1993 (7) TMI 365 - AT - Central Excise

Summary

Issues:
Whether Control Panel and Circuit Breakers are to be considered as component parts of diesel generators for availing Modvat Benefit.

Analysis:
The appellants argued that Control Panel and Circuit Breakers are essential components of the diesel generators they manufacture, as per the technical drawing presented. They contended that these items, though procured from other manufacturers, are integral to the functioning of the generators and are supplied along with the final product. Citing Supreme Court judgments, they claimed these inputs should be considered component parts eligible for exemption or credit. The recent decision of the Tribunal was also referenced to support their case.

The Departmental Representative opposed the appellants' arguments, supporting the findings of the Assistant Collector and the Order-in-Appeal. The Assistant Collector had held that even if the inputs are essential for the functioning of the generators, they do not qualify as inputs under the Central Excise Rules. The generating sets were considered to be complete before the attachment of Control Panel and Circuit Breakers, which was disputed by the appellants.

The Member analyzed the submissions and relevant documents. He found the Assistant Collector's reasoning untenable, emphasizing the essential nature of Control Panel and Circuit Breakers for the generators' functioning. Referring to Supreme Court judgments, he highlighted the concept that anything essential for making the goods marketable should be considered a component part of the final product. The Member concluded that the appellants were entitled to Modvat Benefit for the duty paid on these inputs, as they are used in or in relation to the manufacture of the diesel generators.

The Member criticized the Collector's decision to reject the inclusion of the inputs' value in the assessable value of the generators, noting that these inputs enhance the end product's value at the time of marketing. He emphasized that the actual fitting and specific functions performed by Control Panel and Circuit Breakers in the generators support the appellants' case for Modvat Benefit. Consequently, the Appeal was allowed in favor of the appellants, granting them consequential reliefs.

In conclusion, the judgment established that Control Panel and Circuit Breakers are to be considered as component parts of the diesel generators, making the appellants eligible for Modvat Benefit on the duty paid for these inputs. The decision highlighted the essential nature of these components for the functioning and marketability of the final product, in line with relevant legal precedents and interpretations.