1. This appeal arises from Order-in-Original No. 14/2000 dated 1.5.2000 by which the CCE Trichy has passed the order on account of his earlier order being set aside by the Tribunal and matter being remanded for de novo consideration. The question that was referred back to the Commissioner for de novo consideration was as to whether assembly of various parts and accessories at site would bring into existence generator set for the purpose of classification under Chapter Heading 85.02 of CETA 85 of it is an immovable property as contended by the department, as it is set up as power plant brick by brick and fixed to the earth and make it an immovable property. Therefore, it is not exigible. The department did not produce any evidence of any experts or any other material, technical or oral for the purpose of considering the activity to be of manufacture of goods and not an immovable property. However, the department had relied on the statement of Shri S. Viswanathan recorded on 8.7.93 and on that basis had issued a show cause notice as late as 19.1.99 alleging wilful suppression with intention to evade payment of Central Excise Duty with regard to manufacture of clearances of generator set alongwith its auxiliary without intimating the department. It had been alleged that appellants had manufactured and cleared "diesel generator sets" in a manner otherwise than as provided under the Central Excise Act, 1944 and Rules made thereunder without payment of Central Excise duty and observing any formalities and as such extended period of five years is invokable under proviso to Section 11A(1) of the C.E. Act. The statement of Shri S. Viswanathan was referred to in SCN and to the Clause 9.1 of the contract entered into between the appellants and M/s. Neyveli Lignite Corporation Ltd., Neyveli who had indicated that the "Excise Duty and Sales Tax variations thereon shall not be paid to the Contractor (Appellants) by the Purchaser (NLC)" and that the total contract price would be treated as cum duty price.
2. The appellants contention had been that Shri S. Viswanathan in his statement had clearly disclosed all the material facts and about appellants clear understanding and bona fide belief that such an activity did not result in manufacture of goods and hence there was no wilful suppression and that all the facts about the contract had been disclosed to the department even prior to 1993 itself. It had also been submitted that Board itself by their circular in 1986 had stated that such an activity of assembling diesel generator set would not amount to manufacture. The said circular was withdrawn only on 11.10.99. The contract had been entered in 1989 and therefore during that period there was clear understanding in terms of Board's circular that the item was not a part. Therefore, there was no suppression in the matter.
Shri S. Viswanathan had clearly described the manner in which the work was carried out to bring into existence the diesel engine and AC generator (alternator) and hence it was brought out as an immovable property. Therefore, the Tribunal in the remand order gave a specific direction to the Commissioner to examine the statement of Shri S.Viswanathan with regard to extending of larger period and as to how the activity amounted to a process of manufacture. A direction was also given to examine appellants contention that activity of manufacture was completed on 10.7.93 itself and the department had full information thereof and therefore the show cause notice issued after five years on 19.1.99 is without jurisdiction and patently not sustainable. The Tribunal expressed its view prima facie that Commissioner had not expressed his view on the time bar and had not given a speaking order and hence he was required to address all the questions and redetermine the case.
3. The Commissioner in the impugned order in para-16 has re-examined the issue de novo as per the direction and has stated that he is relying on the paras 13 & 14 of his earlier order-in-original No.19/99 dated 5.8.99 wherein he had held that generator sets are excisable, bought and sold in the market and as such these are liable to duty at the appropriate rate. He held that no further discussion was necessary in this regard.
4. We have heard Ld. Advocate Shri V. Sridharan, assisted by Shri J.Shankarraman for the appellants and Ld. SDR Shri G.S. Menon and Shri A.Jayachandran, DR for the Revenue.
5. We have considered the findings of the Ld. Commissioner in para 16 of his order and note that the Commissioner could not rely on his earlier order No. 19/99 dated 5.8.99 as the said order had already been set aside by the Tribunal and he was required to have re-applied his mind without analysing the statement of Shri S. Viswanathan to see as to whether an immovable property came into existence. Such an exercise, unfortunately, has not been done in the impugned order except to rely upon his earlier order thereby it is clear that the order cannot be sustained and is required to be set aside on this Court alone.
6. Be that as it may, we take up the statement of Shri S. Viswanathan to see as to whether the activity has brought into existence goods required to be exigible and dutiable under chapter heading 85.02. For the purpose of examining this matter, it is necessary to extract question & answers from 4 to 14 as below: Q-4 Whether M/s Parry & Co. Ltd. and M/s. Parry Engineering & Exports Ltd. have any manufacturing premises and please state whether the components required for the execution of the 4 Nos. 750 KVA Generating Sets at site have been supplied from such premises.
