2001 (5) TMI 276 - AT - Central Excise

Summary

Issues:
- Appeal against demand of duty and penalty by Commissioner, Central Excise, Meerut
- Interpretation of Notification No. 179/77 for exemption from duty
- Use of power in the manufacturing process of components for diesel generating sets
- Application of legal precedents and circulars regarding exemption eligibility
- Assessment of whether power usage in component manufacturing affects overall exemption eligibility

Analysis:
1. Appeal against demand of duty and penalty: Two appeals were filed by M/s. Vijay Engg. Corporation and M/s. Vijay Tractors Corporation challenging the duty demand and penalty imposed by the Commissioner, Central Excise, Meerut. The issue revolved around the allegation that the two firms acted as one entity and used power in the manufacturing process of diesel generating sets, leading to the denial of exemption under Notification No. 179/77.

2. Interpretation of Notification No. 179/77: The crux of the matter was the interpretation of Notification No. 179/77, which exempted goods from duty if no process was ordinarily carried out with the aid of power. The appellants argued that power was not used in the assembly of diesel generating sets, emphasizing that alignment of engine and alternator was done manually without power, supported by a certificate from the Head of Mechanical Engg. Department, IIT.

3. Use of power in component manufacturing: The Commissioner contended that power was used in manufacturing components like control panels, fuel tanks, and base frames, integral to the assembly of diesel generating sets. The department's argument was that since these components were made with power, the benefit of the exemption did not apply, as the entire process was considered an integrated one involving power usage.

4. Application of legal precedents and circulars: The appellants relied on legal precedents and circulars to support their claim for exemption. Reference was made to a Board's Circular stating that generating sets manufactured without power but using components made with power were eligible for exemption. Previous judgments like Dassani Electra Pvt. Ltd. and Jackson Engg. Pvt. Ltd. were cited to reinforce the argument that power usage in component manufacturing did not affect overall exemption eligibility.

5. Assessment of exemption eligibility: The Tribunal analyzed the arguments from both sides and concluded that the appellants were eligible for exemption under Notification No. 179/77. Citing the Board's Circulars and legal precedents, the Tribunal held that power usage in component manufacturing did not disqualify the appellants from the exemption, as long as the final assembly of diesel generating sets did not involve power usage in those specific components. The appeals were allowed based on this finding, without delving into the question of the firms acting as one entity.