2015 (10) TMI 1726 - AT - Central Excise

Manufacture - Activity of converting /assembling Gas Generating Sets (Gensets ) comprising of engine (prime mover) coupled with Alternator on common base frame into Power Pack after certain processes - Held that - it is seen from the record that the process undertaken by the Appellant on the imported Gensets for the industrial customers. Thus, the industrial customer would buy Power Pack rather than Gensets. The imported Gensets and Power Pack are known separately in the trade and parlance. It is also noted that the use of both the items are for different purposes. - the process undertaken by the Appellant would constitute manufacture as it emerges a new commodity in the market. - Decided against the assessee. Change is classification is required to not - Held that - the identical issue was raised before the Hon ble Supreme Court in the case of Laminated Packings Pvt. Ltd 1990 (8) TMI 141 - SUPREME COURT OF INDIA . It has been observed that the goods belongs to the same entry is also not relevant because even if the goods belong to the same entry, the goods are different identifiable goods known as such in the market. If that is so, the manufacture occurred and if manufacture takes place, it is dutiable. The said decision would squarely apply in the present case and the Power Pack is rightly classified under sub-heading No.85022090 of Central Excise Tariff Act, 1985. - Decided against the assessee. Extended period of limitation - revenue neutral exercise - Held that - Hon ble Supreme Court in series of cases, has held that the extended period of limitation, would not be invoked in the case of revenue neutrality as the CENVAT Credit is available against the demand of duty. - Benefit of period of limitation allowed. Appellant acted under a bonafide belief that the activities undertaken by them would not amount to manufacture. It is the case of interpretation of the provisions of law and therefore, the imposition of penalties on the Appellants are not warranted. - confiscation and penalties set aside. - Decided partly in favor of asessee.

Issues Involved:
1. Classification of Containerized Gensets (Power Pack) as "manufacture" under Central Excise law.
2. Applicability of extended period of limitation for demand of duty.
3. Eligibility for CENVAT Credit.
4. Imposition of penalties and confiscation of goods.

Issue-wise Detailed Analysis:

1. Classification of Containerized Gensets (Power Pack) as "manufacture" under Central Excise law:
The Tribunal examined whether the activities undertaken by the Appellant on the imported Gensets amounted to "manufacture" under Section 2(f) of the Central Excise Act, 1944. The Appellant imported Gensets which were assessed under sub-heading 8502.2090 of the Customs Tariff Act and paid customs duty. They then undertook certain activities, including assembling various components such as radiators, oil tanks, control panels, and ventilation fans, to create Containerized Gensets (Power Packs). The Tribunal noted that these activities resulted in a new product with a distinct name, character, and use, thus satisfying the conditions of manufacture as defined under Section 2(f) of the Central Excise Act, 1944. The Tribunal upheld the classification of Power Packs under sub-heading 8502.2090 of the Central Excise Tariff Act, 1985.

2. Applicability of extended period of limitation for demand of duty:
The Tribunal addressed whether the extended period of limitation could be invoked for the demand of duty. The Appellant had informed the Department about their activities by letter dated 22.11.2007 and had registered with the Service Tax authorities. The Tribunal found no evidence of suppression of facts with intent to evade duty. Citing the Hon'ble Gujarat High Court's decision in CCE Surat-II Vs Gujarat Glass Pvt. Ltd and the Hon'ble Supreme Court's decision in Anand Nishikawa Company Ltd Vs CCE Meerut, the Tribunal held that the extended period of limitation could not be invoked as the Appellant acted under a bona fide belief and there was no deliberate attempt of non-disclosure.

3. Eligibility for CENVAT Credit:
The Tribunal directed the Adjudicating authority to extend the benefit of CENVAT Credit while quantifying the duty, subject to verification of records. The Tribunal noted that the Appellant was eligible to avail CENVAT Credit during the material period, which would offset the demand of duty.

4. Imposition of penalties and confiscation of goods:
The Tribunal found that the imposition of penalties on the Appellants was not warranted as the case involved interpretation of the provisions of law and the Appellant acted under a bona fide belief. The Tribunal also noted that the goods were available for confiscation and, as per settled law, goods available cannot be confiscated. Consequently, the Tribunal set aside the confiscation of goods and the imposition of redemption fine and penalties.

Conclusion:
The Tribunal held that the activities undertaken by the Appellant amounted to manufacture, classifying the Power Pack under sub-heading 8502.2090 of the Central Excise Tariff Act, 1985, and upheld the demand of duty along with interest for the normal period. However, the demand for the extended period, confiscation, and penalties were set aside. The Tribunal also directed the extension of CENVAT Credit benefit subject to verification of records. The appeal filed by the Appellant company was disposed of accordingly, and the appeal filed by the General Manager (F&A) was allowed.

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