2004 (3) TMI 154 - AT - Central Excise

Summary

Issues:
1. Liability of duty on fabricated items for a Hydel Power Project.
2. Liability of duty on the manufacturer of the fabricated items.
3. Imposition of penalties and adequacy of penalty.

Detailed Analysis:
1. The case involved an appeal against an Order-in-Original passed by the Commissioner, Central Excise, Guntur, regarding the liability of duty on items fabricated for a Hydel Power Project. M/s. KCP Ltd. had entered into an agreement with the Andhra Pradesh State Electricity Board for the project. The issue was whether the fabricated items were excisable goods. The impugned order confirmed the duty demand and imposed penalties on M/s. KCP Ltd. and the manufacturer, Lakshmi Engineering Works.

2. M/s. KCP Ltd. contested the demand on two grounds. Firstly, they argued that the fabricated items were not excisable goods but elements of the project. Secondly, even if the items were excisable, the duty demand should be on the manufacturer, not on M/s. KCP Ltd. They relied on legal precedents such as the Karnataka High Court and Supreme Court judgments to support their defense.

3. The Revenue contended that a higher mandatory penalty should have been imposed. However, upon reviewing the case and considering the arguments from both sides, the Tribunal found that the facts were similar to a previous case where the items were not considered excisable goods. Citing settled law, the Tribunal held that in the absence of a sustainable duty demand, penalties and other actions cannot stand. As the duty liability was deemed contrary to law, the penalties were also not applicable. Therefore, the impugned order was set aside, and the appeals of M/s. KCP Ltd. and others against duty demand, penalties, and fines were allowed. The Revenue's appeal was rejected.