SPECTRUM POWER GENERATION LTD. Vs. CCE

JUDGEMENT

(1.) The first appellant M/s Spectrum Power Generation set up 208 MW power plant with imported equipment near Kakinada in Andhra Pradesh. It awarded an "erection contract" to the second appellant M/s Rolls Royce Industrial Power (India) Ltd. in December 1994. Pursuant to this contract, the second appellant got the power plant erected and installed through two subcontractor vis -a -vis M/s UB Engineering Ltd. and M/s Crompton Greaves Ltd.

(2.) In March 2002, Commissioner, Central Excise, Visakhapatnam issued a Show -cause Notice alleging that the setting up of the aforesaid power plant involved manufacture of goods and that central excise duty of abut over Rs. 87 crore was payable by the second appellant (as the manufacturer) and that the first appellant was liable to a penalty. Both the appellants resisted the demands. The primary contention was that setting up of a power plant involved construction of immovable property and immovable property was not liable to central excise, as that tax was on goods. In adjudication, the Commissioner accepted the contention that power plant was not liable to duty since the same was immovable property. However, he turned the demand in another direction and held that even through the power plant itself was not goods, 3 main elements of the power plant namely - (1) Electric Turbo Generating Set (2) Heat Recovery Steam generator (Waste Heat Recovery Boilers) and (3) DCS Control and Instrumentation would be goods and liable to duty. Based on this finding, duty demand raised in the Show -cause Notice was confirmed at a lower amount of about Rs. 78.5 crores. A penalty of equal amount was also imposed. While these two levies were on the second appellant M/s Rolls Royce Industrial Power (India) Ltd., the Commissioner also imposed a penalty of Rs. 50 lakhs on the first appellant M/s Spectrum Power Generation Ltd. under Rule 26 of the Central Excise 2002. The present appeals challenge those orders.

(3.) The present appeals are a reiteration of the grounds taken in the adjudication. The primary objection against the levy of central excise duty is that the three items picked up by the Commissioner from the power plant for levy are also immovable property and that Commissioner should have desisted from levying duty on these items also, for the same reason for which he held the power plant to be not excisable. It is being pointed out that one look at the items in question or their lay out pictures would have convinced the Commissioner that these items are also not movable and are immovable property. With regard to the electric turbo generating set, it is being pointed out that it consists of gas/steam turbine and electric generator, which when coupled together, constitute electric turbine generating sets. It is being pointed out that a turbine weights around 136 MT and is erected on a concrete foundation which is 29 meters deep. The foundation is made of 2000 tons of concrete. The turbine is grouted/affixed to the foundation. Similarly, the generators are also heavy equipments erected and grouted to the earth. The generators and turbines are coupled after they are individually installed and embedded to the earth. Thus before and after coupling the turbine generators have become immovable property. The appellants have submitted that electric turbo generating set as aforesaid cannot be moved as such, without dismantling. The substance of the contention is that the chattel like this which is not movable as such, are not goods for attracting central excise duty. During the hearing of the case, earned Counsel for the appellants has pointed out that the non -excisability of turbo generator remains specifically settled by the decision of the Apex Court in the case of Triveni Engineering Industries Ltd. v. CCE .