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2025 (6) TMI 679 - AT - Central ExciseEligibility for exemption under N/N. 12/2012-CE - HR plates used by the appellants in the manufacture of towers qualify as parts or components of Wind Operated Electricity Generators (WOEG) - extended period of limitation - penalty - HELD THAT - On going through the provisions of Sl. No. 332 of Notification No. 12/2012 it is is clear that Wind Operated Electricity Generator its components and parts thereof including rotor and wind turbine controller are eligible for exemption. It was also stated that where such uses elsewhere then in the factory of production the exemption shall be allowed if the procedure laid down in Central Excise (Removal of goods at concessional rate of duty for manufacture of Excisable goods) Rules 2001 is followed. It is found that full exemption from excise duty on parts manufactured and consumed captively within the factory of production for manufacture of goods specified in list 8 continued even after the budget in 2014. It is clear that HR Plates are not parts/components of WOEG. They are neither identifiable parts of towers. Just because the towers are made by using HR sheets they do not become parts of towers. Therefore even by assuming that parts of the part become part of the main machine to be correct raw material cannot be held to part of such machine. Kerala High Court has considered a similar issue in the case of Paul Lazar Vs. State of Kerala 1977 (8) TMI 142 - KERALA HIGH COURT held that copper wire used in manufacture of transformers is not a component part thereof; and component part has to be an identifiable object - thus HR plates/sheets cannot be separated are dismantled from the towers and therefore cannot be held to be parts or components of tower and thus of WOEG. Time Limitation - levy of penalty - HELD THAT - For the reason that the show cause notice has been issued invoking the above Rules the time limit prescribed under Section 11A would become redundant/otiose. It has been held by the Tribunal in the case of Emcure Pharmaceuticals Ltd. 2014 (9) TMI 26 - CESTAT MUMBAI held that even when the show cause notice is issued in terms of the B-17 bond the time limit prescribed under Section 28 of the Customs Act requires to be followed. It is found that even if the impugned case time limit prescribed under Section 11A requires to be adhered even when show cause notice is issued invoking Rules 2001. It is the Revenue who have given permission for procurement of goods without payment of central excise duty in terms of the Rules on an application made by the appellant. That being so it is not only unfair but also legally incorrect on the part of the Revenue to allege suppression fraud collusion misstatement etc. so as to invoke extended period - penalty imposed cannot also be sustained. Conclusion - i) HR plates used in the manufacture of towers do not qualify as parts or components of WOEG and thus are not eligible for exemption under Notification No. 12/2012-CE. ii) Extended period of limitation cannot be invoked. iii) Penalty also set aside. The appeal allowed partly holding that the demand for the normal period is sustained. Penalties imposed are set aside.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are: (a) Whether HR plates used by the appellants in the manufacture of towers qualify as "parts" of Wind Operated Electricity Generators (WOEG) and thus are eligible for exemption under Notification No. 12/2012-CE; (b) Whether raw materials (such as HR plates) used in the manufacture of parts of WOEG are eligible for excise duty exemption; (c) The applicability and scope of exemption notifications and related rules, including the impact of amendments and clarifications issued over time; (d) Whether the show cause notice issued by Revenue demanding excise duty on the HR plates is barred by limitation, especially considering the invocation of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001; (e) Whether penalty imposed on the appellants can be sustained in light of limitation and facts of the case. 2. ISSUE-WISE DETAILED ANALYSIS (a) Eligibility of HR Plates as Parts of WOEG Legal Framework and Precedents: Notification No. 12/2012-CE exempts non-conventional energy devices and their parts, including WOEG and its components. The Tribunal relied on precedents such as Pushpam Forging (2006), where flanges used to fabricate towers were held to be parts of WOEG; Technofab Manufacturing Ltd. (2003), which recognized nacelle bodies and towers as parts of windmills; Gemini Introtech (2017) and Rakhoh Enterprises (2016, 2018) affirming exemption for anchor rings and windmill doors respectively; SKF India Ltd. (2023) holding bearings as eligible parts. Court's Interpretation and Reasoning: The Court examined the nature of HR plates vis-`a-vis parts of WOEG. It noted that while parts like flanges, towers, nacelle bodies are identifiable components of WOEG, raw materials such as HR plates are not separately identifiable parts but