A-4 M/s. Parry & Co. Ltd. and M/s. Parry Engineering & Exports Ltd. do not have manufacturing facility for the manufacture of components like engines, alternators & control panels which have gone into NLC's contract of 4 x 750 KVA DG Sets. Such components are bought out items from the manufacturers of these items e.g. engines from Kirloskar Cummins Ltd., Pune, Alternators (AC Generators) from Kirloskar Electric Co. Ltd., Bangalore and control panels from reputed panel manufacturers like LT-Lotus Powergear, etc. The facility which we had at Bangalore and now transferred to Pondy are geared up for Assembly & Testing of DG Sets from out of bought out components from the original manufacturers.
Q-5 Please state the write up of the function of the Generating Sets erected at NLC Site.
A-5 We have been given to understand that these generating sets are meant for emergency use to generate power as needed by the 4th, 5th, 6th and 7th Units of 4x210 MW II Stage expansion of the NLC's T.S. Q-6 Please detail the operations of the Generating Sets from the beginning to the outputs stage? A-6 Basically, the DG Set is made up of 2 main components, i.e.
Diesel Engine and AC Generator (Alternator) and to keep the sets producing flawless power to meet the various technical parameters of the customer, there are other control equipment like the control panels going with the genset installation. In the. case of NLC, their requirement calls for automatic mains failure and synchronization arrangements of all the four DG Sets since the end use is for meeting emergencies. The engine, AC Generator (Alternators) are placed on concrete block foundations provided by NLC at their DG Set room and permanently grouted and rooted to the foundation. Thereafter other auxiliary items like exhaust arrangement, cabling, busbar trunking, wiring to control panel are linked up and fastened so as to be integrated into a whole system interlinked to function with each other. There are other fixtures like cooling towers, fuel tanks, pumps water lines which are fastened to the main equipment and carried through underground, along side the structures and walls and the roof as well.
Q-7 It is seen from your answer above and from the inspection of the site today (that is on 8.7.93), it is clear that the Diesel Generating Set has come into existence at the site and it is classifiable under chapter sub-heading 85.02 of the Central Excise Tariff Act, 1985, why did you not comply with the Central Excise procedures required thereto.
A-7. By nature the DG Sets in the case of NLC are permanently attached plant and can function as a whole with other infrastructure facilities like cooling towers, fuel pumps, transfer system, exhaust arrangement, control arrangement, etc. The DG Sets are inputs to the turbines at NLC 4 x 210 MW at their newly expanded 4th, 5th, 6th 7th units at TS.II. Being part of immovable plant and machinery forming part of a total package, we were under the impression that the DG Package is not dutiable, especially as it form part of the total immovable package and it is not an article, ordinary market goods.
The package that we have carried out at NLC is not goods, being immovable and not marketable. Our impression is that only in the case of goods which are movable the excise formalities will be applicable.
Q-8 please state the function of the engine and the Alternator individually? A-8 The engine i.e. Diesel Engine is the prime mover of the DG Set when started it revoles at 1500 RPM. This prime mover rotates the AC generator (Alternator) and by this rotation, the alternator produces electric power. The engine and alternator are coupled together to carry out their respective functions, they are placed on a common base frame which a fixed rooted and grouted to the civil foundation block of the building (DG Set Room) and connected to the other essential auxiliary systems.
Q-9 Do you mean to say that the engine which performs the function of a prime mover and the AC Generator (Alternator) can produce electricity without cooling towers, bus bar connections and other auxiliaries mentioned in your answer to Q-7? A-9 For the rating of 750 KVA required by NIC on each DG Set the system can function only if the DG Sets are hooked up to other auxiliaries like cooling towers, fuel transfer arrangement, exhaust arrangement, etc. In other words, DG Set of this high rating must necessarily have cooling arrangement and exhaust to make them functional.
Q-10. Please elaborate on the method of mounting of the DG Sets on the foundation? A-10 The concrete foundation is cast by the civil engineering wing to the original dimensions given by us. The foundation is deep in this case as much as 8 feet or so and the entire block is cast in site using reinforcements and foundation bolts provided by us, The base frame which carries both the engine and AC Generator coupled together is placed on the foundation block, bolts fastened, firmly rooted and grouted to the earth and block foundation so as to have a vibration free well aligned operation of the DG Set. Thereafter, other auxiliaries are connected to the DG Set.
Q-11 During the inspection of the site today, we saw a overhead crane. Please state whether it was fabricated by M/s. Parry Engineering & Exports Ltd. A-11 The crane is not in our scope of supply. It was arranged by the customer--NLC themselves.
