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2015 (10) TMI 1726 - CESTAT AHMEDABAD

2015 (10) TMI 1726 - CESTAT AHMEDABAD - 2016 (331) E.L.T. 617 (Tri. - Ahmd.) - Manufacture - Activity of converting /assembling Gas Generating Sets (Gensets ) comprising of engine (prime mover) coupled with Alternator on common base frame into Power Pack after certain processes - Held that:- it is seen from the record that the process undertaken by the Appellant on the imported Gensets for the industrial customers. Thus, the industrial customer would buy Power Pack rather than Gensets. The impor .....

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ME COURT OF INDIA]. It has been observed that the goods belongs 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 occurred and if manufacture takes place, it is dutiable. The said decision would squarely apply in the present case and the Power Pack is rightly classified under sub-heading No.85022090 of Central Excise Tariff Act, 1985. - Decided against t .....

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n of the provisions of law and therefore, the imposition of penalties on the Appellants are not warranted. - confiscation and penalties set aside. - Decided partly in favor of asessee. - Appeal No.E/640/2009-DB, E/1284,1285/2009-DB, & E/557/2012-DB; E/MA(EXTN)/14584,14585,16527/2014 - Order No. A/11498-11501/2015 - Dated:- 15-10-2015 - Hon ble Mr. P.K. Das, Member (Judicial) And Hon ble Mr. P.M. Saleem, Member (Technical) For the Appellant : Shri V. Laxmikumaran, Shri Jigar Shah, Shri Anand Nain .....

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in short Gensets ) comprising of engine (prime mover) coupled with Alternator on common base frame. The imported Gensets were 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 p .....

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he 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 of Note 4 and 6 of Section XVI of the Schedule to Central Excise Tariff Act, 1985. The Appellants filed appeal before the Commissioner (Appeals) against the communication dt.19.08. .....

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odical Show Cause Notices were issued proposing demand of duty alongwith interest, to impose penalty and confiscation of goods as already cleared during the said period, on the identical issue, for the period from August 2008 to March 2011. 3.2 By order dt.27.03.2009, the Commissioner (Appeals) of Central Excise rejected the appeal filed by the Appellant against the communication dt.19.08.2008 of the Assistant Commissioner of Central Excise. The Appellants filed appeal No.E/640/2009 against the .....

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2006 to July 2008 without payment of duty and imposed a fine in lieu of confiscation amounting to ₹ 4,50,00,000.00. Further, a personal penalty of ₹ 50,00,000.00 was imposed on Shri Montu Patwa, General Manager (F&A) of the Appellant Company (Appellant No.2 herein), under Rule 26(1) of the Central Excise Rules, 2002. The Appellants filed appeal Nos.E/1284-1285/2009 against the order dt.28.04.2009 passed by the Commissioner, before the Tribunal. 3.4 By order dt.29.03.2012, the Com .....

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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 A .....

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lants premises to customers premises and proper maintenance. There is no change of identity, character and use of Gensets and therefore, the activity undertaken by the Appellant would not amount to manufacture in terms of Section Notes 4 & 6 of Section XVI of Central Excise Tariff Act, 1985. The Gensets would remain Gensets after the process undertaken by them. He referred to the decision of Hon ble Supreme Court in the case of Union of India Vs DCM Ltd 1977 (1) ELT J 199. 4.1 The Adjudicati .....

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disposable syringe would amount to manufacture or not. The Hon ble Supreme Court held in favour of the Assessee. It is stated that merely the goods were sold under the name and style of Power Pack , would not change the character and use of the item. 4.3 He drew the attention of the Bench to Notes 4 and 6 of Section XVI of Central Excise Tariff Act, 1985. It is stated that the imported Gensets is complete in itself and fully functional and classified under sub-heading No.8502.2090 under Customs .....

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ia Ltd Vs CCE Hyderabad 2010 (252) ELT 273 (Tri-Bang.) 4.4 The learned Advocate also submits that the extended period of limitation by Show Cause Notice dt.19.11.2008 cannot be invoked. It is stated that the Appellants by letter dt.22.11.2007, had informed the Department about their activity. After several correspondences, the Central 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 .....

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t, 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 appea .....

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Power Pack. The character and use of Power Pack is different from the imported Gensets. He drew the attention of the Bench to the relevant portion of the findings of the Adjudicating authority and case laws relied upon by the Adjudicating authority. It is stated that the radiator Oil Tank, Fan etc used by the Appellants are in the nature of accessories and not components of imported Gensets. Regarding the eligibility of CENVAT Credit, the learned Special Counsel submits that they are required t .....

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d of duty for the period upto September 2007 is not barred by limitation, as the Appellant had not informed the Department prior to that period. It is a case of suppression of fact with intent to evade payment of duty and demand of duty for extended period of limitation is to be invoked and the penal provisions are warranted. 6. After hearing both the sides and on perusal of the records, we find that the Appellant imported Gensets with alternator classified under sub heading No.8502.2090 of the .....

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s 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 .....

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e container, there are Remote Radiator, Butterfly Valves, Lube Oil Tank and Silencer and on both sides, Ventilation Fans with Filter are fitted by bolts and that one Window-AC is fitted outside the container to keep Control Panel cool. On being specifically asked whether the imported Genset will be saleable/marketable without the locally bought parts/accessories, he stated that though the Genset can be sold without the above parts/ accessories, it would not be functional (operational) without th .....

