Custom, Excise & Service Tax Tribunal
Larsen & Toubro (Ecc Division) vs Mysore on 10 March, 2026
Central Excise Appeal No. E/2400, 2401/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Central Excise Appeal No. 2400 of 2012
(Arising out of Order-in-Original No. 03/CCE/2012 dated 31.05.2012
passed by the Commissioner of Central Excise, Customs & Service Tax,
Mysore.)
M/s. Larsen & Toubro (ECC Division)
RLMS - MESCOM Project (CKM) Site Store,
MRM Compound, Near Check Post,
Kadur - 577 548. ........Appellant(s)
VERSUS
Commissioner of Central Excise,
Vinaya marga, Siddharthanagar,
Mysore - 570 011 ......Respondent(s)
WITH Central Excise Appeal No. 2401 of 2012 (Arising out of Order-in-Original No. 03/CCE/2012 dated 31.05.2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Mysore.) M/s. Larsen & Toubro (ECC Division) RLMS - MESCOM Project (CKM) Site Store, MRM Compound, Near Check Post, Kadur - 577 548. ........Appellant(s) VERSUS Commissioner of Central Excise, Vinaya marga, Siddharthanagar, Mysore - 570 011. ......Respondent(s) APPEARANCE:
Mr. N. Viswanathan, Advocate for the Appellant Mr. M. A. Jithendra, Asst. Commissioner (AR) for the Respondent CORAM:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order Nos. 20269-20270 /2026 Date of Hearing: 11.09.2025 Date of Decision: 10.03.2026 Page 1 of 14 Central Excise Appeal No. E/2400, 2401/2012 PER: P.A. AUGUSTIAN These Appeals are filed against Order-in-Original No. 03/CCE/2012 dated 31.05.2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Mysore.
2. The issues involved in the present appeals are;
(i) whether the activities carried out by the Appellant amounts to manufacture; and
(ii) whether the demand can be confirmed by invoking the extended period of limitation is tenable.
3. The brief facts are M/s. Larsen & Toubro (ECC Division), the Appellant is engaged in construction and assembly of electrical equipment. They are awarded contract for execution of Rural Load Management System (RLMS), in Chikmagalur Division of Shimoga on a turnkey basis including supply of all equipment, material, testing and commissioning. The scope of work includes providing Rural Load Management unit consisting of programmable logic controller, moulded case miniature circuit breaker (MCCB), miniature circuit breaker (MCB), transformers, energy meter and others. As per the information gathered by the Preventive unit, investigation was taken up and consequently, a SCN was issued alleging that the appellant is manufacturing and clearing assembled RLMUs without payment of central excise duty and without following central excise procedures. Thereafter Adjudication authority as per the impugned order held that the activity of assembly of the RLMUs amounts to manufacture and confirmed demand with interest and also imposed penalty under various provisions of Central Excise Act, 1944. Further, penalty was also imposed on the Co-appellant. Aggrieved by said order, present appeals are filed.
4. When the appeals came up for hearing, the Learned Counsel for the Appellant draws our attention to the finding in the impugned order and submits that the above finding is factually incorrect. As Page 2 of 14 Central Excise Appeal No. E/2400, 2401/2012 per the impugned order, Adjudicating authority held that M/s. L & T., ECC Division, Kadur have sub-contracted the said work of assembly to M/s. SAR Engineering Services, Bangalore, who, in turn, have sub-contracted the said work to M/s. Surabhi Electricals, Kadur. All the raw materials / components required for the said assembly have been purchased by M/s. L & T. ECC Division, Kadur and neither M/s. SAR Engineering Services, Bangalore nor M/s. Surabhi Electricals, Kadur have purchased any raw materials / components. From the quotation / work orders of M/s. Surabhi Electricals, Kadur and M/s. SAR Engineering Services, Bangalore, it is seen that M/s. Surabhi Electrcials, Kadur have provided only manpower to M/s. L & T ECC Division, Kadur for assembly of components into the RLMUs. Thus, the adjudicating authority held that M/s. L & T. ECC Division, Kadur are the manufacturer of the assembled RLMUs in terms of Section 2(f) of the Central Excise Act, 1944.
