Customs, Excise and Gold Tribunal - Mumbai
Pushpaman Forgings vs Cce on 8 July, 2005
ORDER S.S. Sekhon, Member (T)
1.1 Appellants were clearing `flanges' manufactured by them, as per specification, by employing the process of forging, which were cleared under the benefit of exemption under sr.no.251 of notification 6/2000 CE dated 01.03.2000 exempting non-conventional energy devices/systems specified in the list 5 of the said notification. Sr. no. 13 of the list 5 mentioned "Wind Operation, Electricity Generators, their components and parts thereof". The flanges so cleared, as it appears from the show cause notice para 2, which reads as -
"2. Investigations in the matter revealed that these flanges were used by the customers in the erection of towers/structures of the wind mills or the wind operated electric generators and not claimed by the assessee in the manufacture of wind operated electric generators as its spares or components which are exempted from payment of duty by virtue of notification no. 6/2000 dated 01/03/2000 as amended. Purchase orders of the Customers also clearly mentioned for supply of M.S. forged flanges for wind mill towers ..." would indicated that it was the admitted position that the flanges were for supply to and used in the erection of Wind Mill Towers.1.2 The adjudicator found -
"I observe that the company's products i.e M.S forged flanges are used to join the hollow tubes which are then erected to form a tower of specified height on which the blades/blade like structures, a control system and a device to convert the wind energy into electricity, is mounted. I observe that the decision of the CEGAT in the case of CCE, Chennai v. Megatech Control Pvt. Ltd. as reported in 2002(145)ELT 379 (Tri-Chennai) has granted the benefit of exemption under notification 205/88 CE, dated 25/5/1988 to control panels used in the wind mill since there was no restriction with regard to tariff heading in the said notification. In the instant case, the company's products viz. MS forged flanges have been used to fabricate the tower on which the blades have been mounted. Hence, the tower is an integral part of the WOEG. The above inference finds firm footing in the Tribunal's decision in the case of CCE, Calcutta-II v. Techno Fab Manufacturing Ltd. as where in it has clearly been held " Nacelle Body, Towers, lattice, masts are nothing but parts of the windmill which cannot be erected and positioned without the use of the said parts and hence entitled to benefit of exemption notification 205/88".
In the case of Bharat Heavy Electricals Ltd. v. Collector of Customs, Chennai as reported in 1999(108)ELT 448(T) the Tribunal has held that -
"Goods imported not to be regarded as complete WOEG having been imported without tower and foundation. "The said finding has been elaborated as follows :
"Since manufacture of WOEG will not be complete without placing the wind turbine consisting of nacelle, rotor, hub and blades and controller and communication (the imported goods) on a tower erected on a foundation, the goods cannot be themselves be deemed to have constituted - minus tower and foundation - a complete WOEG".
However, the question here is that MS flanges are parts of the tower, which in turn is a part of WOEG. In this connection, I am reproducing Sl. No. 20 of the List 5 to be read with Sl. No. 251 of the Table in Notification no. 6/2000 CE dated 01/03/2000.
"(20) Parts consumed within the factory of production of such parts for the manufacture of goods specified at Sl. Nos. 1 to 19 above".
Thus it is clear that as per S. No. (13) of List 5., "WOEG" their components and parts thereof" such as nacelle, hub, rotors, blades, tower etc. are eligible for exemption, as per discussion above. However, the parts of such parts i.e as in the instant case, MS flanges used in the manufacture of tower, will qualify for exemption, only if the same is consumed within the factory of production for the manufacture of tower. Hence, I hold that though the tower is eligible for exemption as per Sl. No. 13 of List 5, the parts of tower i.e MS flanges will be eligible for exemption, if and only if the same is used captivity for the manufacture of the tower. Since, in the instant case, MS flanges were manufactured by M/s Pushpaman Forgings and cleared to third parties i.e M/s ABG Shipyard Ltd, M/s Megha Engineering Enterprises, the KCP Ltd., M/s Metalfab Hightech Pvt ltd, who manufactured the tower and other parts of WOEG, and sold the same to M/s Emercon (India) Ltd who are the manufacturers of WOEG, I hold that the product MS flanges manufactured by the company M/s Pushpaman Forgings is not eligible for exemption under notification 6/2000 dated 01/03/2000. I observe that the company has misled the department by declaring their products MS flanges as "windmill spares and parts" inasmuch as that MS flanges are merely parts of the tower. Moreover, though the company has quoted Sl. No. 251 of the notification and List 5 therein, the relevant Sl. no. in List 5 has deliberately been left out in an attempt to convey the impression that the products manufactured by them are parts and spares of the windmill itself. Since the Sl. No. applicable to the company's product is sl. No. 20 of list 5 which contains clear specifications to the effect that exemption would be available only if the same i.e MS flanges is captivity consumed in the manufacture of tower, the company's failure to mention the correct Sl. No. 5 in their classification declarations, excise invoices, monthly RT 12 returns amounts to suppression of facts. Hence I hold that proviso to section 11A of the Central Excise Act, 1944 has correctly been invoked, And confirmed the duty demands and imposed penalty with interest. Hence this appeal.