Q-12 Whether the crane has been provided by NLC to facilitate mounting the Assembly of Alternator and the engine on the bolts embedded to the foundation? A-12 We have not used the NLC's crane in the DG Set Room. However, for the heavy operation of mounting the DG Set (Engine and Alternator) to the foundation bolts embedded to the earth, we have had to hire outside help of cranes from contractors doing similar type of works within NLC complex.
Q-13 Would you like to state anything further with regard to this investigation? A-13 From the nature of the supply and work carried out by us, the permanent nature of the facilities, civil work, lot of cabling/wiring, busbar trunking exhaust arrangements, fully automatic controls, synchronization arrangements, the way our DG Set Plant and machinery are immovably attached as part of the DG Set Room, the intended use of the DG sets to take care of emergencies of the TSII 4x210 MV turbines under the expansion, the package to being classifiable as goods and not being marketable as such in our opinion, would not be dutiable underthe Central Excise & Salt Act, 1944. There are other supporting decision to this view viz., namely, Union of India v. DCM, Union Carbide case, Geep Industrial Syndicate's case.
A-14 The following items with costs indicated against each are placed on the common base frame embedded to the earth: 7. From the above answers given by Shri S. Viswanathan, it is clear that the activity has been carried out at the site by purchasing the bought out items and setting up the generating plant by placing the engine, AC generator (alternators) on the concrete civil foundation provided by NIC at their DG Set Room and permanently grouted and rooted to the foundation. Thereafter, other auxiliary items like, exhausting arrangement, cabling, bus bar trunking, wiring to control panel are linked up and fastened to as to be integrated into a whole system inter-linked to function with each other. There are other fixtures like cooling towers, fuel tanks, pumps water lines are fastened to the main equipment and carried through undergrounds, alongside the structures and walls and the roof as well. The equipment in question has become functional only after the entire civil work is completed alongwith deep foundation of eight feet dig for installing the items piece by piece.
This crucial statement has not been analysed at all by the Ld.
Commissioner and without obtaining any technical opinion from any expert body to see as to whether the installation has been kept rooted in the immovable property or not but has merely held that he is proceeding by his previous order, which had not considered this material. Therefore we have to exclusively hold that the statement given by Shri S. Viswanathan, who is a Senior Commercial Executive, is required to be accepted, as the whole case is based on his statement and this statement clearly establishes that the item has come into existence at the site as an immovable property. We also notice that answer to Question 7 clearly indicates that DG sets are permanently attached to the plant which is an immovable structure and the DG set can function as a whole with other infrastructure facilities like cooling towers, fuel pumps, transfer system, exhaust arrangement, control arrangement etc. and has become part and parcel of immovable plant and machinery forming part of a total package. There is no reason to disbelieve this technical information and also the answer given to Question 8 which has clearly explained that the engine i.e. diesel engine is the prime mover of the DG set when started it revolves at 1500 RPM. This prime mover rotates the AC generator (Alternator) and by this rotation, the alternator produces electric power. The engine and alternator are coupled together to carry out their respective functions, they are placed on a common base frame which is fixed rooted and grouted to the civil foundation block of the building (DG set room) and connected to the other essential auxiliary systems. In the absence of any rebuttal evidence, the answer given in Question-8 is required to be accepted. So also the answer given in Question 10 which explains that concrete foundation is cast by the civil engineering wing to the original dimensions given by us. The foundation is deep in this case as much as 8 feet or so and the entire block is cast in site using reinforcements and foundation bolts provided by them. The base frame which carries both the engine and AC Generator coupled together is placed on the foundation block, bolts fastened, firmly rooted and grouted to the earth and block foundation so as to have a vibration free well aligned operation of the DG set, This clearly proves the appellants' case that the item which has come into existence is part and parcel of immovable property and it is manufactured therein and it is not merely fixed to the ground for the purpose of avoiding vibration effects.Triveni Engineering & Indus. Ltd. v. CCE, 2000 (71) ECC 225 (SC): 2000 (120) ELT273 (SC) negatived the Tribunal's contention that such an activity brought into existence goods. The Apex Court after due consideration of Sirpur Paper Mills Ltd. v. Collector, 1998 (59) ECC 46 (SC): 1998 (97) ELT 3 (SC) case which is relied on by the Commissioner has clearly held that steam turbine, the alternator, and coupling which is installed on the platform specially constructed on the land cannot be treated as a common base. Therefore said alternator would be immovable property and cannot be treated as excisable goods. The Apex Court in categorical terms overruled the classification under heading 85.02 in the light of HSN explanatory notes holding that there has to be a common base for the purpose of classification under heading 85.02. In the present case, the said common base joining said the machineries or appliances has not brought into existence goods as per the terms of statement of Shri S.Viswanathan and therefore even the classification under 85.02 is not sustainable.