5. In this regard, Learned Counsel draws our attention to the statement recorded on 19.01.2011 where to a specific question to explain the activities of M/s. SAR Engineering Services, it was stated that M/s. SAR Engineering Services started in 2007, they are consulting Engineers in Power Distribution and Automation for Electrical Systems, they do not have any branches. In addition to the above activities, they have been given a contract by M/s. L&T, ECC Division, Bangalore for installation /assembly of RLMS Components, PLC Programming, Testing and Commissioning of RLMS Box at Kadur. Further, it is stated that since 01.04.2010, they were given the contract of assembly of RLMS Unit by M/s. L&T Ltd., ECC Division, Bangalore and subcontracted the work of assembly of the said RLMS Units to M/s Surabhi Electricals, Kadur. All the components required for the assembly of the said RLMS Unit except for Programmable Logic Controller (PLC) have been supplied by M/s. L&T Ltd., ECC Division to M/s. Surabhi Electricals, Kadur under cover of delivery challans. They don't have any of the delivery challans raised by M/s. L&T on M/s. Surabhi Electricals. M/s Surabhi Electricals, Kadur have assembled the various components viz. MCB, Page 3 of 14 Central Excise Appeal No. E/2400, 2401/2012 MCCB, Contactors, Energy Meters and GSM Modem into the RLMS Box which has already been fitted with Bus Bars, Wires and Current Transformers. This assembling work has been done by the laborers of M/s. Surabhi Electricals at the premises of M/s. L&T Ltd., ECC Division, RLMS Mescom Project (CKM Site Store), MRM Compound, Near Check post, Kadur. They have supervised the work done by M/s. Surabhi Electricals. They have also stated that M/s Surabhi Electricals have assembled 772 numbers of 25/63 KVA RLMS Units.
6. The Learned Counsel also draws our attention to the statement recorded on 15.03.2011 from M/s. SAR Engineering Services and to a specific question, it is stated that since 01.04.2010, the contract of assembly of RLMS Unit is done by M/s. SAR Engineering Services, Bangalore. This assembling work has been done by their labourers at the premises of M/s. L&T Ltd., ECC Division, RLMS Mescom Project (CKM Site Store), MRM Compound, Near Checkpost, Kadur. M/s. SAR Engineering Services assembled 408 numbers of 25 KVA RLMS Units and 314 numbers of 63 KVA RLMS Units. Learned counsel further submits that similar activities were carried out by M/s. Eagle Electricals, Kadur and alleging that the activity carried out by M/s. Eagle Electricals as manufacturing, proceedings were initiated and Adjudication authority as per the Order-in-Original No. MYS- EXCUS-000-COM-017-13-14 dated 31.03.2014 observed that;
"M/s.Eagle Electricals, Kadur have undertaken the activity of assembling of various components into the RLMU boxes as mentioned above which amounts to manufacture. M/s. L&T, ECC Division, Kadur have purchased all the raw materials required for assembly of RLMU and supplied the same to M/s. Eagle Electricals, Kadur under the cover of delivery challans for assembly and return. However, it appears that neither M/s L & T, ECC Division, Kadur nor M/s Eagle Electricals, Kadur have followed Central Excise procedures for movement of raw materials and finished goods as laid down in the Notification No. 214/86-CE dated 25.03.1986 as amended. From the foregoing, it appeared that M/s. Eagle Electricals, Kadur are the manufacturers of the assembled RLMUs in terms of Section 2(f) of Page 4 of 14 Central Excise Appeal No. E/2400, 2401/2012 the Central Excise Act, 1944, and the said excisable goods manufactured and cleared by them appears to be not eligible for exemption under Notification No. 214/86-E dated 25.03.1986 as amended for non-observance of the procedure and non-fulfillment of the conditions prescribed under the said Notification". In this regard the Learned Counsel draws our attention to the Circular No. 56/56/94-CX dated 14.09.94 as regards the assembly and inspection, it is categorically stated that "In view of the above, in cases where the goods are manufactured by a job worker out of raw materials received from a person or a manufacturer and where the relationship between the raw material supplier and the job worker is on principal to principal basis, the job worker will be the actual manufacturer. The question as to whether the relationship between the raw material supplier and the job worker is on principal-to- principal basis will depend on the relevant facts and circumstances of the case. This relationship could be ascertained with reference to the facts such as whether the job worker has received any financial assistance from the supplier of the raw material, whether the supplier of the raw material exercises any control over the management of the affairs of the job worker and whether the job worker is