2008 (3) TMI 576 - AT - Central Excise

Summary

Issues:
1. Duty payment on components of DG set and assembly.
2. Manufacturer of the DG set.
3. Eligibility for Modvat credit.
4. Capital goods credit entitlement.
5. Value revision for payment of duty.

Analysis:

1. Duty payment on components of DG set and assembly:
The case involved M/s. The Lakshmi Mills Co. Ltd. (LML) procuring components of a DG set, paying duty on them, and assembling the set at its factory premises without following Central Excise formalities. The original authority demanded duty on the manufactured DG set, confiscated it, and imposed penalties on the respondents. The Commissioner (Appeals) later vacated the original authority's order, stating that duty had been discharged on the components as well as the profit included in the charges for installation collected by M/s. Powerica Corporation. The Commissioner disagreed with the original authority's finding that the respondents were ineligible for Modvat credit due to non-filing of a declaration.

2. Manufacturer of the DG set:
In the appeal filed by the Revenue, it was contended that M/s. The Lakshmi Mills Ltd. was the actual manufacturer of the DG set, not M/s. Powerica Corporation that supplied the parts/components. The Revenue sought to restore the original authority's order, with the learned SDR reiterating the grounds contained in the appeal.

3. Eligibility for Modvat credit:
The Tribunal considered the submissions and found that LML had paid duty on the components and assembled the DG set at its factory. It was established that LML was entitled to capital goods credit for the duty paid on the DG set, even though it did not file the necessary declaration or follow formalities. The Tribunal concluded that the value of the DG set did not need to be revised for duty payment by including a notional profit on assembly.

4. Capital goods credit entitlement:
The Tribunal upheld that LML, as the manufacturer of the DG set, was entitled to capital goods credit for the duty paid on the set, despite not following all formalities. This decision was based on the understanding that the erection and commissioning of the DG set did not have to be included in its value for duty payment purposes.

5. Value revision for payment of duty:
The Tribunal ruled that it was immaterial to the revenue whether the value of the DG set was revised for duty payment by including a notional profit on its assembly. Consequently, the impugned order vacating the original authority's decision was sustained, and the Revenue's appeal was dismissed.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT, CHENNAI, providing a detailed understanding of the legal reasoning and conclusions reached in the case.