Per C.N.B. Nair : The assessee as well as Revenue are in appeals against the same Order-in-Original No. CE-29/99 dated 30.11.1999 passed by the Commissioner, Central Excise, Guntur. Therefore, all the appeals were heard together and are disposed of by this common order.

2. Briefly stated, the background and facts leading to the passing of the adjudication order are this. M/s. KCP Limited, Macherla entered into a "Hydel Power Development" agreement dated 16.8.94 and 18.1.95 with the Andhra Pradesh State Electricity Board. Under the Agreement, M/s. KCP Ltd. was to set up a Hydel Power Project at Kallaguntla on the Nagarjuna Sagar Right Canal. M/s. KCP Ltd. entrusted the fabrication of items like Stop Log Gates, Draft Tubes, Trash Rocks etc. which were required for the hydel project, with M/s. Lakshmi Engineering. The items so fabricated were required to be transported to the Hydel Power Site and installed. A Show-cause Notice dated 6.11.97 was issued alleging that M/s. KCP Ltd. was liable to pay duty on the items fabricated. The impugned order has confirmed that demand. In addition, penalties have also been imposed on M/s. KCP Ltd. (the alleged manufacturer) and the officers of M/s. KCP Ltd. as well as Lakshmi Engineering Works.

3. M/s. KCP Ltd. has been resisting the demand on two grounds - (a) that items in question are merely fabricated elements of Hydel Project and that these are not excisable goods and (b) that even if these items are liable to be held as excisable goods duty demand is liable to be raised against their fabricator (manufacturer) and not M/s. KCP Ltd.

4. The submission of M/s. KCP Ltd. is that their first line of defence was required to be accepted in the light of the decision of the Karnataka High Court in the case of M/s. Tungabhadra Steel Products Vs. UOI - 1998 (98) ELT 334, which judgment was confirmed by the Hon'ble Supreme Court as reported in 1998 (101) ELT A-139.They have further relied on the decisions of the Supreme Court in the case of Quality Steel Tubes Vs. C.C.E. - 1995 (6) RLT 131 (SC)=1995 (75) ELT 17, Mittal Engineering Works Vs. C.C.E. - 1996 (17) RLT 612 (SC)=1996 (88) ELT 622 and Thermax Ltd. Vs. C.C.E. - 1998 (25) RLT 863 (SC)=1998 (99) ELT 481 also.

5. In support of the second defence, that the demand was required to be raised on the manufacturer of the structurals, reliance has been placed on the decision of the Hon'ble Supreme Court in the case of M/s. Besant Industries Vs. C.C.E., Kanpur - 1995 (6) RLT 1 (SC)=1995 (75) ELT 21 and the decision in the case of Mini Engineering Works - 1996 (86) ELT 260.

6. The grievance of the Revenue is that the Commissioner should have imposed higher mandatory penalty.

7. We have perused the records and have considered the submissions made by both sides. The facts of the present case are almost identical to the case decided in Tunghabhadra Steel Products case. The goods involved are also identical. In Tunghabhadra Steel Products case, the Karnataka High Court held that items in question could not be considered excisable goods and that decision remain confirmed by the Apex Court. We are, therefore, in agreement with the assessee that the duty liability cast on them is contrary to settled law. It is also well settled that in the absence of sustainable duty demand, penalties and other actions cannot survive inasmuch as Central Excise law's application is in the area of levy and collection of central excise duty and penalty and other actions arise from failure to pay duty. Since duty demand is not sustainable. Revenue's grievance about adequacy of penalty cannot arise.

8. In the view we have taken above, the impugned order is set aside and the appeals of the assessee and others against demand of duty, penalty and fine are allowed. Appeal of Revenue fails and is rejected.