Customs, Excise and Gold Tribunal - Mumbai
Elecon Engineering Co. Ltd. vs Commissioner Of Customs on 18 March, 1998
Equivalent citations: 1998(62)ECC95, 1998(103)ELT395(TRI-MUMBAI)
ORDER
K.S. Venkataramani, Vice President
1. The Appellants are manufacturers of Wind Operated Electricity Generators (Wind Mill WOEG). They imported components for the Wind Mill covered by an invoice dated 22-1-1996 from supplier M/s. Wind Master of Belgium and claimed customs duty exemption Notification 64/94 dated 1-3-1994. Wind Mills or WOEG consists mainly of 3 sub-assemblies namely Nacelle, Turbine Controller and Control System. The main parts of Nacelle are Hub, Generator, Gear Box, Brake Caliper, Sensor and Brake Hydraulics, Special Bearings; and the main parts of Turbine Controller are Control Boxes, Resistor Boxes, Power Cable, Control Cable. The control unit is for controlling the operation of WOEG. The goods were exempt on import and it appeared to the Custom house that the Appellants had declared power cables, earthing cables, farm computers, modems, remote, computer programming software as parts of Turbine Controller and claimed that they are covered by Serial No. 3(d) of the Notification 64/94. The components of brake hydraulics were not separately mentioned in Bill of Entry but were declared as brake hydraulics. The oil and grease are claimed against Serial No. 2 of Notification i.e. for maintenance of WOEG. The custom house was of the view that these items are not covered under the Notification. Proceedings were initiated against the Appellants by issue of show-cause notice charging them with mis-declaration of the goods and for confiscating the goods under Section 111(m) of the Customs Act, 1962 and proposing to impose penalty on the Appellants under Section 112 of the Customs Act, 1962. The goods, however had been earlier released provisionally. The show-cause notice was for demanding duty of Rs. 1,03,81,769/- which amount had been provisionally collected while releasing the goods. After considering the reply to the show cause notice the Commissioner of Customs-II, Mumbai passed the impugned order denying the exemption under Notification 64/94 to power cables, earthing cables, wind farm computers and components for brake hydraulics, oil and grease, Nacelle Light, Tower Light and socket, fittings and fasting tools. However, the Commissioner granted the exemption in respect of Yaw components, brake calipers, brake hydraulics, parts of wind turbine controller including control cables. The Commissioner found that the Appellants cannot be charged with mis-declaration and dropped that charge. He also did not find it a fit case for imposing penalty on the Appellants by the impugned order. He confirmed the demand of duty as set out in the show-cause notice which the Appellant had already paid at the time of provisional release of the goods and because of this the Commissioner held that no further recovery needs to be made.
2. Shri V.M. Doiphode, the learned Counsel appearing for the Appellants submitted that the Appellants will not press for the exemption in respect of hydraulic gear oil and grease, lights and light fittings and fasting tools in respect of which exemption has been denied. However, they will strongly urge that the denial of the exemption for the other items in the impugned order is bad in law. In respect of power cables, the learned Counsel contended that these are cut to specific size and having end fittings which are connected to the induction generator in the Nacelle and they have dual function of transforming power to elsewhere and drawing reaction power for excitation and hence this had to be considered as parts of WOEG. Even though the power cables as such are classifiable under sub-heading 8503.00 of the Customs Tariff Act it was pointed out by the learned Counsel that the Commissioner has already given the exemption in the case of control cables which should be extended to electrical cables which have the function of generation of electricity. In respect of earthing cables, it was submitted that these are cut to specific size and are used as a protection to the wind mill from short circuit and it is an essential part of the Wind Turbine Controller. The learned Counsel in this regard cited and relied upon the Supreme Court judgments in the case of Collector v. BHEL 1992 (61) E.L.T. 332.
3. Coming to the next item of Wind Farm Computers, modem, software, the learned Counsel urged that these computers communicates real time data concerning voltage, power etc. and commence operation of individual Turbine and sends alarm to a permanent watch service and these computers are required for centralised monitoring system and are directly connected to the wind turbine controller of each WOEG. They monitor the performance of individual Wind Turbine Controllers. The learned Counsel further referred to a certificate by the foreign suppliers of the wind mill where they have stated that the farm computer is a component of the Wind Turbine Controller.