9. It is seen that after this judgment was rendered, this Bench had an occasion to decide the issue of classification in respect of this item in the case of Bellss India Ltd. v. CCE, Chennai, 2001 (132) ELT 364 and the Bench categorically held that the item is not goods but it was an immovable property. This was rendered in the light of Apex Court Judgment rendered in Triveni Engg. & Inds. Ltd. (supra). Similar view was expressed by the Calcutta Bench in the case of Vineet Electrical Industries Pvt. Ltd., 2001 (136) ELT 784 (T) holding that bringing into existence a generator set although amounts to manufacture, but demands were time barred in view of assessees holding bona fide belief that duty was not attracted on diesel generating assembled at site. The Delhi Bench in B.H.E.L v. CCE, Meerut, 2001 (138) ELT 1223 (T-Del.) also held that Turbo Alternator, installed/erected on the plat form specially constructed at site is an immovable property and does not bring into existence excisable goods. Likewise, the Calcutta Bench in the case of Western India Machinery Co. v. CCE-2001 (133) ELT 574 held that assembly of diesel engine and alternators on a base frame at the site of Installation to make complete diesel generating set ready for use and then attached to concrete platform to ensure that it is vibration free does not bring into existence goods, and as such the process of assembly does not amount to manufacture in this regard, Apex Court's judgment of Triveni Engg. & Inds. Ltd. (supra) has been relied.
10. All the above judgments and the Judgment of Triveni Engg.& Inds.
Ltd. rendered by the Apex Court apply on all fours and the facts of this case with regard to merits and on due application, the appellants contention with regard to duty being not chargeable on the immovable goods which has come into existence is required to be upheld and appeal to be allowed on this point alone.
11. The Commissioner's finding on limitation is also not sustainable for the reason that Tribunal in the case of Triveni Engg.& Inds. Ltd., 1996 (88) ELT 238 while negativing the findings on merits had, however, held that demands are time barred in view of the facts that circular dated 6.11.86 had been issued by the Board that no duty would be chargeable on the combination of engines and alternator assembled at site. However, subsequently on 11.10.90 the Board withdrew the circular dated 6.11.86. In the circumstance, the Tribunal held that in the light of Padmini Products, 1989 (24) ECC 362 (SC): 1989 (43) ELT 195 (SC) mere failure or negligence on the part of manufacturer either to take out of licence in a case where there was scope for doubt as to whether a licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract the longer period for duty demand under Section 11A of the C.E. Act.
12. It is seen that same finding has been recorded with regard to time bar on the same item by the Eastern Bench in Vineet Electrical Inds.
Pvt. Ltd. (supra) holding that demands are time barred with regard same item. We also note that Commissioner has misguided himself with regard to the understanding of the facts on the date of disclosure, and in applicability of Sub-section (3) of Section 11A of the Act. In the present case, appellants were not filing periodical returns nor they were observing the rules. Therefore, Clause (c) of proviso to Sub-section (1) of Section 11A would apply wherein the relevant date has been explained. In the present case, the date has to commence from the date on which duty is required to be paid under this Act. In this case, the contract was submitted and handed over to NLC on 27.5.93, 1.7.93 & 8.7.93. Therefore, the SCN issued on 19.1.99 is beyond the period of five years. Further the statement of Shri S. Viswanathan was recorded on 8.7.93, On that date itself department came to know about the manufacture and installation of the item in question. Appellants had also furnished the contract to the Superintendent as far back in 1992. The department was fully aware of all the facts and it cannot be said that appellants have suppressed the facts for invocation of larger period and therefore on this count also the appellants succeed. Ld. SDR showed the Commissioner's finding that relevant date could be the date on which they were to file RT-12 returns for the months January 1994 to 5.2.94 and the demands were not hit by limitation. Further, we notice that in the present case no periodical returns are being filed and hence Clause (b) cannot be applied and Clause (c) is required to be applied. Furthermore, the department had full knowledge in 1982 onwards and the statement was also recorded in 1993 and hence demands are clearly hit by time bar. Ld. SDR made very persuasive arguments to accept the plea that the item is goods as the foundation is only for preventing the vibration. We notice that this was the finding rendered by the Tribunal in Triveni Engg. & Indus. Ltd. This very finding has been negatived by the Apex Court and hence we are required to apply the Apex Court's judgment holding that the item is not goods but immovable property.
