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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 ..... ere assessed by the Customs authorities under sub-heading 8502.2090 of the Customs Tariff Act and cleared on payment of proper customs duty. Thereafter, certain activities / processes were undertaken by the Appellants and cleared as Containerized Gensets also termed as Power Pack (in short Power Pack ). They were supplying Power Pack on lease basis to the customers and also providing manpower to operate and maintain the power pack in the customer s premises. They were registered with Service Tax authorities under the category Supply of Manpower and Recruitment Agency and paying Service Tax on the service charges received by them. By letter dt.22.11.2007, the Appellants narrated the detailed process undertaken by them and requested the Assistant Commissioner of Central Excise to clarify of any liability under the Central Excise or Service Tax law. 3. On 17.07.2008, the officers of Central Excise (Preventive), Ahmedabad-II visited the Appellant s factory and examined the process undertaken by them. By letter dt.19.08.2008, the Assistant Commissioner of Central Excise, Ahmedabad-II, informed the Appellants that the activities of the Appellants, would amount to manufacture by virtue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Rule 25 of the said Rule on the Appellant Company. It has also confiscated the goods cleared during the period August 2008 to March 2011, without payment of duty and imposed a fine of Rs. 22,00,000.00 in lieu of confiscation. The Appellants filed Appeal No.E/557/2012 against the order dt.29.03.2012 passed by Commissioner of Central Excise. 3.5 In these orders, it has been held that Containerized Gensets also termed as Power Pack manufactured by the Appellant are having a distinct name, character and use and are capable of being sold and marketed and satisfy the conditions of manufacture as defined under Section 2(f) of Central Excise Act, 1944, and classifiable under sub-heading No.8502.2090 of the Schedule to the Central Excise Tariff Act, 1985 and are liable for Central Excise duty. 4. Shri V. Laxmikumaran, the learned Advocate appearing on behalf of the Appellants contested the demand of duty alongwith interest, penalty and fine on merit as well as on limitation. He submits that the Appellants imported Gensets to install at the premises of their customers on the basis of lease agreement. The Appellants had undertaken certain activities in their premises by using few compon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Officers visited the Appellant s factory on 17.07.2008. The Appellants were registered with the Service Tax authorities. The Appellants acted on a bonafide belief. He has strongly relied upon by the decision of Hon ble Gujarat High Court in the case of CCE Surat-II Vs Gujarat Glass Pvt. Ltd 2013 (290) ELT 538 (Guj.). It is also submitted that the entire situation is revenue neutral as the Appellants were eligible to avail CENVAT Credit during the material period and therefore, the extended period of limitation cannot be invoked. He relied upon the decision of Hon ble Supreme Court in the case of Nirlon Ltd Vs CCE 2015-TIOL-96-SC-CX. 4.5 In any event, the Appellant, is entitled to avail CENVAT Credit which is more than the duty as demanded, would show that the demand of duty alongwith interest and imposition of penalty and fine cannot be sustained. The learned Advocate submitted written submissions alongwith case laws. It is submitted that the Appellant No.2 is an employee of the Appellant Company and acted as per the policy of the Company and imposition of penalty is not warranted. 5. Shri P.R.V. Ramanan, the learned Special Counsel appearing on behalf of the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion order that Shri Divyesh Shah, General Manager of the Appellant Company, in his statement dt.18.07.2008, has inter alia stated that Generating Set is not functional on its own. After assembly of the various items only and that accessories like Radiator/Cooling Tower, Cooling Fan (ventilation fan), Air Filter Unit, Oil Tank, Pipes, Flanges, Nut-bolts, Gasket, Control Panel, Cables, Pump, Valve, Silencer, etc are required to make these Gensets functional as would be required for any Gas Generating Sets and that some items are purchased from local market; that the Genset is put into the Container with the help of crane/rolling pipe and then placed on the anti-vibration mounting inside the container, that parts like Radiator, Pumps, Valves, Silencer, Control Panel, Cooling Fan, Air Filter Unit, Oil Tank, etc are fitted alongwith cables and welded pipes, that finally, the container contains Gas Genset (with all knocked down imported parts fully assembled) alongwith Low Temperature/High Temperature Pumps and Pipelines, Control Panel and Power Cables; that on top of the container, there are Remote Radiator, Butterfly Valves, Lube Oil Tank and Silencer and on both sides, Ventilation Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assembling of indigenous components/ parts with the imported machinery, a complete operational Generator Set can come into existence. Therefore, it is held that the activities carried out by the Appellants are squarely covered under the Chapter Note No.4 & 6 of Section XVI of the First Schedule to the Central Excise Tariff Act, 1985. 9.1 For the purpose of proper appreciation of the case, we reproduce below the relevant portions of Tariff description, Chapter Note etc, as under:- (A) Heading 85.02 of the Central Excise Tariff Act, 1985. 8502 Electric Generating Sets and Rotary Connectors. 850220 -- Generating sets with spark - ignition internal combustion piston engines. 85022010 -- Electric portable generators of an output not exceeding 3.5 KVA 85022090 -- Other (B) Heading 85.03 of the Central Excise Tariff Act, 1985. 