TMI Blog2003 (10) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... -- 10,00,000 u/r 173Q(bbb) 34/2002 dt. 21-6-02 M/s. CSL 16-7-96 - 9-4-97 2,44,32,309 /- 2,44,32,309 u/s 57U/57AH 24,00,000 u/r 173Q/210 M/s Wartsila -- 10,00,000 u/r 173Q(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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appellants' factory and the same is exempt from payment of duty in terms of in terms of Rule 57D(2) credit of specified duty shall not be denied if inputs are used in the manufacture of capital goods as defined in Rule 57Q and such capital goods are not chargeable to excise duty. Therefore 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory stands undisputed by the department. When there was no manufacture of DG sets as stated above, the question of who is the manufacturer and where the manufacturing activity was being carried out also does not arise. Further there can be no question of denial of benefit of Modvat Credit, on the ground that capital 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the grounds and appeal. She has invited our attention to the order of the Tribunal in the case of Gujarat Ambuja Ltd. v. CCE, Chandigarah reported in 2001 (130) E.L.T 129 wherein in an identical facts and circumstances, the Tribunal has held that DG sets, parts and components and accessories used for power plant are capital goods in terms of Rule 57Q and even 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 ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailability of Modvat Credit in respect of DG sets, alternators etc. Further, CEGAT, Bangalore vide Order No. F1027/2002, Stay/051/2002, dated 31-7-2002 in their own matter in an identical issue, where a penalty of Rs. 10 lakhs was imposed on them, has set aside the penalty imposed on them. In the circumstances, he prayed for setting aside the penalty and allowing the 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 manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of PVC Resin, the final products. It is viewed that in between the stage of erection of Diesel Engine Alternators, etc. to the manufacture of PVC Resin a final product i.e. Diesel Generating set classifiable under Chapter 8502.10 emerges which is attracting nil rate of duty. Till the operation of the Diesel Generating Set it was the property of Wartsila and hence the erected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicates that in the same premises, two or more manufacturers can operate. In the present case Wartsila manufactured DG set as per the permission given by CSL - II. Wartsila was not issued with SCN for demanding duty since their final product mainly DG set was chargeable NIL rate of duty under sub-heading No. 8502.10. As per the contract between CSL - II and Wartsila the DG sets was transferred 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TABLE Sr. No. Description of capital goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer Description of final products 1. All goods falling under heading Nos. 82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :-(i) all goods falling under Chap ter 24; and (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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner may, on sufficient cause being shown to him, allow the manufacturer to lake credit of the specified duty on capital goods, paid by a contractor or job worker who undertakes the job of initial setting up, renovation, modernisation or expansion of the plant on behalf of the manufacturer of final products, subject to such procedure and conditions as may be specified by the Commissioner. 9. In the instant case, we find from the records M/s. CSL are engaged in the manufacture of the final products viz. PVS resins which requires uninterrupted supply of power and consumption of heavy power and steam. They have therefore, entered into a contract with M/s. Wartsila to set up captive power plant 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 electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to contractor (M/s. Wartsila) by M/s. CSL. Though the supply of Engines and alternators besides certain other equipments were within the scope of Wartsila, certain items were also purchased from various other manufacturers such as BHEL, Bhopal, Alfa Lavel (India) Ltd., Pune, Asea Brown Boveri Ltd., Mumbai, Kirloskar AAF Ltd., Symatic Eng (P) Ltd. Emo Transformers, Enpro Engineering, Pave Chem Industries, Mumbai, SB Electro Mechanicals, Indwep Energy Systems Pvt. Ltd., Efficient Engineers, Bombay etc. Wartsila had also imported certain item such as HFO Separators from Wartsila, Finland and supplied the same to M/s. CSL. Payments were however, made by M/s. CSL to Wartsila and Modvat Credit in respect of the supplies made by various other suppliers were taken by M/s. CSL. M/s. CSL have filed declaration under Rule 57T describing 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of power plant carried out by Wartsila could be considered as a factory of Wartsila in terms of Section 2(e) of the Act. We are not able to understand as to how such an interpretation can be read into the provisions of Section 2(e) of the Act. Further the Commissioner has also noted that M/s. CSL have not filed any declaration under 173B of the CER 1944 for the manufacture of DG sets. We observe that in terms of Rule 173B an assessee is required to file declaration under Rule 173B in respect of excisable goods produced or manufactured by him. In this case, DG sets are not manufactured by M/s. CSL. Therefore, the question of filing declaration under Rule 173B for the DG sets manufactured, supplied and erected by Wartsila as part of the contract for tun key product does not arise. In the instant case, undisputedly M/s. CSL 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the other Benches. 13. We note that the decision in the case of Gujarat Ambuja Cement (supra) 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 operation of a particular order is stayed by a higher forum, it has to be acted upon. Merely because the department has filed a reference application, that by itself cannot be a reason not to grant relief flowing from that particular order. 14. As regards, invocation of longer period of limitation is concerned, we find from the records that it is an admitted fact that they have filed declaration and it cannot be said that they have suppressed any material information 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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