Availability of exemption n/Notf No. 205/88-CE to Cables designed for use in Windmills

PJ/Case Laws/2011-12/1454

Case: Uniflex Cables Ltd. Versus Commissioner of Central Excise, Surat-II

Citation: 2011 (271) E.L.T. 161 (S.C.)

Issue:- Cables - Insulated electrical wires and cables designed for use in wind mill whether eligible for exemption under Notification No. 205/88-CE as parts of windmills or any specially designed devices?

Issue involved of interpretational nature – whether penalty imposable?

Brief Facts:- Appellant is engaged in the manufac ture of insulated wires and cables falling under tariff sub-heading No. 8544.00. They claimed benefit under Notification No. 205/88-CE, dated 25-5-88 as amended by Notification No. 57/95. The said notification grants exemption from payment of excise duty in respect of manufacture of wind mills, parts of wind mills and any specially designed devices which run on wind mills. As appellant had received orders from various windmill manufacturers for specially designed electrical cables which were to be used in the manufacture of wind mills, the appellant filed a declaration under Rule 173-B of the Central Excise Rules, 1944 claiming nil rate of duty so as to avail benefit under the aforestated Notification for the insulated cables manufactured by it and supplied to the manufacturers of wind mills for using the same as part of wind mills for the period commencing from May, 1995 to February, 2006. The appellant reversed the modvat credit taken on inputs for availing the exemption benefit under Notification No. 205/88-CE.

Department issued show cause notices to the appellant demanding duty not paid by appellants on the electrical cables supplied to the manufacturers of windmills. Department contended that the electric cables were neither parts nor specially designed devices, which were necessary for manufacturing or running wind mills. Therefore, the benefit under the aforestated notification could not have been availed by the appellant.

The Commissioner confirmed the demand of excise duty amount and imposed penalty under Rule 173Q(1) of the Rules.

Appellant filed appeal before the Tribunal. The Tribunal relied upon the decision in Nicco Corporation Limited v/s Commissioner of Central Excise, Calcutta whereby an analogous issue was adjudicated and decidedagainst the concerned assessee. Aggrieved by the said order, appellant filed appeal before the Supreme Court.

Appellant’s Contention:- Appellant submitted that the electrical cables supplied to the manufacturers of wind mills were specifically designed for use in wind mills. They were special type of cables, without which the wind mills could not have been operated and, therefore, the Revenue Authorities ought to have granted exemption as stated in the notification referred to hereinabove. Appellant gave details as to how the electric cables were specially used for running the wind mills. It was further stated that without use of the electric cables supplied by the appellant, functioning of the wind mills would not have been possible. Therefore, appellant ought to have been given the benefit of the notification referred to herein above.

Respondent’s Contention:- Revenue relied upon the judgment given in Nico Corporation Ltd. v. Commissioner of Central Excise, Calcutta [2006 (203) E.L.T. 362 (S.C.)] and submitted that electric cables manufactured and supplied by the appellant were not so indispensable that without which the wind mills could not have been operated. It was further submitted that for the reasons recorded in the order passed by the Tribunal, the appellant is not entitled to exemption. That the order imposing penalty is also just and proper as the appellant deliberately did not pay excise duty payable by it.

Reasoning of Judgment:- The Supreme Court noted that the order passed in the Nicco Corporation Limited was appealed before the Supreme Court which was dicmissed. It was held therein that insulated electrical cables designed for use in wind mills would not be eligible for exemption under Notification No. 205/88 as amended [2006 (203) E.L.T. 362 (S.C.)]. It was also noted that during the pendency of the proceedings, the Authorities had issued a notice of demand directing the appellant to pay central excise duty and penalty amount. Appellant had paid the excise duty but had not paid any amount of penalty as stay had been granted against the said demand.

With regard to issue that “Whether the insulated electrical cables manufactured by the appel lant would be eligible for exemption under the above mentioned exemption notification”?, it was held that the issue was no longer res integra in view of the judgment delivered by this Court in the case of Nicco Corporation Ltd. v.Commissioner of Central Excise, Calcutta. The facts in the said case as well as in the present case are similar and, therefore, we need not consider the said issue again. In the circumstances, the first issue is decided in favour of the Revenue. It is also pertinent to note that the appellant has already paid excise duty.

With regard to issue of justification of imposition of penalty in view of the facts and circumstances of the case, it was noted that the Commissioner in his order has stated that the issue involved in the case is of interpretational nature. Keeping in mind the said factor, the Commissioner thought it fit not to impose harsh penalty and a penalty was imposed on the appellant while confirming the demand of the duty. It was also evident that the Commissioner had also found that except for the statement of the Excise Executive Director and Excise Clecrl of the assessee compant there was no evidence pointing out any accusing finger at them in dealing with offending good knwingly. It was noted that the Commissioner had recorded a clear finding that it was difficult to hold that the appellant knowingly dealt with excisable goods which were cleared without payment of duty.

It was held that the Commissioner had found that it is only a case of interpretational nature and therefore, no penalty could be and is liable to be imposed on the appellant.

The Supreme Court held that penalty should not have been imposed upon the appellant. Order of the Commissioner imposing penalty as also the order of the Tribunal so far as it confirms imposition of penalty upon the appellant quashed.

Decision:- Appeal Partly Allowed.

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PJ/Case Laws/2011-12/1454

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