4. The next item, of which the learned Counsel put forth argument is brakes hydraulics. It was submitted that these had been imported consisting of 27 sets which were allowed clearance under part Bill of Entry duty free under Notification 64/94. However, while allowing the clearance of part Bill of Entry some parts of brake hydraulics were not allowed to be cleared. But since there is no charge mis-declaration on the part of the Appellant and as they have imported 27 sets of brake hydraulics, these components are also part of the 27 sets as could be seen from the invoice and packing list. The learned Counsel pleaded, therefore the components of brake hydraulics are also eligible for exemption under the said Notification 64/94.
5. The further contention made by the learned Counsel is that the goods are eligible for exemption from additional duty of customs (CVD) under Notification 205/88. These Notification exempts Wind Mill from payment of duty. But the Commissioner in the impugned order has held that mere is a distinction between Wind Mills covered by Chapter 84 and Chapter 85 of the Tariff. As against this the learned Counsel argued that the Wind Mill is a general term and covers all devices of wind mill whether they are for generation of electricity or mechanical energy and referred to the Encyclopaedia Britannica wherein it is seen that modern wind mill is used to produce electricity. It was further pointed out that the Central Excise authority are granting the exemption on parts of wind mill under Notification 205/88 which are manufactured by the Appellant in their factory.
6. Shri K.L. Ramteke, the ld. DR referred to Notification 64/94 which covers Wind Turbine Controller and parts thereof and pointed out that the Commissioner has found that the power cables and earthing cables cannot be considered as part of Wind Turbine Controller in terms of Section Note 2 to Section XVI of the Customs Tariff Act, 1975. These are separately assessable and cables cannot be classified as part of any of the goods falling under the various headings of Chapter 84 or 85. The power cables are used to transport power generated from the generator to the power box and it cannot be called a part of the controller. The earthing cables also cannot be considered as parts of the Wind Turbine Controller when they are just protective devices connecting the generator to the earth. The certificate produced from the supplier does not advance the Appellant's case. The learned DR also referred to the other findings of the Commissioner in the order that the wind farm computer is not part of the WOEG and the brake hydraulics are items not covered by Notification entry. It was further submitted by the ld. DR, that the Supreme Court judgment in BHEL case relied upon by the Appellant is distinguishable. In that case there is no dispute whether the goods were parts which is present in this case.
7. We have carefully considered these submissions. The Notification 64/94 exempts goods specified in the Table from duty, exempts parts of Wind Operated Electricity Generators namely:
(a) Brake calipers
(b) Special bearings
(c) Brake hydraulics
(d) Wind turbine controller and parts thereof
(e) Gear box and parts thereof
(f) Hubs
(g) Flexible coupling (h) Yaw component (i) Sensors
(j) Blades.
8. In regard to the power cables and earthing cables, the Commissioner of Customs has held that power cables are connecting generator to the power box acting as an conducting medium for power generator and the predominant function being transport of power generated from the generator to the power box, these cables cannot be called as part of Wind Turbine Controller. He has also considered in this context the explanatory notes and the customs tariff regarding the classification of the cables and found that cables even with end fittings as in this case are not taken to be classified as parts of items covered under Chapter 84 and 85 of the Customs Tariff. The Commissioner held that in view of the Section Note 2 of Section XVI of the Customs Tariff Act, cables with end fittings are classifiable as articles of Headings 85.44 and they are not to classified as part of any goods of any of the headings of Chapter 84 or 85. As against the findings of the Commissioner we find that the Appellants have produced a certificate which is on record from the Research and Development Centre of M/s. Turbowinds, Brussels counter signed by a Professor of University of Brussels. This certificate is to the effect that Wind Turbine Controller which is also termed as an electrical regulation cabinet comprises of inter alia inside cabling which includes the cable between tower base and the Nacelle which is split into power cables and control cables. The certificate also says that another component of the Wind Turbine Controller is electronic control system which comprises of an industrial micro processor which is installed in a weather proof cabinet and includes the required micro processor chip. Liquid crystal display and required LEDs to indicate the status of control inputs and outputs. The Commissioner has observed that this certificate does not discuss or consider the finer aspects of classification of the goods and has held that the power cables and earthing cables are not covered by Serial No. 3(b) of the Notification which is for Wind Turbine Controller and parts thereof. However, the certificate itself clearly indicate, in our view, that power cables and control cables together form part of inside cabling of the wind turbine controller. When the custom house has found that the control cables