2000 (1) TMI 519 - AT - Central Excise

Summary

Issues:
Whether the diesel generator set is excisable goods and who is the manufacturer of the impugned diesel generator set.

Analysis:
The appeal involved a dispute regarding the excisability of a diesel generator set and the manufacturer of the said set. The appellant, M/s. Best Cotton Mills (P) Ltd., argued that the diesel generator set, consisting of various components like engine, alternator, batteries, fuel tank, etc., was not mobile and should be considered immovable property. The appellant contended that the activity of assembling the generator set did not amount to manufacturing. Reference was made to legal precedents emphasizing that marketability is a prerequisite for the levy of excise duty. The appellant also challenged the reliance on a trade notice by the Collector, asserting that administrative instructions cannot circumscribe the law.

Alternatively, the appellant argued that the diesel generating set should not fall under Heading 85.02 as it differs from an electric generator set. The appellant also disputed the addition of a notional profit to the value of the goods and claimed eligibility for Modvat credit on inputs. It was further contended that the generator set was assembled by another entity, M/s. Electro Control Devices, and not by the appellant themselves, citing a purchase order specifying payment terms post-assembly. Legal precedents were cited to support the argument that the raw material supplier is not the manufacturer.

In response, the Respondent, represented by Shri Ashok Kumar, argued that a previous Tribunal decision had established the excisability of a similar generating set. It was contended that the appellants had not paid for the generating set as a whole but for individual component parts, and thus, the set was deemed to have come into existence at the appellant's factory.

The Tribunal, comprising Ms. Jyoti Balasundaram and Shri V.K. Agrawal, analyzed the arguments presented by both sides. The Tribunal referred to the previous decision in Trivani Engg. Works case and the judgment of the Supreme Court in Quality Steel Tubes (P) Ltd. The Tribunal emphasized that the fixation of heavy machinery at a site does not render it immovable, as it is necessary for functional effectiveness. Ultimately, the Tribunal agreed with the appellant's contention that they were not the manufacturers of the diesel generating set, as it was assembled by M/s. Electro Control Devices. Since there was no evidence to establish that M/s. Electro Control Devices were hired labor of the appellants, the duty could not be charged from the appellants. Consequently, the Tribunal held that the diesel generating set was excisable goods classifiable under Heading No. 85.02 but set aside the demand of duty and penalty against the appellants.

In conclusion, the appeal was disposed of in favor of the appellant, M/s. Best Cotton Mills (P) Ltd., with the demand of excise duty being deemed unsustainable, and the penalty set aside.