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parts/accessories. It is further observed that the imported Gensets have been carried out a process of assembly of various components/accessories and cleared/marketed the same as Containarized Gensets termed by them as Power Pack for the purpose of marketing strategy. Thus, the goods cleared by them are covered the sub-heading No.8502.2090 of Central Excise Tariff Act, 1985. It is observed that the Containerized Gensets also known as Power Pack, it is a new distinct product, which is marketable .....

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anel, Silencer, Oil Tank, and all parts, the Gensets cannot operate and function for supply of sustained power. The Power Packs are substantially different, as Genset is only one of the components of the composite integrated machine namely power pack , consisting of various components. It is further observed that as a result of process/activity undertaken by them, a new product known as Containerized Genset or Power Pack comes into existence, and which becomes operational. It is beyond imaginati .....

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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 T .....

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ncomplete or unfinished but having the essential character of the complete or finished article (including blank , that is an article, not ready for direct use, having the appropriate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into a finished article or a part), into complete or finished article shall amount to manufacture . (D) The definition of manufacture under Section 2(f) of Central Excise Act, 1944, it includ .....

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l sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. (E) Section XVI HSN: GENERAL (IV) INCOMPLETE MACHINES [See General Interpretative Rule 2(a)] Throughout the Section any reference to a machine or apparatus covers not only the complete machine, but also an incomplete machine (i.e. an assembly of parts so far advanced that it already has the main essential features of the complete machine). Thus a machine lacking only a flywheel, a .....

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mbination of an electric generator and any prime mover other than electric 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 .....

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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 Tariff. We are unable to accept the contention of the learned Advocate, as no material was placed in support of their contention. 9.2 On the other hand, the learned Special Counsel for the Revenue, in his written submissions had narr .....

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s properly placed on the mounting channels and locked on the roof top by suitable nuts, bolts and washers. (iv) For the purpose of HT, LT, Water and Lube Oil pipe lining on the roof of the container, necessary fittings like pipes, reducers, valves, tee, elbows, flanges etc are fitted. (v) Similar process is done for HT, LT, Water, DM Water and Lube Oil line inside the container. Pumps, 3-way valve etc are located inside the container. (vi) Ventilation fans and cowls are thereafter mounted. (vii) .....

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e and electrical testing of all electrical connections. 10. The term manufacture as explained by the Hon ble Supreme Court in the case of DCM Limited (supra), that the transformation of the product with distinct name, character and use. It is submitted by the Appellant that the manufacture of a product cannot depend on functional character, as observed by the Adjudicating authority. The learned Advocate strongly relied upon the recent decision of Hon ble Supreme Court in the case of Servo-Med In .....

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uct 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 r .....

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le syringe and needle in question is a finished product in itself. Sterilization does not lead to any value addition in the said product. All that the process of sterilization does is to remove bacteria which settles on the syringe s and needle s surface, which process does not bring about a transformation of the said articles into something new and different. Such process of removal of foreign matters from a product complete in itself would not amount to manufacture but would only be a process .....

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t categories. (i) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (ii) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said p .....

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articular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place. 13. The learned Advocate on behalf of the Appellant submits that the present 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 sta .....

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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 generators of an output not exceeding 3.5 KVA. As per Notes of Chapter 85 of HSN, Generatin .....

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Gensets imported by them were capable of generating electricity, and the Gensets itself is marketed. But, it is seen from the record that the process undertaken by the Appellant on the imported Gensets for the industrial customers. Thus, the industrial customer would buy Power Pack rather than Gensets. The imported Gensets and Power Pack are known separately in the trade and parlance. It is also noted that the use of both the items are for different purposes. In our considered view, the process .....

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relevant portion of the decision of Hon ble Supreme Court in the case of Servo-Med Industries (P) Ltd (supra) is reproduced below:- 31. Ms.Shirin Khajuria then cited a few other judgments. The judgment in Laminated Packings (P) Ltd Vs CCE 1990 (49) ELT 326 = 2002-TIOL-285-SC-CX held: 4. Lamination, indisputedly by the well settled principles of Excise law, amounts to manufacture . This question, in our opinion, is settled by the decisions of this Court. Reference may be made to the decision of t .....

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et 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 co .....

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in our opirJion, there is sufficient evidence. If that is the position, then the appellant was liable to pay duty. We are, therefore, clearly of the' opinion that the order of the CEGAT impugned in this appeal does not contain any error. The appeal, therefore, fails and is accordingly dismissed. " 32. This judgment again does not take us any further. It was found on the evidence led ir that case that laminated kraft paper is a distinct and separate product known in the market as such an .....

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ading 8502.2090 of the First Schedule to Customs Tariff Act Generating sets with Spark - Ignition Combustion System Engine of an output not exceeding 3.5 KVA. It is submitted that the Customs Department had assessed the goods as complete electric generating sets and classification under the same heading under the Central Excise Tariff Act, 1985, cannot be sustained. We find that the identical issue was raised before the Hon ble Supreme Court in the case of Laminated Packings Pvt. Ltd (supra). It .....

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ions of the learned Advocate that the extended period of limitation cannot be invoked. On perusal of the records, we find that the Appellants by letter dt.22.11.2007, informed the Assistant Commissioner of Central Excise for a clarification on any possible liability of Central Excise duty. The Appellant also pursued the matter before the Department. There is no material on record of suppression of facts with intent to evade payment of duty. The Hon ble Gujarat High Court in the case of Gujarat G .....

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xcise 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 20 .....

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