2.1 The admitted position is MS flanges are parts of Wind Mill Tower, which in turn is a part of a WOEG following Tribunal's decision in the case of CCE v. Techno Fab Manufacturing Ltd., has held tower to be a part of the Wind Mill.
2.2 Once tower is accepted & found & held to be a part of Wind Operational Electric Generator (WOEG for short) it is to be held that part i.e flange of this part i.e tower will be part of the whole i.e Wind Generated Mill producing electricity from unconventional sources. Every devices/systems part in this case having been specifically designed for that purpose in mind. That part of part is a part of whole is well settled, relying upon CCE v. Mahendra Engineering Works, 1993(67)ELT 134 followed in Bansal Industrial Corporation 2000(118)ELT 119. We find the `flanges' to be a part of WOEG.
2.3 The restriction being given to the exemption as part of the tower by reading sr. no. 20 of lists, only on the grounds that flanges were not eligible since they were not consumed in the factory of production for the manufacture of tower has to be considered with the fact that tower of a Wind Mill being a huge structure would only come into existence in the factory of manufacture as a design & in fact they would arise only infact at site after assembly using the flanges. Consumption at site in tower is not questioned on facts not it can be said that flanges is not used where the tower came into existence. The concept of interpretation of "consumed in factory of production" & limiting the same to the Central Excise registered premises of the appellants herein & deprive the use at site cannot be upheld.
2.4 In any case, the flange being part of tower which is essential component of Wind Operated Electrical Generator, an unconventional energy service device, would be eligible under sr. no. 5 if not under 20 as part of sr. no. 1 to 19. Coverage is also to be available under sr. no. 13 of list 5.
2.5 The reliance placed on the decision of Damodar I. Malpani, 2002(146)ELT 483(SC) & submission of invoices of other manufacturers having been exempted, is well founded. That would induce as to uphold the exempted status to be arrived in this case.
2.6 Classification declarations were filed by the appellants the good MS Forged Flanges (Machined) with the exemption claim under sr. no. 251 last 5 & remark column having an entry "Wind Mills" spares & parts (for wind operated electricity generators). We find when "the Board has cast an obligation on the department vide Circular no. 124/35/95 CX dated 10/5/95 to scrutinize the declaration, therefore the finding on suppression as arrived by the Ld. Adjudicator in this order, para 10, of deliberate omission of sr. no. to invoke the proviso clause & lift the bar of limitation cannot be upheld. As the order does not indicate any other objection of verification if any, done by the officers. Since the appellants belief of the product being covered on different sr. no. was well founded & there was no stipulation of reporting the same. Surely if claim is entitled under alternate sr. nos. the same have to be granted. Suppression of facts cannot be arrived. Same has to be of a fact which would disentitle the claim of exemption, if revealed. No such fact is brought out in the order or pleaded before us. The bona fide belief & in view of Boards circular that part of Tower & Tower being part of Wind Operated Electricity Generators would favour the appellant with the bar of limitation to be available in his favour in this case.
2.7 When our findings on merits about eligibility to notificate, & bar of limitation to be in favour of the appellants, we cannot find any reason to uphold any demands of duty or penalty or interest in this case. The same are set aside.
2.8 Consequent to our findings, this appeal is allowed setting aside the impugned order.