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TMI Blog2003 (10) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if the declaration does not contain all the particulars, but contain details of payment of duty, description of the capital goods, assessable value, name and address etc. It is not the case of the department that these essential particulars were missing from the declaration. Inasmuch as M/s. CSL have filed the declaration, they cannot be said to have suppressed any material information from the department. However, as noted above, in the instant case, though the final products which emerged out of the capital goods are exempted from duty, yet M/s. CSL want to avail the benefit in respect of the duty paid on the capital goods while clearing PVS resin which is a final product manufactured by using the inputs caustic soda lye and flakes, apart from electricity and on which no duty is payable. We note that the decision in the case of Gujarat Ambuja Cement [ 2000 (8) TMI 178 - CEGAT, NEW DELHI] was cited by the party before the Commissioner as noted by him in para 54 of the order impugned, but he has endeavoured to distinguish the ratio of this ruling on the ground that the Department has filed reference application and hence the matter is sub judice. It is well settled that unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (bbb) Interest has also been demanded from M/s. CSL under Rule 57U(8)/57AH of the Rules ibid. Since the issue involved in all these appeals are common and common arguments have been advanced by both the sides, they are taken up together for disposal by this common order according to law. 2.The brief facts of the case are that M/s. Chemplast Sanmar Ltd., Plant -II (hereinafter referred to as M/s. CSL) are engaged in the manufacture of PVC resins falling under TSH 3904.10 of CET Act, 1985 and they were availing the benefit of Modvat Credit on the inputs and capital goods in terms of Central Excise Rules. Intelligence gathered by the Dte. General of Central Excise Intelligence indicated that the M/s. CSL availed Modvat Credit under Rule 57Q of the CER, 1944 improperly on the power plant (Diesel Generating Set) comprising of 1 No. 6 MW and 1 No. 4 MW Engines (Total 10 MW), alternators and auxiliaries, supplied, erected and commissioned by M/s. Wartsila. This power plant is used for manufacture of their final product such as PVS resins etc. As a follow up action the officers visited the factory premises of M/s. CSL on 13-10-2000 and studied the functional and other aspects of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore going by the definition of Rule 57D(2), there can be no question of denial of Modvat Credit on the various components, spares and accessories of DG sets on the ground that DG sets is exempted from payment of duty. (d) There was no manufacture of DG sets. The diesel Engines, Alternators, Auxiliary Systems, Lubricating oil Storage and Piping etc. are part of captive power plant and are parts of first module of the captive power plant. No commercially identifiable Diesel Generating set as such came into existence. Diesel engine is manufactured and cleared ex-works M/s. Wartsila and similarly various other capital goods including Alternator and other Auxiliary systems are cleared by the respective manufacturers on payment of duty and these duty paid components are assembled together to form part of the captive power plant. These are also incapable of being dismantled for setting up at any other site and hence are not excisable goods. The Hon'ble Apex Court in the case of Quality Steel Tubes reported in 1995 (75) E.L.T. 17 (S.C.) and in the case of Mittal Engineering reported in 1996 (88) E.L.T. 622 has held that to be excisable the article must be goods and must be marketable or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods are used in the manufacture of final product (DG sets) which is subject to nil rate of duty when no DG set is being manufactured and the same is not a final product. Further, the finding of the Commissioner that in terms of Section 2(e), the factory of the appellants can be considered as an extension of the factory of M/s. Wartsila is absolutely wrong because on a plain reading of the provisions of Section 2(e), there is no room for such an interpretation. (g) Diesel engines manufactured by M/s. Wartsila were purchased by M/s. CSL after testing and it was a case of outright purchase and hence the finding of the Commissioner that M/s. Wartsila were the owners of the Diesel Engines at the relevant time is wrong. Similarly various other components required for setting up the power plant were purchased from various other parties by the appellants. (h) Modvat Credit cannot be denied on the ground that on the date of availment of the credit the title to the goods was not with the appellants (M/s CSL) on the ground that on the date of availment, the payment was not made on the goods by the purchaser, because purchase of goods on credit on deffered payment is the order of the day. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if DG sets which have been manufactured out of these parts and components and accessories have not discharged duty liability, there is no bar to availment of credit of duty on such components and accessories. It was also held therein that the place where the DG sets were assembled in the factory of the appellants therein and cannot be treated as the factory of WDL (Contractor). She has also invited our attention to the decision of the West Regional Bench of the Tribunal in the case of CCE, Mumbai-III v. NRC Ltd. Anr. reported 2001 (135) E.L.T. 1012 (T) = 2001 (46) RLT 609 wherein it was held that when Engine and Alternator purchased by the assessee therein and contractor assembled them into a generating set in the assessee's factory, the assessee is entitled to Modvat Credit of duty paid on engine and alternator though generating set is exempt from payment of duty and alternator are to be treated as components of machine i.e. generating set used by the respondents in the manufacture of dutiable final products, and the appeal filed by the department was dismissed. She has also invited our attention to the decision of the Tribunal in the case of Aditya Cement Ltd. v. CCE, Jaipur r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal. 6.Smt. Bhagyadevi, learned SDR reiterated the view taken by the Commissioner in the impugned order and defended the impugned order. She has also referred to the comments received from the department a copy of which is filed in the file and which is extracted herein below : "Issues raised in the Order-in-Original of the Assistant Commissioner of Central Excise, Salem Division are entirely different from the issues considered by the Commissioner in his Order-in-Original which is in dispute in the present appeal. In the AC's order the issue involved was whether Diesel Engine was covered under Explanation to Rule 57Q. It was decided that the same was covered under Rule 57Q. The order was passed under the premise that CSL - II was the real manufacturer. CSL - II and Wartsila have suppressed the facts of manufacturing of Diesel Generating set in the premise of CSL - II. In this case dispute put forth is whether the Diesel Generating Set is manufactured by Wartsila or CSL - II. Hence the Rule of res judicata does not bar the Commissioner in proceedings against CSL - II. Wartsila were neither job worker nor a contractor of CSL - II. In fact Wartsila were an independent manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Diesel Generating set is undoubtedly the final product of Wartsila which is exempted from duty. Though the components are covered under Rule 57Q the benefit of Modvat credit can be availed by Wartsila for the manufacture of the Diesel Generating set only and not by CSL - II. The appellant has stated that the Commissioner failed to note that there is in fact no manufacture of DG sets taking place. The Diesel Engine, Alternators, Auxiliary systems. Lubricating oil storage and piping etc., are parts of the captive Power Plant. In the reply to the show cause notice in F.No. INV/DGCEl/SZU/38/2001, dated 1-10-2001, Wartsila stated that their DG sets comprise of various components mainly (i) Engine (ii) Alternator and also stated that it was practically difficult to despatch a full DG set from their factory premises and hence they have delivered the components to CSL - II. Also CSL - II have stated that the Diesel Engines, Alternators Light Fuel Oil Storage etc., while are supplied to CSL - II by Wartsila and other manufacturers from different parts of the country. As per the reply given by Wartsila and as per the facts put forth by the appellant, it is clear that the Diesel Generator set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to CSL - II after the completion of manufacture assembly erection and commission of the plant. Hence Wartsila owned the components received till the completion of installation of DG set and hence CSL - II was not eligible to take Modvat credit on the components. Wartsila is not a job worker of CSL - II. Wartsila us the real manufacturer of the DG set as held by the Commissioner. If Wartsila is treated as job worker materials should have been supplied by CSL - II and CSL - II ought to have followed the procedures specified under Rule 57F. CSL - II did not do so since Wartsila was not a job worker but a real manufacturer of DG set. Hence credit cannot be allowed to CSL - II under Rule 57T (7). For reasons of non-filing of declaration under Rule 173B the appellant stated that there is no DG sets were being manufactured, which is not correct and the fact of manufacturing DG set is proved in the above paras........... The appellant stated that proviso to Section 11A cannot be invoked where parallel proceedings have been initiated on the same issue. Here the issue involved is different one as discussed in Para B CSL - II have never declared that Wartsila was the real manufacturer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (ii) all goods falling under head ing Nos. 36.05 or 37.06. (iii) ingots and billets of non-alloy steel falling under sub-heading Nos. 7206.90 and 7207.90, manufactured in an in duction furnace unit, whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under Section 3A of the Central Excise Act, 1944 (1 of 1944). 