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TMI Blog2015 (10) TMI 1726X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant because even if the goods belong to the same entry, the goods are different identifiable goods known as such in the market. If that is so, the manufacture occurred and if manufacture takes place, it is dutiable. The said decision would squarely apply in the present case and the Power Pack is rightly classified under sub-heading No.85022090 of Central Excise Tariff Act, 1985. - Decided against the assessee. Extended period of limitation - revenue neutral exercise - Held that:- Hon ble Supreme Court in series of cases, has held that the extended period of limitation, would not be invoked in the case of revenue neutrality as the CENVAT Credit is available against the demand of duty. - Benefit of period of limitation allowed. Appellant acted under a bonafide belief that the activities undertaken by them would not amount to manufacture. It is the case of interpretation of the provisions of law and therefore, the imposition of penalties on the Appellants are not warranted. - confiscation and penalties set aside. - Decided partly in favor of asessee. - Appeal No.E/640/2009-DB, E/1284,1285/2009-DB, & E/557/2012-DB; E/MA(EXTN)/14584,14585,16527/2014 - Order No. A/11498-11501 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest and to impose penalty on the power pack cleared during the period from November 2006 to July 2008, classifiable under sub-heading 8502.2090 of the First Schedule to the Central Excise Tariff Act, 1985 (CETA). It has also proposed confiscation of the goods cleared during the said period. Thereafter, six nos. periodical Show Cause Notices were issued proposing demand of duty alongwith interest, to impose penalty and confiscation of goods as already cleared during the said period, on the identical issue, for the period from August 2008 to March 2011. 3.2 By order dt.27.03.2009, the Commissioner (Appeals) of Central Excise rejected the appeal filed by the Appellant against the communication dt.19.08.2008 of the Assistant Commissioner of Central Excise. The Appellants filed appeal No.E/640/2009 against the order dt.27.03.2009 passed by the Commissioner (Appeals), before the Tribunal. 3.3 By order dt.28.04.2009, the Commissioner of Central Excise, confirmed the demand of duty of ₹ 7,08,99,886.00 alongwith interest and also imposed penalty of equal amount of duty under Section 11AC of Central Excise Act, 1944, and a penalty of ₹ 2,00,00,000.00 under Rule 25 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise Tariff Act, 1985. The Gensets would remain Gensets after the process undertaken by them. He referred to the decision of Hon ble Supreme Court in the case of Union of India Vs DCM Ltd 1977 (1) ELT J 199. 4.1 The Adjudicating authority erroneously proceeded on the basis of functionality as the relevant test for deciding the question of manufacture, which is beyond the scope of the decision of Hon ble Supreme Court. 4.2 The recent decision of the Hon ble Supreme Court in the case of Servo-Med Industries Pvt. Ltd Vs CCE Mumbai 2015-TIOL-103-SC-CX would be applicable in the present case. In that case, the issue was whether the process of sterilizing of syringe and needle before the products are sold in the market as disposable syringe would amount to manufacture or not. The Hon ble Supreme Court held in favour of the Assessee. It is stated that merely the goods were sold under the name and style of Power Pack , would not change the character and use of the item. 4.3 He drew the attention of the Bench to Notes 4 and 6 of Section XVI of Central Excise Tariff Act, 1985. It is stated that the imported Gensets is complete in itself and fully functional and classified unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the process undertaken by the Appellant would amount to manufacture, as it brings into existence, a new product having distinct name Containerized Genset termed as Power Pack. The character and use of Power Pack is different from the imported Gensets. He drew the attention of the Bench to the relevant portion of the findings of the Adjudicating authority and case laws relied upon by the Adjudicating authority. It is stated that the radiator Oil Tank, Fan etc used by the Appellants are in the nature of accessories and not components of imported Gensets. Regarding the eligibility of CENVAT Credit, the learned Special Counsel submits that they are required to produce the evidence in support of their claim. 5.1 He submitted that the Heading No.8502 of Central Excise Tariff Act includes even a simple combination of 2 machines of engines and alternators. The goods in question Power Pack, would cover under the Heading 8502 of Central Excise Tariff Act 1985 as it covers simple combination of engines and alternator. He relied upon the decision of Hon ble Supreme Court in the case of Laminated Packings Pvt.Ltd. Vs CCE 1990 (49) ELT 326 (SC). 5.2 The demand of duty for the period up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above parts/ accessories, it would not be functional (operational) without these accessories. 8. The Central Excise Officers obtained opinion of a Government approved Engineer Shri Deepak C. Shah. By letter dt.12.11.2008, it is observed that the Appellant had not cleared the Gensets as such, in the form which they have imported. The Adjudicating authority observed on the basis of the statement of Shri Divyesh Shah and the report of Shri Deepak Shah that though the Gensets can be sold without above parts/accessories, it would not be functional (operational), without these parts/accessories. It is further observed that the imported Gensets have been carried out a process of assembly of various components/accessories and cleared/marketed the same as Containarized Gensets termed by them as Power Pack for the purpose of marketing strategy. Thus, the goods cleared by them are covered the sub-heading No.8502.2090 of Central Excise Tariff Act, 1985. It is observed that the Containerized Gensets also known as Power Pack, it is a new distinct product, which is marketable and the same satisfies all the conditions of manufacture as provided under Section 2(f) of Central Excise Act, 1944. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion of an article, which is incomplete or unfinished but having the essential character of the complete or finished article (including blank , that is an article, not ready for direct use, having the appropriate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into a finished article or a part), into complete or finished article shall amount to manufacture . (D) The definition of manufacture under Section 2(f) of Central Excise Act, 1944, it includes any process, - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule (MRP goods etc) involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. (E) Section XVI HSN: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns had narrated the activities/processes undertaken by the Appellant in detail as follows:- (i) Using jacks and rollers, the imported equipment is first rolled into a steel transport container and properly positioned on anti-vibrating mounting pad. (ii) Remote radiator is lifted by crane and properly positioned onto the roof of the container. Further, it is arrested on the roof with suitable sized nuts, bolts and washers. (iii) Lube Oil Tank is lifted by crane and moved onto the roof of the container. It is properly placed on the mounting channels and locked on the roof top by suitable nuts, bolts and washers. (iv) For the purpose of HT, LT, Water and Lube Oil pipe lining on the roof of the container, necessary fittings like pipes, reducers, valves, tee, elbows, flanges etc are fitted. (v) Similar process is done for HT, LT, Water, DM Water and Lube Oil line inside the container. Pumps, 3-way valve etc are located inside the container. (vi) Ventilation fans and cowls are thereafter mounted. (vii) Silencer is lifted by crane and located on the roof top at the appropriate position. (viii) Necessary Cable Trays are placed inside and outside the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in question is a finished product in itself. Sterilization does not lead to any value addition in the said product. All that the process of sterilization does is to remove bacteria which settles on the syringe s and needle s surface, which process does not bring about a transformation of the said articles into something new and different. Such process of removal of foreign matters from a product complete in itself would not amount to manufacture but would only be a process which is for the more convenient use of the said product. In fact, no transformation of the original articles into different articles at all takes place. Neither the character nor the end use of the syringe and needle has changed post-sterilization. The syringe and needle retains its essential character as such even after sterilization. 12. The Hon ble Court, after discussing the various decisions had laid down a test of manufacture as under:- 27. The case law discussed above falls into four neat categories. (i) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be mounted) together as one unit or on a common base. In the present case, the activities of fixing of anti-vibrating mounting pad, radiator, Lube Oil Tank, Ventilation, fans, silencers, Cable Trays, Control Panel and other electrical items, hydraulic test processing etc, are mounted together as one unit on a common base, known as Power Pack and also Containerized Gensets. 14. According to the Appellant, the Gensets imported by them were capable of generating electricity, and the Gensets itself is marketed. But, it is seen from the record that the process undertaken by the Appellant on the imported Gensets for the industrial customers. Thus, the industrial customer would buy Power Pack rather than Gensets. The imported Gensets and Power Pack are known separately in the trade and parlance. It is also noted that the use of both the items are for different purposes. In our considered view, the process undertaken by the Appellant would constitute manufacture as it emerges a new commodity in the market. 15. In the case of Servo-Med Industries Pvt. Ltd (supra), the Hon ble Supreme Court, while considering the decision of the Apex Court in the case of Laminated Packings Pvt. Vs C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the order of the CEGAT impugned in this appeal does not contain any error. The appeal, therefore, fails and is accordingly dismissed. 32. This judgment again does not take us any further. It was found on the evidence led ir that case that laminated kraft paper is a distinct and separate product known in the market as such and is apart from kraft paper. 16. In the case of Laminated Packings Pvt. Ltd (supra), the Hon ble Supreme Court considered that manufacture is bringing into the goods as known in the Excise law, i.e. known in the market having distinct and separate and identifiable function. In the present case, we have also noticed the photograph of the products of the Gensets and the Power Pack are different and distinct items. The learned Advocate contended that the imported Gensets is covered under the sub-heading 8502.2090 of the First Schedule to Customs Tariff Act Generating sets with Spark - Ignition Combustion System Engine of an output not exceeding 3.5 KVA. It is submitted that the Customs Department had assessed the goods as complete electric generating sets and classification under the same heading under the Central Excise Tariff Act, 1985, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd Vs CCE 2003 (153) ELT 7 (SC) f) Jay Yuhshin Ltd Vs CCE 2000 (119) ELT 718 (Tri-LB) g) Jay Yuhshin Ltd Vs CCE 2001 (137) ELT 1098 (Tri-Del.) h) International Auto Ltd Vs CCE 2005 (183) ELT 239 (SC) 19. We find that the Appellant acted under a bonafide belief that the activities undertaken by them would not amount to manufacture. It is the case of interpretation of the provisions of law and therefore, the imposition of penalties on the Appellants are not warranted. It is noted that the goods were available for confiscation. It is well settled that if the goods are available, the same cannot be confiscated. Accordingly, the confiscation of goods and imposition of penalty cannot be sustained. 20. In view of the above discussions, we hold that the activities undertaken by the Appellant would amount to manufacture and Power Pack also known as Containerized Gensets would be classifiable under sub-heading No.8502.2090 of the Schedule to the Central Excise Tariff Act, 1985 and the demand of duty alongwith interest for the normal period is upheld. The Adjudicating authority is directed to extend CENVAT Credit benefit, while quantifying duty, subject to verification of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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