13. We have considered all the submissions made by Ld. SDR and also perused the impugned order and the entire records. We are not in a position to accept the finding of the Commissioner for the reason that the issue is no longer res integra and is covered by the Apex Court judgment rendered in Triveni Engg., which has been followed by the Tribunal. Furthermore the demands are also time barred and larger period cannot be invoked in the facts and circumstances as there was no wilful suppression of facts, as department was aware of all the facts much earlier to 1993. The department cannot allege suppression in the present case for the reason also that Board had itself issued circular in 1989 holding the item to be not goods and not dutiable. Therefore, there was clear bona fide belief on the part of appellants to hold that the item is not excisable. Therefore, we do not accept the findings given by the Commissioner and set aside the impugned order and allow the appeal with consequential relief, as per law.
14. I am not able to persuade myself to agree with the view taken by learned Brother Shri S.L. Peeran that the impugned order should be set aside and the appeal allowed with consequential relief. Hence I proceed to record a separate order.
15. The facts of the case have already been recorded by learned Member (J) and I am not repeating the same as it is. This is a case where the appellants had entered into a contract with M/s. NLC, and according to the contract, as confirmed by the buyer of the goods i.e. M/s NLC, vide their letter dated 25.10.89 (referred to in para 10 of the impugned order) the contract was for design, engineering, manufacturing, assembling, erection, testing and commissioning including trial operation and performance testing of four numbers of DG Generator sets of 750 KVA complete with all auxiliaries. The contract was for Rs. 2,65,23,300. This price was inclusive of toots, spares, taxes and Central Excise Duty as per clause No. of the Contract. When the price was inclusive of Central Excise Duty, it cannot be contended by the appellants that they were bona fide under the impression that no Central Excise Duty was payable on the goods on the ground that the item was an immovable property. It is borne out by the records, that the appellants had not taken Central Excise licence for the manufacture of the goods in question. It is also not the case of the appellants that they had sought for any clarification from the department as to whether their manufacture and installation of DG sets at site would attract Central Excise duty in case they had entertained any doubt in regard to durability of the goods. Learned Member (J) in para 7 (page 8) of the order has held that the activity of manufacture of the goods had been carried out by bought out items and setting up the generating plant by placing the engine, AC generator (alternators) on the concrete foundation provided by the NLC, who is the buyer. He has also held that equipment in question has become functional only after the entire civil work is completed alongwith deep foundation of eight feet dig for installing the item piece by piece. As rightly noted by the learned M(J), the concrete foundation is provided by the buyer of the goods viz. M/s NLC. It is true that the equipment will become functional only after the civil work is completed. By no stretch of imagination it can be held that the concrete foundation is a part of the DG sets. On the other hand it goes without saying that the concrete foundation is a necessity for fixing the DG sets and this is to ensure wobble free operation of the DG sets. That does not mean that the concrete foundation is a part of the DG sets. Fixation of the DG sets in a civil concrete foundation does not in any way alter the position so far as emergence or coming into existence of DG sets as a commodity which is marketable, is concerned. Even after the DG set is fitted on to the concrete foundation with the help of nuts and bolts, it cannot be said that the DG sets cannot be unbolted and removed from the concrete foundation. I find that the Hon'ble Supreme Court in the case of Sirpur Paper Mills Ltd. v. CCE, 1998 (59) ECC 46 (SC) : 1998 (97) ELT 3(SC) has held that paper making machine assembled and erected at site mainly from bought out components is a marketable commodity and is goods. The Court further held that embedding it in a concrete base to ensure its wobble free operation does not make it immovable property in the sense a building or a tree is. It was further held that machine is capable of being sold in part and being dismantled from its base and just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. Further, the Hon'ble Apex Court in the case of Narene Tulaman Manufacturers Pvt.
Ltd. v. CCE, 1988 (18) ECC 165 (SC): 1988 (38) ELT 566 (SC), while considering the question whether assembling of weighing bridge would amount to manufacture and whether duty was payable on the goods, held that assembling of duty paid components of the weighbridge amount to manufacture when both parts and final products are separately and specifically dutiable. The Court further held that the activity of assembling the three components (i) platforms (ii) local cell, and (iii) indicating system amounts to manufacture as it brings into existence weighbridge, a new product known to the market and known under the excise item. It was also held by the Court that mere fact that the appellant bought out the two parts and manufactured only the 'indicating system' and paid duty thereon will not change the position because parts and end products are separately dutiable. The Hon'ble Apex Court in para 3 has held as under: 3. The appellant's contention before the Tribunal was that it was only preparing a part and that part is dutiable as a separate part.
