Customs, Excise and Gold Tribunal - Bangalore
Triveni Engineering And Industries ... vs Commr. Of C. Ex. on 25 June, 2004
Equivalent citations: 2004(172)ELT353(TRI-BANG)
ORDER K.C. Mamgain, Member (T)
1. This appeal is against the Order-in-Appeal No. 61/03-CE., dated 7-7-2003 passed by the Commissioner Central Excise (Appeals), Bangalore.
2. The appellants are manufacturers of steam turbines. They have cleared turbines said to be used for producing energy from non-conventional sources without payment of duty by availing the exemption under Notification No. 6/2000-C.E., dated 1-3-2000. They filed classification declaration in respect of turbines to be cleared for Malavalli Project by claiming exemption under Sl. No. 251 of Notification No. 6/2000-C.E., dated 1-3-2000. The classification declaration was approved by the Deputy Commissioner in his O-I-O dated 12-1-2001 allowing benefit of exemption under Notification No. 6/2000 for the period from January 2001 to December 2002. The department not being satisfied with the order of Deputy Commissioner, filed an appeal before the Commissioner (Appeals) who passed the impugned order and held that appellants are not entitled to exemption under Sl. No. 251 of Notification No. 6/2000.
3. Shri V. Lakshmikumaran and Shri G. Shivadass, Advocates, appeared for the appellants. It was pleaded that Sl. No. 251 of Notification No. 6/2000-C.E., dated 1-3-2000 and Sl. No. 237 of Notification No. 6/2002-C.E., dated 1-3-2002 exempts non-conventional energy devices/systems specified in Lists 5 & 9 respectively from payment of excise duty. S. No. 16 in List 9 indicates that the items covered are agricultural, forestry, agro-industrial, industrial, municipal and urban wastes conversion devices 'producing energy. The wordings in this Notification are more or less identical to the wordings in earlier notification like Notification 120/81-C.E., dated 15-3-1981 and Notification No, 205/88, dated 12-5-88 excepting that earlier only agricultural and municipal wastes were sought to be covered as sources whereas presently other types of wastes like forestry industrial wastes etc., are also sought to be covered. The wordings of the Notification needs to be interpreted in a manner to carry out the intention of the Rule Making Authority. If we read the entry and the item mentioned in the list of notification, it is evident that exemption is given to goods which are used in the production of energy from non-conventional sources. The amplification of the scope of energy is to be appreciated in the context of increasing emphasis being laid by the Govt. on the use of renewable sources for tapping of energy. For the purpose of energy generated from non-conventional sources the states have been asked to formulate guidelines and Karnataka Govt. has set up Karnataka Renewable Energy Development Ltd. (KREDL) which provides a list of energy producing devices/systems. The letter issued by KREDL specifically indicates the turbines to be an equipment used for specific purpose. Bio-mass is used as a fuel in the boiler for generating steam. In this process the combustion energy present in the bio-mass is transferred to steam. The steam is made to expand in the turbine and the heat energy in the steam is converted into work. i.e. kinetic energy. The rotating movement of rotator is transferred to a generator through a coupling and power is produced. The heat energy present in the steam is thus converted to another form only by the turbine. The boiler only transfers the combustion energy present in the fuel to steam in order to facilitate conveying the same to the conversion device. The steam turbine translates relatively large fraction of the heat energy in the steam into mechanical rotary motion. The function of the steam turbine generator is to convert the thermal energy in the steam to electrical energy by converting the mechanical energy to electrical energy. Heat produced by combustion is transferred by the heater to the working medium. The working medium is conveyed to a prime mover which is able to transform part of heat energy carried by the medium into mechanical work. Boiler and condenser are heat transferring devices one operating at the higher temperature end of the cycle and the other at low temperature end. The turbine is however heat utilising device. It transfers energy from one form to another i.e. from heat to mechanical work. Steam is therefore just a working medium and not energy by itself. The boiler and condenser transfer heat energy from one medium to another whereas turbine transfers energy from one form to another i.e. from heat to mechanical work. The steam turbine used in bio-mass based power projects are specially designed and tailor made for these projects. The steam can be fluctuating both in terms of temperature as well as pressures and even the flow of steam could vary unlike standard fuels such as coal, coke, lignite or petroleum fuels where the temperature/pressure generated is consistent. The turbine used in the present case should therefore be capable of withstanding the fluctuations and give corresponding power at a constant out put. Therefore the turbines are custom designed to take care of this feature of bio-mass fuel. CEBC vide Circular dated 19-5-1992 has clarified that if boiler is specifically designed for converting agricultural and municipal waste, it would be eligible for Notification No. 205/88 (predecessor of present Notification). Similar view was taken by the Tribunal in the following cases.
