M/s Quippo Energy Ltd. VS Commissioner Of Central Excise Ahmedabad-II
Central Excise Act (1 of 1944) , S.35L(b), S.2(f)— Levy of excise duty – Manufacture – Tests of transformation and marketability – Process of placing Genset within a steel container and fitting the steel container with components such as radiator, ventilation fan, air filter unit, oil tank, pipes, pumps, valve and silencer for providing “Containerized Genset” or “Power Pack”, satisfied tests of transformation and marketability – The process would amount to ‘manufacture’ – Levy of excise duty by assessing the Gensets under sub-heading 8502.2090 of Schedule to the Customs Tariff Act, 1975, was proper.
2015 AIR SCW 3362-Relied on
In the instant case, appellant was engaged in the business of providing containerised gas generating sets known as the Power Packs on a lease basis. Levy of excise duty by assessing the Gensets under sub-heading 8502.2090 of Schedule to the Customs Tariff Act, 1975, was under challenge.
Held, process of placing the Genset within the steel container and fitting that container with additional, integral components brought into existence a new, distinct, and marketable commodity. Said process would amount to “manufacture” under Section 2(f)(i) of the Act, 1944 and appellant would be liable to pay excise duty.
The two pronged test laid down in ‘Servo-Med’ was applied. The test is – (i) Transformation test (Whether a distinct product with a new name, identity, character, or use emerges?); and (ii) Marketability test (Whether the transformed product is marketable as such?).
Determining the ‘character’ and ‘identity’ of goods is an inherently fact-specific inquiry, necessitating assessment on a case-to-case basis. In facts of case, Court found that change in the form/structure and the addition of new components to the imported Genset had transformed it and brought into existence a different product, i.e. the Power Pack, which has its own distinct character and identity. On a preliminary analysis itself, it was amply evident that the constituent components of the imported Genset are very different from the constituent components of the Power Pack. The additional components were ‘parts’ of the Power Pack. Admittedly, once the Genset was placed in the steel container, these additional components, such as the radiator, ventilator fan and air filter unit, were required for its effective functioning. Without these additional components, the Power Pack would not produce electricity within the steel container and thereby be able to fulfil its primary function. Thus, these additional components were not mere ‘accessories’ attached for the sake of convenience. The process undertaken by the appellant imparted the core functional utility of portability to the Genset, a utility that was non-existent in the product at the time of its import. The imported Genset and the Power Pack are two different commodities with distinct constituent elements, structure and functional utility. The test of transformation was satisfied.
Since the Power Packs were subject of the lease agreements and were delivered to the ultimate customer, marketability was an established and undisputed fact.
