Custom, Excise & Service Tax Tribunal
Raydean Industries vs Principal Commissioner Cgst &Amp ... on 22 April, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
EXCISE APPEAL NO. 52480 OF 2019
(Arising out of Order-in-Original No. JAI-EXCUS-000-COM-22-19-20 dated 18.07.2019
passed by the Commissioner, Central Goods & Service Tax Commissionerate, Jaipur)
M/s Raydean Industries .... Appellant
G-1-22, RIICO Industrial Area,
Bindayaka, Jaipur
VERSUS
The Commissioner, ...Respondent
Central Gooods & Service Tax, Jaipur APPEARANCE:
Shri A.K. Prasad and Ms. Surabhi Sinha, Advocates for the Appellant Shri Sanjay Kumar Singh, Authorized Representative for the Department CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Date of Hearing: 22.02.2022 Date of Decision: 22.04.2022 FINAL ORDER NO. 50361/2022 JUSTICE DILIP GUPTA:
M/s Raydean Industries 1 has filed this appeal to assail the order dated 15.07.2019 passed by the Principal Commissioner, CGST and Central Excise Commissionerate, Jaipur 2 , by which the demand of central excise amounting to Rs. 6,85,64,844/- has been confirmed by invoking the extended period of limitation provided under section 11A(4) of the Central Excise Act 1944 3, with interest and penalty.
1. the appellant
2. the Principal Commissioner
3. the Excise Act 2 E/52480/2019
2. The appellant manufactured 'module mounting structures' and supplied the same to suppliers of solar power water pumping systems for irrigating agriculture fields. These water pumping systems were provided under various tenders floated by the State and Central Governments under subsidy schemes of the Ministry of New and Renewable Energy, Government of India. According to the appellant, the water pumping systems have three critical components namely: (i) solar photo voltaic module or solar panel, (ii) AC or DC solar water pump with controller and (iii) module mounting structure with manual tracking facility. The appellant supplied the third component to the successful bidders and the material was sent to the location where the solar panels or solar water pumps were installed. The appellant further claims that the solar panels are fixed on these module mounting structures, which have the facility to track the movement of the sun from east to west so that solar energy is produced for maximum time period.
3. According to the appellant, module mounting structure are parts of the solar generating system, which system is exempted from payment of central excise duty at serial no. 332 of the notification dated 17.03.2012. The appellant, therefore, claimed exemption from payment of central excise duty on module mounting structures and cleared the goods against 'Nil' payment of central excise duty.
4. The relevant portion of the notification dated 17.03.2012 containing serial no. 332 is reproduced below:
Sl. No. Chapter or heading Description of Rate Condition No. or sub-heading or excisable goods tariff item of the First Schedule
-- -- --------- --- ----
332 Any Chapter Non-conventional Nil -
energy devices
or systems
specified in List 8
3
E/52480/2019
5. List 8 of the Notification is as follows:
List 8
(1) Flat plate solar Collector (2) Black continuously plated solar selective coating sheets (in cut length or in coil) and fins and tubes (3) Concentrating and pipe type solar collector (4) Solar cooker (5) Solar water heater and system (6) Solar air heating system (7) Solar low pressure steam system (8) Solar stills and desalination system (9) Solar pump based on solar thermal and solar photovoltaic conversion (10) Solar power generating system (11) Solar photovoltaic module and panel for water pumping and other applications (12) Solar crop drier and system (13) Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller (14) Water pumping wind mill, wind aero-generator and battery charger (15) Bio-gas plant and bio-gas engine (16) Agricultural, forestry, agro-
industrial, industrial, municipal and urban waste conversion device producing energy (17) Equipment for utilising ocean waves energy (18) Solar lantern (19) Ocean thermal energy conversion system (20) Solar photovoltaic cell (21) Parts consumed within the factory of production of such parts for the manufacture of goods specified at S.No. 1 to 20."
(emphasis supplied)
6. The aforesaid notification dated 17.03.2012 was amended on 11.07.2014 by omitting serial no. 21 from List 8 and inserting a new serial no. 332A in the notification. Serial No. 332A is as follows:
Sl. No. Chapter or Description of Rate Condition No. heading or sub- excisable goods heading or tariff item of the First Schedule 332A Any Chapter Parts consumed Nil 2 within the factory of production for the manufacture of goods specified in LIST 8 4 E/52480/2019
7. Condition number 2 of the aforesaid notification dated 11.07.2014 is as follows:
2. Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
8. The department took a view that the appellant was not eligible for exemption under the notification and, accordingly, a show cause notice dated 04.01.2019 was issued demanding central excise duty of Rs.
7,71,30,460/- for the period December 2013 to June 2017. Interest was also demanded and penal provisions were invoked under section 11AC of the Excise Act as well as rule 27 of the Central Excise Rules, 2002 4.
9. The appellant filed a reply to the show cause notice, but the Principal Commissioner, by order dated 18.07.2019, confirmed the demand of Rs. 6,85,64,844/- after accounting for cum-duty benefit.
