the classification of the impugned goods as a 'Mobile Chilled Water Plant' under Heading 84.18 of the CET, 1985, and rejected the plea that the appellants were 'hired labourers'. The matter was remanded to the original authority to re-compute the duty after considering the appellants' claims for Modvat credit and the reduction of duty on accessories. The penalty imposed under Rule 173Q was to be re-determined after the duty computation, with an opportunity for the appellants to be heard on these issues. The appeal was allowed on these terms.