2002 (3) TMI 151 - AT - Central Excise

Issues Involved:
1. Classification of plants under the Tariff.
2. Determination of the plants as movable goods liable to duty.
3. Validity and reliability of the panchnama as evidence.
4. Applicability of the extended period of limitation.
5. Imposition of penalties on the manufacturer and its Vice President.

Issue-wise Detailed Analysis:

1. Classification of Plants under the Tariff:
The Commissioner classified the salt handling plant, secondary brine plant, and electrolyser plant under Heading 84.79 of the Tariff as machines having individual functions not elsewhere specified, making them liable to duty. This classification was based on the argument that these plants were not embedded to the earth and were capable of being moved by unbolting, thus qualifying as goods.

2. Determination of the Plants as Movable Goods Liable to Duty:
The show cause notice concluded that the machinery was "easily dismantleable and capable of being sold after dismantling." This conclusion was drawn from a panchnama which indicated that the machinery and its parts were fastened to a base above the ground with nuts and bolts. The Commissioner's order, based solely on this panchnama, stated that the machinery was not embedded like a tree or wall and hence was movable and chargeable to duty.

3. Validity and Reliability of the Panchnama as Evidence:
The panchnama, which was the sole piece of evidence, was scrutinized for its reliability. It was observed that the inspection carried out by non-experts within a limited period of two hours was insufficient to determine the complex engineering question of whether the plants could be removed and relocated without losing their identity. The Tribunal found the panchnama unreliable and emphasized the need for technical experts in such matters.

4. Applicability of the Extended Period of Limitation:
The Tribunal referred to the decision in Essel Packaging Ltd. v. CCE, where it was held that there was no basis for invoking the extended period of limitation if the duty payable would be available as Modvat credit. Since the duty on the plants would be available towards payment of duty on the products manufactured, the manufacturer had no incentive to evade duty. The appellant's letter dated 21-1-1994 to the Superintendent indicated the setting up of a new plant, negating the allegation of non-disclosure.

5. Imposition of Penalties on the Manufacturer and its Vice President:
The Commissioner's order imposed penalties under Section 11AC of the Act and Rule 173Q on the manufacturer and under Rule 209A on the Vice President. However, the Tribunal found no basis for these penalties, as the plants were not marketable as movable goods. The Commissioner's reasoning about CKD/SKD condition was found irrelevant to the marketability of the plant.

Conclusion:
The appeals were allowed, and the impugned order was set aside. The Tribunal concluded that the plants were not movable goods liable to duty based on unreliable evidence and that the extended period of limitation was not applicable. Consequently, the penalties on the manufacturer and its Vice President were also set aside.

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