The court established that the transformation of Gensets into Power Packs through additional components constitutes 'manufacture' under the Central Excise Act, meeting the transformation and marketability criteria.

JUDGMENT :

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the following parts:

1. These appeals under Section 35L(b) of the CENTRAL EXCISE ACT , 1944 (for short, the “Act, 1944”) are at the instance of an assessee and are directed against the Final Order dated 15.10.2015 (for short, the “Impugned Order”) passed by the Customs, Excise and Service Tax Appellate Tribunal West Zonal Bench (for short, the “CESTAT”) at Ahmedabad in Appeal bearing Nos. E/640/2009-DB, E/1284,1285/2009-DB & E/557/2012-DB respectively, by which all the three appeals filed by the assessee came to be partly allowed by setting aside: (i) the demand of duty with interest for the extended period of limitation and (ii) the imposition of fine, penalty and confiscation of goods. However, the CESTAT in the impugned order held that the activities undertaken by the assessee- appellant to set up the “Containerized Gensets” would amount to “manufacture” and the same are liable to be classified under the sub-heading No. 8502.2090 of the Schedule to the Central Excise Tariff Act, 1985 (for short, the “Act, 1985”). Accordingly, the demand of duty along with interest for the period other than the extended period was upheld.

A. FACTUAL MATRIX

2. The appellant is engaged in the business of providing containerised gas generating sets known as the Power Packs on a lease basis.

3. To carry out the above business, the appellant imported Gas Generating Sets (for short, “Gensets”) consisting of an engine (prime mover) coupled with an alternator on a common base frame. The Gensets are imported along with the standard accessories and total electronic management system. At the time of import, the Customs Authorities assessed the Gensets under the sub-heading 8502.2090 of the Schedule to the Customs Tariff Act, 1975, categorising them as “Generating sets with spark-ignition combustion piston engines of an output exceeding 3.5 kVA”.

4. Since the Gensets were to be provided on a lease basis, the appellant considered it unfeasible to install them at customer premises. This was because, in cases of non-renewal of the lease, the Genset would have to be relocated to the premises of a new customer.

5. In such circumstances, to avoid inconvenience during shifting and to provide for ease of transportation, the appellant placed the Genset in a steel container. Further, in order to ensure the functioning of the Genset within the container, the appellant indigenously procured components such as radiator, ventilation fan, air filter unit, oil tank, pipes, pumps, valve, silencer and fitting items and fixed them to the container. The appellant has described the process as follows:

(i) Using jacks and rollers, the imported equipment is first rolled into a steel transport container and properly positioned on anti- vibrating mounting pad.

(ii) Remote radiator is lifted by crane and properly positioned onto the roof of the container. Further, it is arrested on the roof with suitable sized nuts, bolts and washers.

(iii) Lube Oil Tank is lifted by crane and moved onto the roof of the container. It is 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 thereaf