10. Shri A.K. Prasad learned counsel appearing for the appellant made the following submissions:
(i) Serial Number 332 of the notification dated 17.03.2012 prescribed 'nil' rate of duty to 'non-conventional energy devices or systems specified in List 8'. In other words the notification itself distinguishes a 'device' from a 'system' and this is also borne out by the various 'systems' included in List 8;
(ii) An exemption under central excise law pre-supposes excisability of the product. In other words, exemption can only be provided to 'excisable goods' as defined in section 2(d) of the Excise Act. A 'system' cannot be considered as excisable goods since a system comprises various excisable goods connected together to form a 'system'. There is no classification of a 'system' as a whole under
4. the 2002 Rules 5 E/52480/2019 the Central Excise Tariff. Each component or element comprising the 'system' would, however, be classifiable individually under the Central Excise Tariff and would be 'excisable goods' in their own right;
(iii) When the 'systems' mentioned in the above notification are not 'goods' or 'excisable goods', as they are generally assembled at site as immovable property, the clearance of the components from the factory cannot also be considered 'goods' being cleared in CKD form. In this connection reliance has been placed on the decisions of the Tribunal in IBEX Gallagher Pvt. Ltd. vs. Commissioner of C. Ex. Bangalore-III5 and Commissioner of C. Ex., Indore vs. Virdi Brothers 6;
(iv) From both the Circulars dated 17.08.2019 and 13.11.2019 and the aforesaid decisions of the Tribunal, it is clear that the various 'systems' covered under List 8 of Serial No. 332 of notification dated 17.03.2012, are not 'excisable goods' by themselves but individual parts or components which make up the 'system' and are excisable independently.
(v) Solar Power Generating System, being serial No.10 of List 8 of the above notification, cannot, therefore, be considered as 'excisable goods' as a whole since this solar power generating system is erected at the site by connecting the three critical components. Each of the above items conforms to the definition of 'excisable goods' and at the time of clearance from the relevant factory have to discharge appropriate duty including 'nil' duty (where it is exempted, as in the instant case). The appellant is manufacturing the third component namely, module mounting structure and supplies them for installation at various field sites;
5. 2008 (231) E.L.T. 580 (Tri.-Bang.)
6. 2007 (207) E.L.T. 321 (S.C.) 6 E/52480/2019
(vi) Since 'systems' including Solar Power Generating System, are not excisable goods when considered as a whole, a harmonious interpretation of the above notification read with the definition of 'excisable goods' under the Excise Act, would be that the notification exempts not the various 'systems' mentioned in List 8 (since they are not excisable goods) but various components (which are clearly excisable goods) comprising various 'systems', including the solar power generating system. In other words, each of the three components of the solar power generating system referred to above would be eligible for exemption under the said exemption notification. In this connection, reliance has been placed on the decision of the Madhya Pradesh High Court in Belectric Photovoltaic Tax vs. Commr. of Commercial Tax 7;
(vii) Since the items manufactured by the appellant are covered under serial No. 10 of List 8 of the above notification under the category of 'Solar Power Generating System', there is no need to take recourse to serial No. 21 of List 8 which refers to 'parts' consumed within the factory of production of such parts for the manufacture of goods specified at serial No. 1 to 20. On the basis of the interpretation given to the word 'system', serial No. 21 of List 8 will, in any case, not apply to 'systems' as it refers only to parts of 'goods' and not to parts of 'systems'; and
(viii) If the interpretation adopted by the department is taken to be correct, it would defeat the very purpose of issuing the notification to encourage use of non-conventional energy devices and systems. If duty is charged on a component of the 'solar power generation system', the whole purpose of exempting the 'system' would be defeated.
7. 2019 (21) G.S.T.L. 319 (M.P.) 7 E/52480/2019
11. Shri Sanjay Kumar Singh, learned authorised representative appearing for the Department, however supported the impugned order and made the following submissions:
(i) A plain reading of the notification dated 17.03.2012 is that devices and systems are covered under the List 8 (entry 1-20) read with the description in column 3 of serial number 332 and are eligible for the exemption under the notification. The parts of goods under entry 1-20 of the List 8 will be eligible for the exemption under entry 21 of the List 8 provided they are consumed within the factory of production for the manufacture of such goods. The description of excisable goods in entry 332 is 'non-conventional energy devices or systems specified in List 8'.
Entry 10 of the List is 'solar power generating system', of which the item manufactured by the appellant i.e. Mobile Mounting Structures is a part. Entry 21 reads 'parts consumed within the factory of production of such parts for the manufacture of goods specified at Nos. 1 to 20'. The appellant is, therefore, not correct in asserting that entry 21 of the said list does not cover parts of the systems under the said list;
(ii) The interpretation sought to be given by the appellant is not in accordance with the plain language of the notification;
(iii) The decision of the Madhya Pradesh High Court in Belectric Photovoltaic would not help the appellant; and
(iv) The rejection of the petitioner's claim for benefit of duty exemption for 'substation, by the Commissioner of Commercial Tax by order dated 25.03.2017 was not because parts cannot be given exemption benefit but because the item concerned was not considered to be a part but a separate/independent item in itself. 8
E/52480/2019
12. The submissions advanced by learned counsel for the appellant and the learned authorized representative appearing for the department have been considered.