an independent entity and not merely a dummy or an agent of the raw material supplier. If it is found that the job worker is an independent entity and carries out the manufacturing activities independently and is not an agent, of the raw material supplier or a dummy, then the job worker will be treated to be the manufacturer and also in the Circular No. 58/1/2002- CX dated 15.01.2002 it is clarified that the turn key projects like Steel Plants, Cement plants, Power plants etc., involving supply of large number of components, machinery, equipments, pipes and tubes etc., for their assembly /installation /erection /integration /inter-connectivity on foundation /civil structure etc. at site, will not be considered as excisable goods for imposition of central excise duty the components, however, would be dutiable in the normal course.Page 5 of 14
Central Excise Appeal No. E/2400, 2401/2012
7. Learned Counsel further submits that the case records reveal that the Audit Section of Mangalore Central Excise Commissionerate have made a reference to the Headquarters Preventive Section of Mangalore Central Excise Commissionerate vide letter dated 02.03.2010 informing that the activities undertaken by M/s. Eagle Electricals for supply of RLMUs to M/s. L & T appeared to amount to manufacture of excisable goods and that Central Excise duty was not paid on the same. On the basis of the said reference the Headquarters Preventive Section of Mangalore Central Excise Commissionerate have conducted preliminary investigation to find out whether activities undertaken by M/s. Eagle Electricals for supply of RLMUs to M/s. L & T amount to manufacture by recovering relevant records and recording statements. As they have found that the activity of assembly was undertaken at Kadur, which falls under Mysore Central Excise Commissionerate they have referred the matter to respondent Commissionerate vide letter dated 27.09.2010. The above facts reveal that the department had full knowledge about the activity of assembly of RLMUs by M/s. Eagle Electricals for M/s. L&T on the date of Audit, which was 04.01.2010. The department had at that point of time taken a stand that the same did not amount to manufacture. Further, the Service Tax payable on such activity has been recovered for the period from 2006-07 to 2009-10. M/s. Eagle Electricals have also accepted the view of audit and paid the entire Service Tax with interest on different dates during the period from 05.01.2010 to 27.03.2010. Therefore, the said Service Tax has been recovered for the larger period of limitation, which is applicable when suppression of facts is involved. The present show cause notice is issued on 03.10.2012 for demand of duty on the same activity of assembly of RLMU undertaken during the period from 24.10.2007 to 28.02.2009, by alleging suppression of facts and invoking the larger period of limitation under proviso to Section 11A of the Central Excise Act, 1944. Further held that the present show cause notice has been issued by invoking suppression of facts again, after a lapse of more than 2 years from the date of Page 6 of 14 Central Excise Appeal No. E/2400, 2401/2012 Audit and recovery of Service Tax on the same activity and for the same period. Under such facts and circumstances, the allegation of suppression of facts will not sustain and held that the present show cause notice issued for demand of Central Excise duty on assembly of RLMU is time-barred. As the entire demand is hit by limitation, not proposed to discuss any merits of this case. Accordingly, the demand of Rs.9,22,97,003/- being the Central Excise duty/Cess on 7048 RLMUs assembled by M/s. Eagle Electricals during the period from 24.10.2007 to 28.02.2009 is liable to be dropped. Consequently, the charges leveled against M/s. Eagle Electricals proposing confiscation, demanding interest and proposing imposition of penalties also were dropped as the same relate to the demand of duty mentioned above. The proposal to impose penalty on M/s. L&T, Shri. Subodhchandra Shetty and Shri Satish Sangameswaram under Rule 26 of the Central Excise Rules, 2002 also do not sustain as the same is dependent on the demand of duty on 7048 RLMUS.
8. As regards marketability of the goods, the Learned Counsel draws our attention to the judgment of Hon'ble Supreme Court in the matter of Hindustan Zinc Ltd Vs. CCE, 2005(181) 170 (SC) wherein it held that the Department had not proved capability of marketability and thereby the goods were not excisable. In the present case the assembly had been done as per the specification of M/s. Mescom and without all the components i.e. RLM box, modem, PLC etc., RLM is not capable of performing the specific function of regulating the electricity. This fact was confirmed by Shri. J Stalin Babu, Manager M/s L & T, in his statement dated 25.10.2010.