The appellant, however, did the work of assembling. As a result of the work of the appellant a new product known in the market and known under the excise item "weighbridge" comes into being. The appellant will become a manufacturer of that product and as such liable to duty. That is precisely what the Tribunal found on the facts of the case. The appellant seems to have been obsessed by the idea that as a part of machine is liable to duty then the whole end product should not be dutiable as separate excise goods. That is mistake, a part may be goods as known in the excise laws and may be dutiable. The appellant in this case claims to have manufactured only the indicator system. If the indicator system is a separate part and a duty had been paid on it and if the rules so provide then the appellant may be entitled to abatement under the rules. But if the end product is a separate product which comes into being as a result of the endeavour and activity of the appellant then the appellant must be held to have manufactured the said item. When parts and the end product are separately dutiable-both are taxable.
16. In the present, it is an admitted position that DG sets have been manufactured mainly with bought out items. It is manufactured at site by the appellants and after the manufacture is complete and the item DG set, as a new product, has come into existence, it is fitted on to an already constructed concrete platform and after that only, certain auxiliary items like exhausting arrangement, cabling, wiring to control panel etc. are linked up. These auxiliary activities are for the purpose of operation of the DG sets. The parts and end products are separately dutiable. It Is true that the concrete structure is immovable, that does not mean that the machinery fitted on to it also becomes immovable when it is not the case of the appellants that the DG sets so fitted on to the concrete platform cannot be un-bolted, dismantled and re-erected at any other site. I further find that Shri Viswanathan in his answer to question No.7 has clearly stated that "Being part of immovable plant and machinery forming part of a total package, (emphasis supplied by me), we were under the impression that the DG package is not dutiable especially as it forms part of the total immovable package and it is not an article or ordinary market goods", it is therefore clear that even according to the statement of Shri Viswanathan which has been heavily relied upon by learned M(J), the DG sets is only part of the immovable property. In this case immovable property is only the concrete foundation and not the DG sets as the goods were already assembled before being shifted to the concrete foundation. Learned Member (J) has placed reliance on the judgment the Hon'ble Supreme Court in the case of Triveni Engineering & Industry Ltd. v. CCE, 2000 (71) ECC 225 (SC): 2000 (120) ELT 273 (SC). In the said judgment, the Hon'ble Apex Court in para 4 has held that "From a combined reading of the definition of 'immovable property', in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property, there is neither mobility nor marketability as understood in Excise taw". The Apex Court has held that whether an article is movable or immovable property has to be ascertained from the facts and circumstances of each case. In the said case, the appellants were according to specified designs, combining steam turbine and alternator by fixing them on a platform and aligning them, whereas in the present case, DG sets have come into existence before they were bolted on the concrete foundation and the DG sets are marketable. Further, in the case of Triveni Engineering & Industries Ltd. (supra) the Hon'ble Apex Court has distinguished the decision of the Apex Court in the case of Name Tulaman Manufacturers Ltd..(supra) and also their decision in the case of Sirpur Paper Mills Ltd. (supra). Therefore, I am of the considered opinion that the case laws which are squarely applicable to the present case are the ratio laid down by the Hon'ble Supreme Court in the case of Sirpur Paper Mills (supra) and that of Name Tulaman Manufacturers (supra), not that of the Triveni Engineering (supra), more particularly because in the present case, Shri Viswanathan himself has clearly stated that DG set is only apart of immovable property (emphasis supplied by me). Further as already noted above, it is not the case of the appellants that the DG sets are not marketable and it cannot be detached from the concrete foundation once it is fitted on to it. In any case just because the concrete foundation is an immovable property, it cannot be said under any circumstances that the machinery fitted on to it also becomes immovable property, The appellants have taken a plea before the original authority that the Generator Sets and auxiliaries and setting up of the power plant were executed brick by brick. This plea cannot be accepted for the reason that DG sets were assembled at site and were then shifted to the already prepared concrete foundation where they were fitted with bolts and were grouted. Therefore I am of the considered opinion that the question whether goods which are excisable and marketable have come into existence, in the present case, should be answered in favour of the Revenue and I do so and t do not agree with the view taken by the learned M(J) in this regard in favour of the appellants.