8503 Parts suitable for use solely or principally with the machines of Heading 8501 or 8502. (C) Notes 4 & 6 of Section XVI of Central Excise Tariff Act:- 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c motor (e.g. hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion engines). Generating sets consisting of the generator and its prime mover which are mounted (or designed to be mounted) together as one unit or on a common base (see the General Explanatory Note to Section XVI), are classified here provided they are presented together (even if packed separately for convenience of transport). Electric generating sets for welding equipment are classified in this heading when presented separately, without their welding heads or welding appliances. However, they are excluded (heading 85.15) when presented together with their welding heads or welding appliances. Note 4 of Section XVI of CETA covers a machine consisting of individual components intended to contribute to defined function. Similarly, Note 6 of the said Section would apply of an article incomplete or unfinished but having the essential character of the complete or finished goods. The learned Advocate submitted that Genset is a complete article and fully functional and has been classified by the Customs authority as electricity generator under heading No.85022090 of Customs Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilize the syringes and the needles and put one syringe and one needle in an un-assembled form in a printed plastic pouch. The Syringe and the needle were capable of use only once and hence, were disposable. According to the Revenue, the process of sterilizing was found to be an integral and un-assembled part of the manufacturing process to make the product marktetable. It was further held that the process of sterilization brings about the transformation of the product by making something non-sterilized/sterilized. The Commissioner (Appeals) set aside the Adjudication order reasoning that the process of sterilization does not bring about any change in the basic structure of syringe and the needle even though post-sterilization, the value of the product gets enhanced. The Tribunal, in turn, set aside the order of the Commissioner (Appeals) and restored the Adjudication order. 11. The Hon ble Supreme Court in the case of Servo-Med Industries Pvt. Ltd (supra) set aside the order of the Tribunal and observed as under:- "If a surgical instrument is being used five times a day, it cannot be said that the same instrument has suffered a process which amounts to manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case covers Para 27 (ii) of the said decision. It is submitted that the Gensets imported by the Appellant remains essentially the same. We have already observed that in the present case, the imported Gensets after certain process sold as Power Pack, different and distinct nature. As per statement of Shri Divyesh Shah, the Gensets imported by the Appellant is incomplete machine, can be used into complete form after assembly of various accessories/components. Note 6 of the Section XVI of Customs Tariff Act provides that the conversion of an incomplete or unfinished article into complete or finished goods shall amount to manufacture. It is evident from the record that the activities undertaken by the Appellant are incidental to the completion of manufacture of Power Pack, and without such activities Power Pack cannot be used by the customers. Section 2(f) of Central Excise Act, 1944, the definition of manufacture includes the process incidental to the completion of a manufactured product. Heading 85.02 covers Electric Generating Sets and Rotary Connectors . Sub-heading 8502.2090 covers Generating sets with spark-ignition internal combustion piston engines other than Electric portable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CX. We are, therefore, of the opinion that by process of lamination of kraft paper with polyethylene different goods come into being. Laminated kraft paper is distinct, separate and different goods known in the market as such from the kraft paper. 5. Counsel for the appellant sought to contend that the kraft paper was duty paid goods and there was no change in the essential characteristic or the user of the paper after lamination. The fact that the duty has been paid on the kraft paper is irrelevant for consideration of the issue before us. If duty has been paid, then benefit or credit for the duty paid would be available to the appellant under Rule 56-A of the Central Excise Rules, 1944. 6. The further contention urged on behalf of the appellant that the goods belong to the ,same entry is also not 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 occurs and if manufacture takes place, it is dutiable. 'Manufacture' is bringing into being goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of suppression of facts with intent to evade payment of duty. The Hon ble Gujarat High Court in the case of Gujarat Glass Pvt. Ltd (supra) observed that the Assessee on his own brought to the notice of the Department the fact about the clearance of the goods to its sister unit without duty before the date of visit of the officers. The Assessee s conduct was candid and therefore, bonafide. There is no evidence of intentional evasion. 18. In the case of Anand Nishikawa Company Ltd Vs CCE Meerut 2005 (185) ELT 149 (SC), the Hon ble Supreme Court observed that there was no deliberate attempt of non-disclosure of excise duty. No claim as to suppression of facts would be entertained for the purpose of invoking extended period of limitation within the meaning of proviso to Section 11A (1) of the Act. It is also noted 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. The learned Advocate relied upon the following decisions:- a) Nirlon Ltd Vs CCE 2015-TIOL-96-SC-CX b) CCE Vs Narmada Chematur Pharmaceuticals Ltd 2005 (17 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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