9. In this regard, the Learned Counsel submits that the activity of assembling of duty paid components viz. Energy Meter. GSM Modem, Power Contactor, MCB, MCCB and PLC into the duty paid Rural Load Management Unit pre-fitted with panel accessories viz. wires, bus bars, insulators, sleeves and three current transformers, undertaken by them at RLMS-MESCOM Project (CKM) Site Store, MRM Compound, Near Check Post, Kadur, resulting in the Page 7 of 14 Central Excise Appeal No. E/2400, 2401/2012 emergence of a new product viz. Rural Load Management Unit (RLMU) capable of being bought and sold and capable of performing specific functions when assembled together as a unit i.e. regulating electricity, should not be held as an activity amounting to "manufacture" in terms of Section 2(f) of the Central Excise Act, 1944.
10. Thus the Learned Counsel submits that; the show cause notice also seems to be ignorant of the true position that the RLM boxes even after fitted with certain components and parts and its installation on a transformer, there has been a incorrect twist in the notice as if the goods at the time of removal to the location has become RLMU which is a travesty of truth made for the sole purpose of averring the concept of manufacture for a duty liability. In other words, the commodity mentioned in the entry relating to RLM Boxes did not undergo the necessary process of transformation so as to make excise duty exigible as a distinct product.
11. The Learned Counsel further submits that the Appellant had registered themselves with service tax authority and discharged tax on the turnkey project undertaken by them under the taxable category of 'erection and commissioning' as required under the Finance Act, 1994. Thus, it is an admitted fact that Appellant had registered themselves with service tax authority under 'erection. commissioning or installation' for providing service at the site rented by them for the above purpose namely Kudur, besides remitting the applicable VAT under the works contract tax on deemed sale basis. A concept not available under the excise provision. Further the Appellant had admittedly procured the excise duty paid components required for use in the erection of the above contract namely Programmable Logic Controller (PLC) and originally engaged M/s. Eagle Electricals prior to 01.04.2010 and later M/s. SAR Engineering service, Bangalore who are professional and qualified consultant engineers for power distribution, automation for electrical systems.
Page 8 of 14Central Excise Appeal No. E/2400, 2401/2012
12. The learned Counsel further submits that the RLMU emerging at the site could never be considered as a removal in terms of Rule 4 of the Central Excise Rules also as no separate invoice has been raised for the sale of the RLMU by the appellant the moot question that arise for consideration is whether there was a sale of the so- called RLMU within the meaning of Section 2 (g) of the Central Excise Act to subject the goods to duty of excise at all. For the same reason the valuation of the so-called RLMU done by the respondent taking the ex-works value indicated in the tender document as the value of the RLMU arising at the transformer site as the transaction value in terms of Section 14 of the Central Excise Act is highly improper.
13. As regards invoking extended period of limitation, Learned Counsel submits that the whole issue only hinges on the correct interpretation of the term manufacture, Manufacturer, Marketability and goods which are pure questions of law meaning susceptible to different interpretation covered by plethora of judicial pronouncements giving out different views whether the invocation of the extended period of time and imposition of the mandatory penalty is justified on the only allegation that the appellant had suppressed the fact of manufacture and removed the goods in contravention of the provisions of the Central Excise Rules without alleging or bringing out any fact showing that the appellant in fact had any intention to evade the payment of the duty which is a sine quo non for the sustainability of the proviso to Section 11 A of the Central Excise Act. Learned Counsel further submits that it is an admitted fact that the appellant had registered themselves with the department for providing the installation and commissioning services provided in respect of the same contract entered into with MESCOM but also their previous contractors Eagle Electricals had registered with the department for the assembly operations undertaken at the appellant's Kadur site thereby making their entire transactions known to the department with no room to even presume any intention against the appellant that they intended to evade the Page 9 of 14 Central Excise Appeal No. E/2400, 2401/2012 payment of the duty. Further since the components procured by the appellant being duty paid, the input cenvat credit of the duty so paid would be very much available for the discharge of the duty on the RLMU, if it was liable for duty also negate the possibility of maintaining the allegation of intention to evade the payment of the duty. Hence the invocation of the proviso and the consequent imposition of the penalty is totally incorrect and unsustainable.