(a) CCE, Coimbatore v. Jaya & Company [2000 (121) E.L.T. 433]
(b) CCE, Chennai v. Megatech Control Pvt. ltd. 12002 (145) E.L.T. 3791
(c) CCE, Ahmedabad v. Boiler Tech Engineers [2002 (147) E.L.T. 95]
(d) Bharat Heavy Electrical Ltd. v. CC, Chennai [1999 (108) E.L.T. 448]
He pleaded the steam turbine is therefore the device that converts wastes to energy. Since the crucial activity of converting heat contained in the steam that emerges from the boiler to electric energy which is the output expected of the bio-mass produced is done only by the turbine. It is therefore the device that converts waste into useful energy. He relied on the Calcutta High Court decision in the case of Suttons & Sons (India) Pvt. Ltd. v. UO1,1995 (75) E.L.T. 229 where, it was held that interpretation by another Ministry monitoring the distribution would be binding on the Revenue authorities. He also said that the Apex Court in the case of STP Ltd. v. CCE, Patna, 1998 (97) E.L.T. 16 held that if there is any doubt in the construction of any provision of taxing statute that doubt must be in favour of assessee. He therefore pleaded that a careful look at List No. 9 of Notification No. 6/2002-C.E., dated 1-3-2002 indicates that the goods that are eligible for benefit of the said notification are used in generation of useful energy. The item listed in the Notification makes it clear that the intention of Notification is to give benefit to all the parts that are used in generation of usable energy from non-conventional sources. Since turbine in question performs similar activity, denial of benefit of the notification to the said turbine is unwarranted.
4. Smt. Shoba L. Cahri, learned JCDR appearing for revenue pleaded that the issue for consideration is whether the steam turbine supplied to the Bio-mass Power Projects are eligible for benefit of Notification 6/2000-C.E., dated 1-3-2000 Sl. No. 251 read with Sl. No. 16 in List 5 of the said Notification gives exemption to non-conventional energy device using agricultural, forestry, agro-industrial, industrial, municipal and urban waste conversion device, producing energy. The word 'non-conventional' was introduced in the Notification in 1998 and until then the items were grouped as goods connected with solar and natural energy. The replacement of the word 'natural' with non-conventional shows that the thrust was now on the source of the energy which had to be non-conventional for eligibility under the Notification. The entry relating to turbines for hydro electric equipment was dropped as water though a natural energy source is not a non-conventional source even though the ultimate energy produced is electrical energy. From this list it is clear that function of the device covered by this Notification should be conversion and the source of energy to be converted should be non-conventional. There are various non-conventional energy sources namely solarthermal, solarphotovoltaic, wind, waves, sea currents, ocean thermal energy and energy from agricultural wastes. As against this the conventional sources of energy are coal, oil, gas, water and nuclear. The boiler can use any kind of fuel both conventional and non-conventional. When conventional fuel such as bagasse or other waste is used for the boiler the calorific value existing in the bagasse combined with air when ignited produces heat which converts water into steam. This steam produced in the boiler which is a form of thermal energy is the input for turbine where it gets converted to rotational or kinetic energy for rotating the alternator to produce electricity. Steam is not just a working medium but it contains latent heat which gets converted to kinetic energy. Turbine does not use any of the non-conventional energy sources. It uses a latent heat in the steam as input and produces kinetic energy (mechanical rotation) as the output. The output of the turbine is therefore not electricity. The turbine can also use various energy sources such as water gas and steam. The turbine is not directly involved in conversion of bagasse or any agricultural waste into energy. In the instant case the turbine requires only steam. Steam itself can be produced in a boiler by using conventional fuel or by using non-conventional fuel. Steam turbine is thus not a device which converts waste into energy. It is the boiler which does these. The Board in it's Order 4/92, dated 19-5-92 issued under Section 37B of the Central Excise Act has also clarified that Boiler whether cleared in CKD/SKD condition if designed for conversion of agricultural waste for producing energy is eligible for the exemption. It is not correct that no device can convert non-conventional energy directly to electrical energy. The solar photovoltaic module directly, converts solar energy to electrical energy. Similarly for conversion of wind energy to electrical energy, boiler, condenser and steam