TMI Blog1996 (6) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... manded in the order of the Commissioner of Central Excise, Bangalore is Rs. 17,85,220.10 and the penalty imposed is Rs. 1,75,000/- These related to the period October, 1986 to September, 1987. 2. The appellants herein had taken out Central Excise licence of several excisable goods including Steam turbine and parts thereof. The department found on enquiry and scrutiny of record that they had supplied turbo alternator or generator at site of their customers as tailor-made items against contracts. In the proceedings initiated by Commissioner of Central Excise, Allahabad show cause notice was issued on 28-8-1991 proposing to demand duty on turbo generator sets under Heading 85.02 Central Excise Tariff Act and also proposing to levy the duty on the total contracted value inclusive of erection commissioning drawing and designing charges and show cause notice also indicated that the interest accrued on advances paid by customers is also to be included in the assessable value. This aspect of valuation is not raised in the proceedings initiated by the Commissioner of Central Excise, Bangalore where the show cause notice was issued on 30-10-1991 for the generator sets and proposed to impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the site. After checking the foundation for the outer dimension of the pockets, size of the pockets and height of foundation slab, the turbine is placed on the foundation platform and then fastened with foundation bolts into the pocket after levelling. Similary the alternator is also placed and bolted to the turbine through a high speed coupling between the turbine outershaft and alternator shaft and the two are aligned properly. Check is also carried out to ensure that there is no movement of the alternator pedestal. Thereafter other accessories like control panel are installed at respective places. 5. Thus it is seen that the turbine and the alternator are in fact taken to the site. Had they been immovable it would not have been possible to take them from place to place or to install them where the customers wished. Because the items are heavy and so have to be fixed in what appears to be a permanent position should not deceive us into holding that they are immovable. Fixing them is necessitated by the need to make them functionally effective to reduce vibration, and to minimise disturbance to the coupling arrangements and other connections with the related equipments. Careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et is such as not amounting to a permanent attachment to earth. 7. The learned Counsel has relied upon the CEGAT decision in Tata Robins Fraser Ltd. v. Collector of Central Excise, reported in 1990 (46) E.L.T. 562 (Tribunal) in support of their case saying that CEGAT has held that a project as a whole is not an article or excisable goods falling under Item 68 of Central Excise Tariff as they are not goods at all. As against this we note that there is a later Tribunal decision in the case of National Radio Electronics Co. v. Collector of Central Excise, Bombay - 1995 (76) E.L.T. 436 (Tribunal). In that case the contention before the Tribunal was that Uninterrupted Power System (UPS), on which Department sought to levy duty, comes into existence assembled at site as immovable property because it is finally attached to the earth and hence is not excisable goods chargeable to duty. However, this argument did not find acceptance with the Tribunal which, after noting the Supreme Court decision in Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. - 1995 (75) E.L.T. 17 (S.C.) held that the item in question is not immovable property but goods since it is specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as they emerge permanently fixed to the ground. Further, a perusal of the contracts show that customers have placed orders with the appellants for turbo-alternator sets and the warranty for the working of the set is also given by the appellants who have to guarantee the entire equipment against all manufacturing defects. Further, in the Price List filed by the Allahabad unit of the appellants effective from 15-4-1986, they had declared Turbine and Alternator Base Plate, under the Column description of excisable goods and they have also indicated in the Remarks Column of the Price List Rs. 16.30 lakhs as value as not claimed for approval being cost of brought out items alternator, panels etc. This would further support the conclusion that the turbo generator sets emerging as a result of appellants activity of assembling turbines manufactured by them with bought out items at site amounts to manufacture of a new commercial article specifically described under Heading 85.02 of Central Excise Tariff Act and is chargeable to duty thereunder. 10. In this context, and having found that the turbo generator set is not immovable, the ratio of Supreme Court decision in the case of Narn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise licence within the jurisdiction of the adjudicating authority in both the case. Hence duty on the turbo generator sets has to be discharged by the appellants. It is hence not possible to accept the appellants contention that duty cannot be demanded where the sites are outside the adjudicating authority s territorial jurisdiction. 12. There is substance in the appellants plea that while subjecting the turbo generator sets to duty Modvat credit on the bought out items should be given. Since it is not disputed that the bought out items have been used in the manufacture of turbo generator sets, the appellants should be extended the facility subject to their establishing the claim with satisfactory evidence of duty payment on the inputs and of their use in manufacture of the final product. The fact that the appellants had not followed the prescribed procedure for availing Modvat credit need not come in the way, considering the facts and circumstance of this case where the appellants had been disputing dutiability on generator sets, and there was some doubt in the matter within the department also requiring clarification. 13. The next question is whether the notional interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, the Madras High Court held that in such circumstances regard should be had to provisions of Section 4 of Central Excises and Salt Act, 1944 and Rule 5 of Central Excise Valuation Rules to see whether the deposits and advances constituted an additional consideration flowing directly or indirectly from the buyer and whether such additional consideration could be computed in money terms. In other words the High Court observed, one has to see in each case whether the deposits/advance received by the assessee goes to the depression of the sale price....... this factual assessment has to be made by the Quasi Judicial Authorities.....It cannot be laid down as a uniform and inflexible rule that notional interest payable on advances/deposits made by the customers can or cannot be included in the assessable value of the goods. In a particular case the notional interest may influence the sale price as amounting to additional consideration. In a particular case it may not so influence . 14. In the present case such examination of the issue with reference to guideline given by the above case in the light of provisions of Section 4 of Central Excises and Salt Act read with Rule 5 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this case. Further, there was also a decision dated 28-11-1990 in favour of the appellants that the generator sets were not goods and hence not excisable by the Commissioner Central Excise (Appeals), Bangalore. It is also seen from the copy of the Price List submitted at Allahabad that the name of the industrial user customer and the purchase order number are also indicted therein. In these circumstances, therefore allegation of wilful suppression of facts by the appellants is not sustainable and the duty demand in both cases beyond six months under Section 11A of Central Excises and Salt Act, 1944 is not correct in law and is set aside. For the same foregoing reasons, as there did exist circumstances in which the appellants could claim that they were under bona fide belief that their activity of assembling of turbine and alternator at site did not amount to manufacture of excisable goods, the penalty on them is not justified and is, therefore, set aside. 17. It is, therefore, held as follows :- (1) The appellants activity of setting up of the turbo-generator sets at site amounts [to] manufacture of excisable goods answering the description under Heading 85.02 CETA on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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