inputs used in manufacturing parts. The Court emphasized that parts must be identifiable and separable from the main machine, which HR plates are not, as they undergo cutting, bending, welding, and other processes to become towers. Key Evidence and Findings: The Tribunal referenced the manufacturing process involving HR plates-cutting, beveling, bending, punching, drilling, welding, galvanization, and finishing-to produce towers classified under Chapter 7308.20. The Court observed that HR plates are raw materials and not components or parts of WOEG. Application of Law to Facts: The exemption under Notification No. 12/2012 applies to parts and components of WOEG, not to raw materials used to make those parts. The Court held that HR plates do not qualify as parts or components of WOEG and thus are not eligible for exemption. Treatment of Competing Arguments: The appellants argued that HR plates are parts of towers, which are parts of WOEG, invoking common sense and prior rulings. The Court rejected this, relying on the principle that raw materials cannot be considered parts merely because they are used to manufacture parts. The Court cited Kerala High Court's decision in Paul Lazar, which held that raw materials (copper wire) are not component parts unless identifiable. Conclusion: HR plates are raw materials, not parts of WOEG, and thus not eligible for exemption under Notification No. 12/2012-CE. (b) Scope and Interpretation of Exemption Notifications and Amendments Legal Framework: The Court analyzed the evolution of exemption notifications:
Court's Reasoning: The Court noted that exemption is granted only to parts/components of WOEG and their manufacture and consumption within or outside the factory subject to prescribed conditions. Raw materials used to manufacture parts are not covered. The Court observed that the amendments clarified and restricted exemption to parts, not raw materials. Application to Facts: HR plates, as raw materials, fall outside the ambit of exemption. The appellants' reliance on circulars and past orders was found insufficient to override the clear statutory scheme and classification. (c) Classification and Nature of HR Plates Legal Framework: The classification of WOEG under heading 8502, its parts under 8503, and HR plates under 7308 was considered. The Court referred to the HSN Explanatory Notes and various judicial precedents emphasizing strict interpretation of exemption notifications. Key Findings: HR plates are flat rolled products of iron or non-alloy steel used in structural works and classified under heading 7208/7308. They are raw materials, not finished parts or components. (d) Limitation and Validity of Show Cause Notice Legal Framework: Section 11A of the Central Excise Act prescribes limitation for issuance of show cause notices. The Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, regulate concessional removal and related proceedings. Court's Interpretation and Reasoning: Revenue contended that invoking the Rules 2001 removes the time bar under Section 11A. The Tribunal, relying on its earlier decision in Emcure Pharmaceuticals Ltd., held that even when show cause notices are issued under such rules, the limitation under Section 11A applies. The Court reasoned that allowing otherwise would render the limitation provisions redundant and unfair to the appellant who had declared the exemption and obtained permission from Revenue. Application to Facts: Since the appellant had obtained permission and filed declarations for exemption, no suppression or fraud was found to justify extended limitation. Therefore, the show cause notice issued beyond the prescribed period was held time barred. Treatment of Competing Arguments: Revenue's reliance on the Rules and bond conditions was rejected as illogical and contrary to the principle of limitation. Conclusion: The show cause notice is barred by limitation; hence, penalty imposed cannot be sustained. 3. SIGNIFICANT HOLDINGS "HR plates are not parts/components of WOEG. They are neither identifiable parts of towers. Just because the towers are made by using HR sheets they do not become parts of towers. Therefore, even by assuming that parts of the part become part of the main machine, to be correct, raw material cannot be held to part of such machine." "No exemption from Central excise duty has been provided for raw material used in the manufacture of parts of WOEG." "Even if the show cause notice is issued invoking the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, the time limit prescribed under Section 11A of the Central Excise Act is applicable and must be adhered to." "It is not only unfair but also legally incorrect on the part of the Revenue to allege suppression, fraud, collusion, misstatement etc. so as to invoke extended period when permission was granted and declarations filed by the appellant." The Tribunal upheld the demand for excise duty for the normal period but set aside penalties imposed due to limitation.
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