1996 (2) TMI 282 - AT - Central Excise

Summary

Issues: Application for dispensation of duty and penalty on electricity generating set for captive consumption.

Analysis:
1. The appellants sought dispensation of duty and penalty on an electricity generating set installed in their factory for captive consumption. The generating set of 4.5 MW capacity, weighing about 70 metric tonnes, was assembled with bought-out items and some fabrication work done in the appellants' unit. The appellants argued that the set should not be considered as goods affixed to the floor, as it required proper installation and foundation to prevent damage. They contended that duty exemption from 21-1-1994 applied, and the set only came into existence after being put to use on 1-3-1994. They highlighted the inspection by electricity authorities on 2-2-1994, rectification of defects, and compliance report submitted on 19-3-1994. The appellants claimed that duty liability should be from 19-3-1994 when defects were rectified and permission for use was obtained in July 1994, citing exemption notification from 1-3-1994.

2. The respondent argued that the generating set physically existed from 21-1-1994, and test runs were conducted before 1-3-1994, implying readiness and captive use from that date. They contended that the appellants failed to inform authorities promptly about the set's existence, making them liable for duty and penalty.

3. The Tribunal considered both arguments and acknowledged the set's physical assembly on 21-1-1994. Referring to a Supreme Court case, the Tribunal noted that goods assembled outside a factory but affixed on-site are still considered goods for excise duty. The generating set, comprising motors, diesel engines, and other parts, was deemed goods despite being affixed to the ground for operational reasons. The Tribunal found that the set was operational on 21-1-1994, as minor defects identified by the Electricity Board were rectified promptly. The appellants operated the set before 1-3-1994, and the Tribunal questioned the delay in obtaining permission for use after defect rectification. The Tribunal upheld the lower authority's order, emphasizing that the appellants failed to demonstrate any legal impediment to immediate use after assembly completion.

4. Regarding financial aspects, the appellants claimed full duty demand was unjust, mentioning potential MODVAT Credit benefits for bought-out items. However, they failed to provide supporting documentation or financial statements to prove hardship. The Tribunal, considering the circumstances, directed the appellants to pre-deposit Rs. 50,00,000 by a specified date and report compliance. The balance duty and penalty pre-deposit requirement was dispensed with pending appeal, subject to the initial pre-deposit compliance.