14. Learned Counsel further submits that even if it is held that appellant is liable to pay excise duty, appellant is eligible for benefit of the input duty credit and cum-duty valuation, and goods are not liable for confiscation to impose fine and penalties.
15. As regards the penalty imposed on the 2nd appellant under Rule 26 of the Central Excise Rules, Learned Counsel submits that the penalty under Rule 26 of the CE Rules on the 2nd appellant do not meet any of the express requirement since the 2nd appellant being only a Head working away from the Kadur site. Inflicting the penalty on him that too when he is only an employee of the 1st appellant and the matter is susceptible to different interpretation of the statutory provision is highly improper and totally unjustified.
16. Learned Counsel relied on the following decisions:-
(i) P M Abdul Latif and Others Vs. Asst. Collector of Central Excise, Trichirapalli - 1985 (22) ELT 785 (Mad.)
(ii) Kerala State Electricity Board vs. Collector of Central Excise - 1990 (47) ELT 62 (Tribunal)
(iii) Apex Electricals Pvt. Ltd. Vs. Union of India - 1992 (61) ELT 413 (Guj.)
(iv) Ashok Leyland Ltd. Vs. Collector of Central Excise -
1993 (68) ELT 65 (Mad.)
(v) Gujarat Electricity Board Vs. Collector of C. Ex., Vadodara - 1997 (93) ELT 418 (Tribunal) Page 10 of 14 Central Excise Appeal No. E/2400, 2401/2012
(vi) Blue Star Ltd. Vs. Collector of Central Excise, Madurai - 1999 (107) ELT 609 (Tribunal)
(vii) Tansi Vs. Collector of Central Excise, Trichy - 1999 (111) ELT 645 (Tribunal)
(viii) Chief Engineer (IRR.), PWD Vs. Commissioner of C. Ex., Madras - 2000 (115) ELT 789 (Tribunal)
(ix) Tamil Nadu Electricity Board Vs. Commissioner of C. Ex., Coimbatore - 2001 (133) ELT 639 (Tri. - Del.)
(x) Collector of C. Ex., Trichy Vs. Tamilnadu Electricity Board - 2001 (134) ELT 91 (Tri. - Chennai)
(xi) Kartik Telecomptrols (P) Ltd. Vs. Commissioner of C. Ex., Delhi - I - 2002 (141) ELT 800 (Tri. - Del.)
(xii) Circular No. 49/90-CX.8 dated 23 Jul 1990
(xiii) Circular No. 56/56/94-CX dated 14 Sep 1994
(xiv) Circular No. 58/1/2002-CX dated 15 Jan 2002
(xv) Circular No. 643/34/2002-CX dated 01 Jul 2002 (xvi) Collr. Of C. Ex., Coimbatore Vs. Dynaspede Integrated Systems P. Ltd. - 1997 (89) ELT 193 (Tribunal) (xvii) L E Industries Vs. Commissioner of Customs, (AC) Mumbai - 2005 (180) ELT 409 (Tri. -
Mumbai) (xviii) Commissioner of C. Ex., Bangalore Vs. Venlon Polyster Films Ltd. - 2005 (181) ELT 282 (Tri. - Bang.) (xix) Bharat Bijlee Ltd. Vs. Commissioner of C. Ex. & Cus., Belapur - 2009 (234) ELT 652 (Tri. -
Mumbai.)
17. Learned Authorized Representative (AR) for the Revenue reiterated the finding in the impugned order and submits that M/s. SAR Engineering through M/s Surabhi Electricals, Kadur have supplied only manpower to M/s. L&T for assembly work at the said premises of M/s. L&T, Kadur. It is further stated that no PLCs have Page 11 of 14 Central Excise Appeal No. E/2400, 2401/2012 been supplied by M/s. L&T either to M/s SAR Engineering or M/s Surabhi Electricals. Normally the PLC's programming need to be loaded only after charging the PLC for minimum 36 hours. Hence PLCs are programmed and installed at site at the time of commissioning of Transformers. Further stated that M/s L&T Ltd., ECC Division is carrying out the activity of programming and fixing of PLCs in the RLMS Unit at site. Thus, appellant is the manufacturer, and Adjudication Authority rightly confirmed demand with interest and imposed penalties as per impugned order.