are eligible for exemption, the power cables also as a part of inside cabling of the wind turbine controller has to be extended the benefit. The ground taken by the Commissioner that cables with end fittings are classifiable on their own under Heading 85.44 and in Chapter Note 2 to Section XVI this cannot be considered as a part of WOEG have to be considered. For this purpose the Supreme Court judgment in the case of BHEL relied upon by the Appellants becomes relevant. That was a case where pressure gauges specifically covered by 92.04 of CTA have been imported and the importer claimed exemption under Notification 35/79 which exempts part of any articles falling under various sub-heading thereunder from duty on condition that AC of Customs should be satisfied that they are required for setting up of the article or its assembly or manufacture. The department's case there was the Notification 35/79 only exempts articles falling under 84.04/05 and since pressure gauges have been classified under Heading 92.04, hence 35/79 cannot be extended, and the department there also relied upon Chapter Note 2 to Section XVI of CTA. The Supreme Court, however held that to get the benefit of Notification 35/79 it is not necessary that pressure gauges should be assessable under Heading 85.04/05. All that is needed is that it should be a part of an article falling inter alia Heading 84.04/05, and that the section notes, the Supreme Court held did not advance the case of the department. In this view of the matter, and having regard to the certificate referred to supra from Brussels, it is to be held that the power cables are eligible for exemption under Notification 64/94.
9. As regards the earthing cables it is merely a protective device and the related drawings shows that it is connecting the earthing rail of the wind mill to the earth. No evidence has been produced to show that these cables are specially designed for the unit imported. Therefore, in regard to the earthing cables we see no reason to interfere with the impugned order, that they are not eligible for the exemption as it is also not specifically included among protection devices in the Brussels Certificate.
10. As regards the claim for exemption in respect of the Wind Farm computer, we find that even the certificate produced by the Appellants refers to only the electronic control system which is a component part of the wind turbine controller installed in a cabin. The certificate cannot be extended as the Appellants have urged to cover the centralised control system which the wind farm computer will provide for monitoring the performance of the various wind turbines. Such a computer system is not part of wind operated electricity generators which only is eligible for exemption against Serial No. 3 of the Notification. However, the Commissioner in the adjudication order has held that the goods as presented are computers only and not part of wind turbine controller. The Commissioner has also found correctly from the technical literature given by the supplier that each windmaster turbine is equipped with a computer allowing stand alone operation, with LCD screen providing important information. The Commissioner has also observed that the literature shows that wind farm computers are used for management of a wind farm which have a maximum of 36 generators for data gathering and remote monitoring of all the turbine computers which can be inter-connected with Modems. In such a situation we are of the view that the Commissioner has rightly held that the wind farm computers will not be covered by Serial No. 3(d) of Notification 64/94.
11. In respect of Brake Hydraulics it is seen that brake hydraulics is specifically covered at Serial No. 3(e) of the Notification. It is also the admitted position that 27 sets of brake hydraulics has been allowed clearances with exemption against a part Bill of Entry in this case. In such a situation the balance part of the brake hydraulics cannot be isolated for denial of exemption. A perusal of the packing list also support the Appellants claim in this case and therefore it is held that brake hydraulics should be exempted under Notification 64/94.
12. The Commissioner in the impugned order has denied exemption for CVD by making a distinction between different types of wind mill under Chapters 84 and 85. The Commissioner has also referred to the Notification 205/88. Serial No. 12 thereof covers wind mills, parts of wind mills and any specially designed devices which run on wind mills. Serial No. 13 of the Notification covers any special devices including electric generators and pumps running on wind energy. Examining these conclusions of the Commissioner, it is seen that the Notification 205/88 does not grant exemption with reference to tariff heading or the Chapters in the CETA, therefore since Serial No. 12 of the Notification covers parts of wind mills and in the discussions foregoing it is seen that items of power cables, brake hydraulics are such as would answer the discription, and again going by the Supreme Court judgment in the case of BHEL, the exemption from additional duty of Customs under Notification 205/88 has to be extended to these parts. A further aspect in this regard is that the Central Excise Department is extending the benefit of this Notification to the goods manufactured by the Appellant. Therefore it is held that the exemption from CVD under the Notification has to be extended to the subject goods which have been held to be eligible for exemption under Notification 64/94 as above. The appeal is disposed of in the above terms.