Customs, Excise and Gold Tribunal - Mumbai
Asea Brown Boveri Ltd. vs Commissioner Of C. Ex., Visakhapatnam on 31 January, 2002
Equivalent citations: 2002(143)ELT87(TRI-MUMBAI)
ORDER Jyoti Balasundaram, Member (J)
1. M/s. Asea Brown Boveri Ltd. (hereinafter referred to as M/s. ABB) are inter alia engaged in the activity of engineering and construction services of power plants. M/s. GVK Industries (hereinafter referred to as M/s. GVK) are engaged in the production of electricity at their power plant in East Godavari District, Andhra Pradesh. M/s. GVK had entered into an agreement with M/s. ABB, Germany, parent company of the appellant, in August, 1994, for supply of requisite plant and machinery for setting up of 235 MW combined cycle electric power plant in Andhra Pradesh and had also simultaneously entered into an agreement with M/s. ABB for erection and commissioning of power project at the project site of M/s. GVK. M/s. GVK thereafter executed a Memorandum of Understanding with M/s. APSEB for supply of power generated at the plant. Concessional customs duty certificate for import of plant and machinery along with essential spares for the power plant was granted by the Ministry of Power, Government of India in August, 1995. M/s. GVK got the certified list of approved items of import registered under project import with the Commissioner of Customs and Central Excise, Visakhapatnam. Project registration number was allotted to Ms. GVK who then imported complete equipment of the 235 MW power plant under project import vide Notification No. 90/94, dated 1-3-1994 at a concessional rate of basic customs duty of 20% and at NIL rate of CVD vide Notification No. 91/94, dated 1-3-94. Subsequently, M/s. ABB executed the erection and commissioning of the power plant and handed over the same to M/s. GVK after tests and trial runs.
2. In the course of erection and commissioning of the power plant, M/s. ABB had inter alia set up 3 turbo generating sets and one steam generating set. The department was of the view, based upon the judgment of the Apex Court in the case of Sirpur Paper Mills v. CCE, Hyderabad [1998 (97) E.L.T. 3 (S.C.)] that the civil foundation embedded to the earth permanently on which the turbine and generator were fixed with foundation bolts did not answer the test of permanency and immovability of the structure since by mere undoing of the foundation bolts, the entire generating sets could be relocated elsewhere and thus the activity of M/s. ABB at the project site of assembly of turbines and generators was viewed as amounting to manufacture of Turbo/Steam generating set under Heading 85.02 of the Schedule to the CETA, 1985. On this basis, show cause notice dated 27-8-1999 was issued to M/s. ABB proposing recovery of Rs. 52.72 crores being Central Excise duty payable on the generating sets, proposing levy of interest as well as imposition of penalty under Section 11AC and under Rules 9(2), 52(A) and 173Q of the Rules and proposing confiscation of the goods in question. The authorities also proposed penal action under Rule 209A of the Central Excise Rules on M/s. GVK. The notice was adjudicated by the Commissioner of Central Excise, Visakhapatnam who confirmed the duty demand of Rs. 42,55,38,769/-on the generating sets manufactured by M/s. ABB at the site of M/s. GVK, applying the rate of duty of 10% on Turbo generating sets and 13% on Steam generating sets, directed payment of interest in terms of Sec. 11AB of the Central Excise Act, imposed a mandatory penalty of amount equal to duty as per the provisions of Sec. 11AC of the Act as well as a further penalty of Rs. 4 crores as per Rule 173Q and a penalty of Rs. 4 crores on M/s. GVK as per the provisions of Rule 209A of the Rules. Hence this appeal by M/s. ABB.
3. The appellants do not contest the finding of the adjudicating authority that the assembly of Turbo generating sets amounts to manufacture.
Therefore, the issues that arise for our consideration are as under :
(i) Whether the test of marketability is satisfied by the items in question;
(ii) In the alternative, if the items are held to be excisable goods liable to duty, whether they are eligible to the benefit of exemption from payment of duty in terms of Notification No. 66/95-C.E., dated 16-3-95; and (iii) Whether the entire demand is barred by limitation.
4. We have heard Shri Nambirajan, advocate for the appellants who submits that the first issue stands covered in favour of the appellants by the decision of the Hon'ble Supreme Court in the case of Triveni Engineering & Indus. Ltd. v. CCE [2000 (120) E.L.T. 273 (S.C)] wherein, the Supreme Court, while holding that the process of fixing of steam turbine and alternator and coupling and aligning them in a specified manner to form a turbo alternator amounted to manufacture, held that the Turbo alternator does not satisfy the test of marketability as on removal a turbo alternator gets dismantled into its components - steam turbine and alternator. He submits that the above decision is applicable on all fours to the facts of the present case having regard to the identical method of setting up of turbo alternator. He submits that the above decision of the Apex Court has been followed by the Tribunal in several cases and in this connection he cites the decisions of the Tribunal in the case of Wintech Taparia Ltd. v. CCE, Indore [2001 (132) E.L.T. 698], CCE, Chandigarh v. Vardhman Spinning Mills [2001 (132) E.L.T. 663] and Belliss India Ltd. v. CCE, Chennai [2001 (132) E.L.T. 364]. The ld. Counsel next put forth his alternate submission that in the event of it being held that the assembly and erection of turbo alternator results in marketable and hence excisable goods, then the benefit of exemption under Notification No. 67/95 is available to the goods in the light of the Tribunal decision in the case of Triveni Engg. & Industries Ltd. v. CCE, Allahabad [2001 (136) E.L.T. 617 (T) = 2000 (36) RLT 619 (CEGAT)] wherein the Tribunal had extended the benefit holding that the Notification does not require use of capital goods by the same manufacturer in his factory. Lastly, he pleads that the entire demand is time barred since the fact of erection and commissioning activities undertaken at the site of M/s. GVK was fully known to the department and there was extensive exchange of correspondence between M/s. GVK. and its jurisdictional Central Excise authorities and since there were conflicting views of the Apex Court on identical issues on excisability of goods erected at site in the decisions in the case of Quality Steel Tubes (P) Ltd. v. CCE, U.P. [1995 (75) E.L.T. 17 (S.C.)] and Mittal Engineering Works (P) Ltd v, CCE, Meerut [1996 (88) E.L.T. 622 (S.C.)] in terms of which the appellants were under the bona fide belief that assembly and erection of turbo and alternator did not give rise to excisability. He, therefore, prays for setting aside the duty and penalty amounts.