turbines are not required. The Notification does not say that wastes should get converted to electricity. If this was the intention, even a boiler would not get the benefit. The word 'energy' is a broad term including various forms such as thermal mechanical, electrical etc. The turbines cleared by the appellants are especially designed for use with boilers using agricultural wastes. Such equipment are made to order and need to be tailor made to suit the need of the plant. The issue here is not whether turbine is ultimately going to be a part of a particular type of power plant. The issue is whether the turbine itself is a waste conversion device. It cannot convert waste into energy. Therefore turbine does not qualify to be called a waste conversion device. The approval given by the Govt. departments relates to the customers of the appellant and pertains to the power plant as a whole. These are not relevant to the issue of eligibility of exemption notification of one of the components of the power plant i.e. the turbine. The power generation project may include number of components or sub-systems. These components and sub-systems cannot individually be termed devices converting wastes into energy. Only a device which actually uses wastes as an input can be so termed. The device which is cleared by the appellants cannot convert waste into energy. Therefore the benefit of Notification No. 6/2000-C.E. cannot be extended to such turbines.
5. We have carefully considered the submission made by both the sides. We find that the issue involved in this appeal is whether turbine is eligible for exemption under Notification No. 6/2000-C.E., dated 1-3-2000. We find that the appellants have claimed exemption under Sl. No. 251 of the table attached to the said Notification Sl. No. 251 reads as under:
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Serial Chapter Particulars Duty No. Heading
----------------------------------------------------------------------------- 251 Any chapter Non-conventional energy devices/ Nil systems specified in List 5
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Sl. No. 16 of the List 5 is "Agricultural, forestry, agro-industrial, municipal and urban wastes conversion devices producing energy. Thus it is clear that exemption is only to these devices which are using agricultural, forestry, agro-industrial, industrial, municipal and urban waste for converting these into energy. The Appellants are supplying steam turbines to M/s. Malavalli Power Plant Pvt. Ltd., for their bio-mass based power project to be set up at Mandya district. In this project the steam will be used for running the turbine which is connected to alternator and thereby generating electric power. This Project is approved by Ministry of Non-conventional Energy Sources. The steam turbines has been specifically designed and manufactured to match the output characteristics of the bio-mass boiler. The bio-mass fuel is obtained from the agricultural and industrial waste to generate steam in the boiler. Therefore bio-mass has been used for producing heat energy which is taken by the steam. Turbine itself, does not work on bio-mass. In all the cases in the past under the Notifications predecessor to the present notification, exemption was allowed only to the boilers where agricultural municipal and other wastes were used for converting the same in the boiler into heat energy. It is seen that all the decisions relied upon by the appellants are for exemption to boiler. The agricultural, industrial, municipal wastes etc., as given in the Notification is not used in the turbine for conversion of the steam into energy. The conversion of this waste into energy is only in the boiler. Energy can be converted from one form to another form. Therefore the heat energy is converted into mechanical energy, mechanical energy into electrical energy but the exemption is only for waste conversion devices producing energy from the waste material. Exemption is not for the system under this Sl. No. 16 of List 5. The waste material is used to create thermal energy. The exemption is only for these purposes and not for purposes of conversion of one form of energy into another form of energy. Therefore boiler is the only device where the agricultural, industrial etc. waste is converted into thermal energy. Thereafter this thermal energy is used. Therefore the exemption cannot be extended to turbine which converts heat energy into rotational energy (kinetic energy). Therefore, we are not convinced with the appellants plea that the turbine is eligible for nil rate of duty under Sl. No. 251 of Notification No. 6/2000, read with Sl. No. 16 of list of the said notification or under Notification 6/2002, dated 1-3-2002 read with Sl. No. 16 of List 9. We therefore do not find any merit in this appeal and the same is rejected and order of Commissioner (Appeals) is upheld.