17. Now coming to the next question as to whether longer period of limitation can be invoked in this case, I observe that the learned M(J) has referred to a Circular dated 6.11.86 wherein it was stated that no duty would be chargeable on the combination of engines and alternator assembled at site. He has also placed reliance in the case of Padmini Products, 1989 (24) ECC 362 (SC): 1989 (43) ELT195 (SC) wherein it was held that merely failure to take out a licence in a case where there was scope for doubt as to whether a licence was required to be taken out or where there was a scope for doubt whether the goods were dutiable or not, would not attract the longer period for demand of duty in terms of Section 11 (A) of the Act. In this case it is not the case of the appellants that they have made known to the department about the existence of a contract with their buyer viz. M/s NIC. It was borne out by records during investigation that the price paid by the buyer was inclusive of the all components viz. taxes and Central Excise Duty.
Therefore, the plea that they were bona fide under the belief that no duty was payable on the goods cannot be countenanced. The manufacture in this case according to the appellants was completed on 10.7.93 and they plead that the department was fully aware of the fact of manufacture. They have pleaded that the show cause notice was issued on 19.1.99 and hence beyond six months period. The Commissioner has held that under Sub-rule (3) of Rule 173G, every assessee is required to file monthly return within five days after the close of each month and accordingly, they were required to file return for the month of January 94. In this case no monthly return was filed by the assessee as noted by the learned M(J). The contract in this case was entered into in the first half of 1989 and ft was on 18.12.92, that the Supdt. of Central Excise, Preventive Group, Pondicherry, division issued summon dated 18.12.92 calling for documents relating to the contract and information in that regard was provided only on 29.12.92. Therefore, it cannot be said that the department had knowledge about the activities undertaken by the appellants particularly when they had not taken any licence.
Show cause notice was issued in this case on 19.1.1999. In this case according to the learned Commissioner, the relevant date would be in terms of Section 11(B) whereas according to learned M(J) it should be in terms of Section 11(C). Both Section 11(B) and 11(C) are extracted hereunder: (B) Where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rule; (C) In any other case, the date on which the duty is to be paid under this Act or the rules made thereunder.
18. Admittedly in this case no monthly return has been filed by the assessee and hence in my view, the Section 11 A(c) (B) would be applicable as held by the original authority. The DG sets were repaired and trial run was done on 5.1.94 and hence the date of completion of the DG sets can be taken to be 5.1.94 and the assessee was required to file the first monthly return on 5.2.94. Since show cause notice was issued on 19.1.99, the show cause invoking the longer period of limitation has been issued within time, as held by the Commissioner.
Therefore, I am of the considered opinion that longer period of limitation for demand of duty has been correctly invoked as held by the Larger Bench comprising of Five Members of the Tribunal in the case of Nizam Sugar Factory, 1999 (114) ELT 429 that acquiring knowledge by the department does not take away the period of five years and the department can issue show cause notice within a period of five years from the relevant date on account of fraud, suppression, wilful mis-statement or contravention of the Act or rules with an intent to evade payment of duty. In view of above, I am of the considered view that the impugned order should be upheld and the appeal rejected and f order accordingly.
In view of difference of opinion between the Members, the following question arises for determination by Third Member: "Whether the appeal is required to be allowed both on merits and on time bar as held by Member (Judicial) in his order The appeal is required to be rejected both on merits as well as on time bar as held by Member (Technical) in his order.
19. The point of difference in this case is, principally, on the excitability of Diesel Generating Sets (DG Sets) installed, commissioned and supplied by the appellants to M/s Neyveli Lignite Corporation under a contract dated 26.10.1989. The total contract value was Rs. 2,65,23,300 which included the erection, installation, commissioning and cost of accessories. By show cause notice dated 19.1.1999, the Department invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 and demanded duty on the above item to the tune of Rs. 41,87,650 and also proposed to impose penalty of equal amount on the appellants under Section 11 AC of the Act read with Rule 173-Q of the Central Excise Rules, 1944. The notice was contested. The Commissioner, who adjudicated the dispute, confirmed the demand of duty against the party and imposed on them a penalty of Rs. 10 lakhs under Rule 173-Q. Hence the present appeal, 20. One of the learned Members of the regular Bench which heard the matter allowed the appeal both on merits and on limitation while the other learned Member rejected the appeal on both counts. Hence the point of difference before me as Third Member.
21. The learned Counsel Shri V. Sridharan for the appellants and learned SDR Shri G.S. Menon for the Revenue have reiterated their respective positions.
22. The learned Counsel submits that the question of excitability of the item under reference has been squarely settled by the Hon'ble Supreme Court in the case of Triveni Engineering & Industries, 2000 (71) ECC 225 (SC): 2000 (120) ELT 273 (SC). In that case, the item considered by the Apex Court was a turbo-alternator. The turbo-alternator consisted of a turbine and an alternator. The steam turbine was the prime mover and the alternator generated power. The item considered by the Apex Court was thus a power-generating system.