5. The submissions of the appellants are strongly opposed by Shri K.M. Mondal, ld. representative for the Revenue who draws our attention to the finding of the Commissioner on the aspect of marketability and the non applicability of the Supreme Court judgment in the case of Triveni Engineering and Industries [2000 (120) E.L.T. 273 (S.C.)]. He submits that the Commissioner has recorded a detailed finding on the distinction and difference between the facts of the Triveni Engg. & Industries case and the present case and, has therefore, rightly held that the ratio of the Triveni Enggg. & Industries judgment cannot be applied to the present case. On the aspect of eligibility to exemption under Notification 67/95-C.E., Shri Mondal submits that such benefit is not available for the reason that -
(a) M/s. GVK site cannot be construed as a factory within the scope of Section 2(e) of the Central Excise Act since no Central Excise registration was obtained by M/s. GVK, and
(b) Section 57Q of the Central Excise Act would show that the provisions thereof would apply to finished excisable goods of description specified in the annexure (hereinafter referred to as the final product) for the purpose of allowing credit of duty paid on capital goods by the manufacturer in his factory and for utilising the credit so allowed towards the payment of duty of excise leviable on the final product and in the present case the final product is 'electricity' which is non excisable.
Shri Mondal supports the findings of the Commissioner on the applicability of the extended period of limitation on the ground that M/s. ABB and M/s. GVK did not disclose the fact of manufacture of generating sets and clearance of the same and this was deliberately suppressed with intention to evade payment of duty. He, therefore urges that the demand and penalties be sustained.
6. We have carefully considered the rival submissions. The admitted process of assembly and erection of generating sets is as under :-
The turbo and alternator are first placed on concrete foundation; pre-alignment of generator with gearbox and thermal block was subsequently done; foundation bolts, guide and fixed keys were fixed in their respective packets in the foundation; intermediate shaft was then coupled with gearbox; final alignment of generator, gearbox and thermal block was made; grouting of key was done with the help of special imported grouting cement followed by further grouting of foundation bolts; finally coupling was done leading to completion of activity.
Looking to the above process, we find that it is identical to the facts of the Triveni Engg. & Industries judgment cited (supra). The Supreme Court held that "it is a common ground that a turbo alternator comes into existence only when a steam turbine and alternator with all their accessories are fixed at the site and only then it is known by a name different from the names of its components in the market. The Tribunal recorded the finding that fixing of steam turbine and the alternator 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. It also noted that removal of the machinery does not involve any dismantling of the turbine and alternator in the sense of pulling them down or taking them to pieces but only undoing the foundation bolts arrangement by which they are fixed to the platform and uncoupling of the two units and, therefore, the turbo alternator did not answer the test of permanency laid down by this Court in the case of Municipal Corporation of Greater Bombay (supra). In our view, the findings recorded do not justify the conclusion of the Tribunal in as much as on removal a turbo alternator gets dismantled into its components steam turbine and alternator. It appears that the Tribunal did not keep in mind the distinction between a turbo alternator and its components. Thus, in our view, the test of permanency fails." The Supreme Court then went into the HSN Explanatory Note Heading 85.02 and held that "it is clear that when generating sets consisting of the generator and its prime base mover are mounted together as one unit on a common base they are classified under the Heading 85.02; in this connection floors, concrete bases, walls, partitions, ceiling etc. even if specially fitted out to accommodate machines or appliances, cannot be regarded as a common base joining such machines or appliances to form a whole. On a combined reading of the Explanatory Notes, there can be no difficulty in inferring that installation or erection of turbo alternator in the concrete base specially constructed on the land cannot be treated as a common base and, therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable properly, as such it cannot be 'excisable goods' falling within the meaning of Heading 85.02."
7. In the light of the above judgment, which is squarely on the main issue in dispute, we are not in a position to accept the contention of Shri Mondal that Section Note 4 to HSN Explanatory Notes covering functional units, wherein existence or otherwise of common base is not relevant, as the appropriate Section Note 2 has to be applied for holding that the items in question are marketable and hence excisable goods, as also the reliance placed by the Commissioner on the case study of M/S. Birla Periclase Limited, Visakhapatnam who had relocated huge generating sets in dismantled condition. (The case report was also obtained behind the back of the appellants and was not furnished to them.).
8. Following the ratio of the Apex Court judgment in the case of M/s. Triveni Engg. & Industries Ltd. [2000 (120) E.L.T. 273 (S.C.)] we hold that the assembly of turbo and alternator to form turbo alternator does not pass the test of marketability and excisability and hence set aside the duty demand and also the penalties.
9. In view of our answering issue No. (1) in favour of the appellants, we do not deem it necessary to record any findings on the remaining 2 issues.
10. The impugned order is set aside and the appeal is allowed.