Customs, Excise and Gold Tribunal - Delhi
Nugas Technologies India (P) Ltd. vs Commissioner Of C. Ex. on 15 December, 2004
Equivalent citations: 2005(181)ELT75(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. The issue raised is whether conversion of old Diesel Engine into CNG Engine involves manufacture which attracts central excise duty.
2. The facts of the case are that diesel run buses of Delhi were found to be highly polluting. In order to reduce pollution, these engines were converted into CNG engines. Some of these engines were already in use from 1992 and the conversion was carried out in 2001-2002.
2. The contention of the appellants is that the process carried out by them is only a conversion process rendering diesel engines fit for handling CNG. It is being pointed out that the modification made in the engines is very small. Essentially, it involves modifying cylinder head so as to take in spark plugs and modifying piston to reduce compression ratio. It is being pointed out that except for these small changes, the old engines remain intact with most original parts. During the hearing of the case, it is also pointed out that the relatively the cost of conversion is small, Rs. 20,000/- as against the cost of a new engine Rs. 3,00,000/- and that fact alone would show that the activity is not one of manufacturing new goods (engines).
3. During the hearing of the case, learned Counsel for the appellants has pointed out that it is well settled that alteration/modification of an already existing manufactured product would not amount to manufacture. Reliance in this connection has been placed on the following judgements :
(i) U.O.I. v. Delhi Cloth and General Mills Co. Ltd. - 1977 (1) E.L.T. (J 199) (S.C.)
(ii) Shriram Refrigeration Industries v. C.C.E. -1986 (26) E.L.T. 353
(iii) Lathia Industries Supplies v. C.C.E. - 1987 (29) E.L.T. 751
(iv) Raman Electricals v. U.O.I. -1988 (35) E.L.T. 275 (All.)
(v) C.C.E. v. Hindustan Tyres (P) Ltd. - 1988 (35) E.L.T. 409
(vi) C.C.E. v. Maize Products Ltd. -1994 (73) E.L.T. 390
(vii) Rajasthan Tools Pvt. Ltd. v. C.C.E. -1999 (108) E.L.T. 467 (T)
(viii) Enfield India Ltd. v. C.C.E. -1996 (88) E.L.T. 773 (T)
(ix) Maschinenfabrik Polygraph (India) v. C.C.E. - 1999 (110) E.L.T. 833 (T)
(x) C.C.E. v. Molins of India Ltd. -1997 (95) E.L.T. 89 (T)
(xi) Reliance Storage Energy & Systems (P) Ltd. v. C.C.E. - 2001 (131) E.L.T. 210 (T)
(xii) Bengal Cylinder & Containers Pvt. Ltd. v C.C.E. - 2003 (153) E.L.T. 170 (T)
(xiii) C.C.E. v. Usha India Ltd. - 2000 (122) E.L.T. 870
(xiv) C.C.E. v. Lipi Data Systems Ltd. - 2003 (156) E.L.T. 968
(xv) Glass Equipment (India) Ltd. v. C.C.E. - 2003 (157) E.L.T. 411 (T) = 2003 (59) RLT 511.
4. We have heard the learned SDR. It is his submission that after conversion, the engines get a new identity - CNG engine as against the diesel engine. He has submitted that it is well settled that a process which involved the bringing into existence of a product with a new identity involves manufacture.
5. We have perused the record and considered the submissions made by both sides. It is elementary that excise duty is attracted only when new goods are manufactured. In the present case, IC engine for a bus is a complex machine attracting a price of over Rs. 3,00,000/-. In the case of DTC buses, such engines remain installed on the buses. The appellant has made some modification in the already existing engines so as to make them capable of accepting another fuel. The cost of such modification is very small, less than 10% of the cost of manufacturing a new engine. Therefore, the learned Counsel for the appellants is right in his contention that the modification in question does not bring into existence new goods attracting levy of excise duty.
6. In view of what is stated above, we hold that no manufacture of new goods is involved in the present case and the activity of conversion did not amount to manufacture. In this view of the matter, the demand for central excise duty is not sustainable. In the absence of duty, penalty is also not sustainable. In the result, the appeals are allowed after setting aside the impugned order.