It was found by the Court that the turbo-alternator was brought into existence by fixing the steam turbine and alternator with accessories thereof permanently to civil foundation and further that installation or erection of the turbo alternator on the concrete platform specially constructed on the land resulted in an immovable property as the platform could not be treated as a common base in the light of the HSN notes to Heading 85.02. The Apex Court applied the marketability test and held that the turbo alternator was not marketable and hence not excisable. The test laid down by the Court was that any goods to be excisable should be in a state to be taken as such to the market for being sold. The turbo alternator was found to be incapable of being taken as such to the market for sale as it could not be removed without being dismantled into movable components. It is the contention of the learned Counsel that the DG set in the present case is analogous in all respects to the turbo alternator considered by the Apex Court in M/s Triveni Engineering & Industries case (supra). The learned Counsel has also referred to a few decisions of the Tribunal wherein the ratio laid down by the Apex Court in the Triveni Engineering & Industries case has been followed. He cited the following decisions:Blue Star Ltd. v. CCE, In the former case, a belt conveyor system erected bit by bit on a civil foundation embedded in the earth at customer's site was held to be immovable (and non-excisable) property. In the latter case, a central air-conditioning plant installed, tested and commissioned at customer's site as per their specifications on turnkey basis was also held to be immovable, non-marketable and non-excisable property.
23. On the limitation issue, the learned Counsel submits, the appellants have a clean case. He refers to correspondence dating back to 1992, between the appellants and the department, available on record and submits that all the relevant facts and materials were made available to the department even before the DG sets were handed over to the purchaser. Referring to the Commissioner's finding as to the relevant date for the purpose of invoking the extended period of limitation, the learned Counsel submits that the finding would not help the revenue as the charge of suppression of facts has not been established against the appellants. The learned Counsel, therefore, prays for endorsing the view taken by learned Member (Judicial) of the regular Bench.
24. The learned SDR, on the other hand, urges that the view taken by the learned Member (Technical) of the regular Bench be endorsed. The SDR appears to be banking on the finding recorded by the learned Commissioner to the effect that the DG sets had been assembled before being fixed to the concrete block foundation and hence were capable of being removed as such to the market for being sold.25. Examined the submission. I find that Shri S. Viswanathan, a senior functionary of the appellant-company, had stated as early as on 8.7.1993 to the Central Excise authorities their claim that the DG sets were not excisable. He had also given an account of the process undertaken by the appellants under the contract dated 26.10.1989.
According to that account, the diesel engine and the AC generator (the 2 main components of DG set) were placed on the concrete block foundation provided by M/s NLC in the DG set room and were permanently grouted and rooted to the foundation. Thereafter, other auxiliary items like exhaust arrangement, cabling, busbar turnking (sic, Turnkey), wiring to control panel were linked up and fastened so as to be integrated into a whole system interlinked to function with each other.
I have found nothing in the statement of Shri Viswanathan to indicate that the engine, alternator (AC generator) and other equipments and auxiliaries were assembled into one unit before fixing to the concrete foundation. The account given by Shri Viswanathan was one of a bit-by-bit building process which resulted in an immovable property incapable of being removed as such to the market without being dismantled. The ruling of the Apex Court in the case of Triveni Engineering & Industries Ltd. (supra) as to the marketability of a manufactured product is that the goods should be capable of being brought as such to the market for sale. The item under reference has no positive answer to this test. The bit by bit process undertaken by the appellants was a process of erection or installation of an immovable property. That was a process of building and not one of manufacturing.
For an item to be excisable, the activity giving rise to it should be manufacture [under Section 2(f) of the Central Excise Act]. There was no such manufacture in respect of the DG sets installed by the appellants. Thus the question of excitability of the item under reference is found to have been covered, squarely in favour of the party, by the judgment of the Hon'ble Supreme Court in Triveni Engineering & Industries (supra) followed by the Tribunal in the cases of TRF Ltd. and Blue Star Ltd. (supra) 26. Once the item is held to be non-excisable, there is no question of levy of duty of excise, nor any question of demand of duty. Any question of limitation does not arise before me. I need not examine a question which does not arise before me.
27. In the result, I hold that the DG Sets installed, tested, commissioned and handed over by the appellants to M/s NLC at the letter's site on 12.1.1994 were not excisable. The order of the Commissioner demanding duty on the item is unsustainable in law. I, therefore, concur with the order recorded by the learned Member (Judicial) of the regular Bench in so far as the question of excisability of the item is concerned.
In terms of majority order, the impugned order is set aside and appeal allowed with consequential relief, if any, as per law.