2. All goods falling under Chapter 84 (other than internal combustion engines falling under heading No. 84.07 or 84.08 and of a kind used in motor vehicles, compressors falling under heading No. 84.14 and of a kind used in refrigerating and aircon-ditioning appliances and machinery, head ing or sub-heading Nos. 84.15, 85.18, 8422.10, 8424.10, fire extinguishers falling under sub-heading No. 8424.80, 8424.91, 8424.99, 84.29 to 84.37, 84.40, 84.50, 84.52, 84.69 to 84.73, 84.76, 84.78, expansion val ves and solenoid valves falling under sub-heading No. 8481.10 of a kind used for refrigerating and airconditioning applian ces and machinery); 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant on a turn key basis. Consequently, the entire operations connected with the setting up the power plant rested with the contractor viz. M/s. Wartsila India. The Captive power plant is composed of Diesel Engines, alternators (Generator), transformers, switchgears, control panels, boilers, cooling towers etc. This captive power plant according to M/s. CSL is also known as co-generation system. We note that the final product that emerged from the captive power plant is electricity which is non-dutiable. The electricity which is the final product of the captive power plant is further used for the manufacture of PVS resins which is cleared on payment of duty. For manufacture of the final product viz. PVS resins using the power generated from the captive power plant, the inputs are caustic soda lye and flakes (barium carbonate and soda ash are used to obtain caustic soda lye). No doubt in terms of Rule 57Q which came into force with effect from 1-3-97 the manufacturer of final product will be entitled to Modvat Credit on capital goods as in the table annexed to Rule 57Q, used in the manufacture of final product. In terms of serial No. 3 of the table above, all the goods falling under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribing as "spares for diesel Genset machinery". Wartsila conducted test on all the equipments/components/ parts irrespective of the fact whether the same were manufactured/supplied by them or not and the test reports were made over to M/s. CSL. The plant was assembled, erected, installed and commissioned by Wartsila at the premises of the M/s. CSL. 11. It is, therefore, clear from the above, that in terms of the contract for turn key project contract, the manufacture of Diesel Generating Set took place and it took place at the hands of M/s. Wartsila though the manufacturing activity took place at the factory premises of the appellants. We note that Diesel Engine and Alternator (Generator), are capital goods required for the manufacture of DG Sets. The DG Set is one of the items required for the setting up the Captive power plants. The Captive power plant comprises of DG sets and Distribution box. As noted above, the final product that emerges from the Captive power plant is electricity which is not dutiable. Therefore, the finding reached by the adjudicating authority that the manufacturer of the DG sets and the captive power plant is M/s. Wartsila, in our view is correct. Be that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L have filed Modvat declaration under Rule 57T to avail the benefit of Modvat credit on capital goods and in the declaration they have given description of the goods as capital goods used in the assembly of power plants and they have also shown the sub-heading under CETA and have also described the goods as spares of Diesel Generating machinery. The objection of the department is that they have not indicated in the declaration that these items were being brought for the assembly of new power plants which would come into existence at a later date. It is settled law that substantive benefit of Modvat Credit cannot be denied even if the declaration does not contain all the particulars, but contain details of payment of duty, description of the capital goods, assessable value, name and address etc. It is not the case of the department that these essential particulars were missing from the declaration. Inasmuch as M/s. CSL have filed the declaration, they cannot be said to have suppressed any material information from the department. 12. However, as noted above, in the instant case, though the final products which emerged out of the capital goods are exempted from duty, yet M/s. CSL wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation from the department with an intent to evade payment of duty. Therefore, the charge of suppression of facts with intent to evade payment of duty fails. 15. Inasmuch as the co-ordinate Benches of the Tribunal have decided the issue in favour of the assessees, following ratio of the above decisions, we set aside the impugned orders and allow the appeals filed by M/s. CSL with consequential relief, if any. 16. So far as imposition of penalty on M/s. Wartsila is concerned, the evidence on record does not show that they have committed any contravention of Rule 173Q(bbb) or abetted M/s. CSL to take the benefit of Credit. We, therefore, set aside the penalty on M/s Wartsila and allow their appeals. 17. Before parting with this case, we would like to observe that in the comments prepared by the Joint Commissioner and a copy of which was made available to the court on the date of hearing on 5-6-2003, it is stated as under : "The case of Gujarat Ambuja Cements v. CCE, Chandigarah in [2001 (130) E.L.T. 129 (T)] was passed by Northern Regional Bench of the CEGAT. The Commissioner of Central Excise, Coimbatore is not coming under the jurisdiction of the Northern Regional Bench." 18. From ..... X X X X Extracts X X X X X X X X Extracts X X X X
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