18. Heard both sides and perused the records.
19. As regards classification of the activity carried out by the appellant as manufacturing, we find that as per the statement recorded on 19.01.2011 where to a specific question to explain the activities of M/s. SAR Engineering Services, it is stated that M/s. SAR Engineering Services started in 2007, they are consulting Engineers in Power Distribution and Automation for Electrical Systems, they do not have any branches. Further stated that since 01.04.2010, they had given the contract of assembly of RLMS Unit by M/s. L&T Ltd., ECC Division, Bangalore and sub-contracted the work of assembly of the said RLMS Units to M/s. Surabhi Electricals, Kadur. M/s. SAR Engineering Services assembled 408 numbers of 25 KVA RLMS Units and 314 numbers of 63 KVA RLMS Units. Similar activities were carried out by M/s. Eagle Electricals, Kadur and alleging that the activity carried out by M/s. Eagle Electricals as manufacturing, proceedings were initiated and Adjudication authority as per the Order-in-Original No. MYS-EXCUS-000-COM-017-13-14 dated 31.03.2014 observed that; "M/s.Eagle Electricals, Kadur have undertaken the activity of assembling of various components into the RLMU boxes as mentioned above which amounts to manufacture. Thus, we find that job worker M/s. Eagle Electricals, Kadur are considered as the manufacturers of the assembled RLMUs in terms of Section 2(f) of the Central Excise Act, 1944, and benefit of exemption under Notification No. 214/86-CE dated 25/03/1986 Page 12 of 14 Central Excise Appeal No. E/2400, 2401/2012 also denied to them for non-observance of the procedure and non- fulfillment of the conditions prescribed under the said Notification. Further, we find that as per the Circular No. 56/56/94-CX dated 14.09.94, in cases where the goods are manufactured by a job worker out of raw materials received from a person or a manufacturer and where the relationship between the raw material supplier and the job worker is on principal to principal basis, the job worker will be the actual manufacturer. Thus, if it is found that the job worker is an independent entity and carries out the manufacturing activities independently and is not an agent, of the raw material supplier or a dummy, then the job worker will be treated to be the manufacturer. Further as per the Circular No. 58/1/2002- CX dated 15.01.2002, turnkey projects like Steel Plants, Cement plants, Power plants etc. involving supply of large number of components, machinery, equipments, pipes and tubes etc., for their assembly /installation /erection /integration /inter-connectivity on foundation /civil structure etc. at site, will not be considered as excisable goods for imposition of central excise duty. The components, however, would be dutiable in the normal course. Further, Appellant had registered themselves with service tax authority under 'erection. commissioning or installation' for providing service at the site rented by them for the above purpose namely Kudur, besides remitting the applicable VAT under the works contract tax on deemed sale basis. A concept not available under the excise provision. Further the Appellant had admittedly procured the excise duty paid components required for use in the erection of the above contract namely Programmable Logic Controller (PLC) and originally engaged M/s. Eagle Electricals prior to 01.04.2010 and later M/s. SAR Engineering service, Bangalore who are professional and qualified consultant engineers in power distribution, automation for electrical systems. Thus, the appellant cannot be considered as manufacturer of the goods and is not liable to pay excise duty.
20. As regards invoking extended period of limitation, we find that the appellant had registered themselves with the department for Page 13 of 14 Central Excise Appeal No. E/2400, 2401/2012 providing the 'installation and commissioning' services provided in respect of the same contract entered into with MESCOM but also their previous contractors Eagle Electricals had registered with the department for the assembly operations undertaken at the Kadur site thereby making their entire transactions known to the Department with no room to even presume any intention against the appellant that they intended to evade the payment of the duty. Thus, demand confirmed by invoking the extended period of limitation is also unsustainable.
21. Accordingly, the impugned orders are set aside, and appeals are allowed with consequential relief, if any, in accordance with law.
(Order was pronounced in Open Court on 10.03.2026.) (P.A. Augustian) Member (Judicial) ( Pullela Nageswara Rao) Member (Technical) hr/Sasi Page 14 of 14