DIESEL COMPONENTS WORKS Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE fight in this case is between two wings of the Central Government. Excise Department tried to realise a sum of Rs. 33,80,27,960.00 being the duty amount payable by the Railways by way of duty on the components manufactured by their Diesel Component Works, Patiala, which went into the repair of diesel locomotives. An equal sum has also been imposed as penalty on the Railways, namely, Diesel Component Works, Patiala invoking the provisions under Section 11 AC of the Central Excise Act, 1944 read with Rule 173Q of the Central Excise Rules, 1944. Interest on the above amount at the rate of 20% under Section 11AB of the Act has also been levied.

(2.) THE short facts necessary for the disposal of these appeals are as follows.

(3.) DIESEL Component Works, Patiala, under the Ministry of Railways, is engaged in the activity of reconditioning diesel locomotives falling under Chapter 87 of the Schedule to the Central Excise Tariff Act, 1985. Apart from reconditioning of diesel locomotives, they were manufacturing parts of compression - ignition, internal combustion piston engines, which, according to the Excise Department, fall under sub -headings 8409.00 and 8483.00. The goods manufactured were captively consumed in reconditioning the diesel locomotives to be used by Zonal Railways. The appellant did not obtain Central Excise registration. Twelve show cause notices were issued to the Diesel Component Works, Patiala, hereinafter referred to as the company, requiring them to show cause why the produce manufactured by them should not be classified under various sub -headings in Chapters 84 and 85 of the Central Excise Tariff Act. They were also asked to show cause why scrap generated in the factory should not be subjected to assessment of duty. Detailed objections were filed disputing claims raised in the show cause notices. The main contention was that the component parts manufactured by the appellant company were of Railway locomotives falling under Tariff Heading 86.07 and consequently, eligible to exemption from duty as per Notification No. 197/87 -CE dated 28 -8 -1987. Regarding the scrap, it was contended that the major portion of the scrap generated in the factory was of the unusable parts removed from old and worn out locomotives and are not liable to any duty. All these contentions raised by the company were negatived by the Commissioner in the order -in -original No. 176 -187/CE/98 dated 5 -3 -1999.