13. The issue that arises for consideration in this appeal is whether 'module mounting structures', which are manufactured by the appellant and which are supplied to suppliers of solar power water pumping systems for irrigating agriculture fields, is exempted from payment of central excise duty in terms of the notification dated 17.03.2012. The appellant claims that such exemption would be available at serial no. 332 of the said notification. The description of excisable goods at serial no. 332 is 'non-conventional energy devices or systems' specified in List 8 and the appellant has placed reliance upon serial number (10) of the List 8, which is 'solar power generating system'. The contention of the appellant is that the notification would not exempt the 'systems' mentioned in List 8, but various component comprising the system and since 'module mounting structures' is a component of the 'solar power generating system', it would be exempted from payment of central excise duty under this notification.
14. It is not possible to accept this contention of the learned counsel of the appellant. What has been exempted from payment of central excise duty under serial no. 332 of the notification dated 17.03.2012 is 'non-conventional energy devices or systems' specified in List 8. At serial number (10) of List 8, 'solar power generating system' is mentioned. Serial number (21) of List 8 mentions 'parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20'. Only such parts are exempted from payment of central excise duty which are consumed within the factory of production of such parts for the manufacture of 9 E/52480/2019 goods specified at serial numbers 1 to 20 and not parts of water pumping station. It needs to be noted that entry number (10) of List 8 mentions 'solar power generating system' and not 'module mounting structures'.
15. The Principal Commissioner in the impugned order, has also dealt this issue in the following manner:
"5.6.2 On going through the Notification No. 12/2012-CE dated 17.03.2012, I find that the said Notification, under Sl No. 332 of the Table mentioned therein, provided exemption from Central Excise Duty to Non-conventional energy devices or systems falling under any chapter of the CETA, 1985 having description as specified in List 8 appended thereto.
5.6.3 On going through the said List 8, I find that it contains/mentions the item "Solar power generating system" at S. No.(10) but the "Mounting Structure for Solar Photovoltaic Module" had not been specified therein. I further find that on being asked by the jurisdictional Superintendent of erstwhile Central Excise Range-V of Division-II, Jaipur vide letter C.No.:CE-20/R- V/Misc./45/2015/336 dated 31.12.2015 to submit clarification as to how the goods cleared were covered under the above said Notification, the noticee vide letter dated 05.01.2016 submitted that the "Solar Power Generating System" primarily consists of (1) Solar Photovoltaic Module (2) Mounting Structure for Solar Photovoltaic Module (fixed tilt or tracking type) and (3) Solar Inverter; that they have been manufacturing and selling Mounting Structure for Solar Photovoltaic Module (fixed tilt or tracking type), which forms an integral part of Solar Power Generating System and is covered under List No.8 to the Notification No.:12/2012-CE (SI.No.332).
5.6.4 I also find that as per entry at serial number (21) of the List 8, the exemption from Central Excise Duty was available to the parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 in List 8, which implies that the exemption is available to the parts only if they are consumed actively within the factory for manufacture of goods mentioned at S. Nos. 1 to 20 in List 8 of the 10 E/52480/2019 Notification No. 12/2012-CE dated 17.03.2012. Therefore, the contention of the Noticee is clearly devoid of merits.
5.6.5 I further find that the subject Notification No.:12/2012-CE dated 17.03.2012 was amended by Notification No.:12/2014-CE dated 11.07.2014 by omitting item no. (21) from the said List 8 and inserting a new Serial number 332A and entries relating thereto in the said Table after Serial No.332, ****** 5.6.6 The effect of the said amendment was that the Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 of List 8 were removed from Serial No. (21) of the List 8 and were separately included against the newly inserted Serial No. 332A in the Table to the said Notification on fulfillment of Condition No.2 specified in the Annexure to the Table of the said Notification. Prior to the amendment dated 11.07.2014, the Notification No.: 12/2012-CE dated 17.03.2012 exempted the parts of goods specified at S. Nos. 1 to 20 of the List 8 subject to the condition of their consumption within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20. After the said amendment in the Notification No.:12/2012-CE dated 17.03.2012 vide Notification No.: 12/2014-CE dated 11.07.2014, the exemption was made available to the parts of goods specified at S. Nos. 1 to 20 of the List 8 in both the situations - (i) when consumed within the factory of production for the manufacture of the goods specified in the List 8 and also (ii) when used elsewhere than in the factory of production i.e. on as such clearance from the factory of manufacture i.e. without being further used in the factory for manufacture of the goods specified in the List 8. However, the exemption in case (i) above was available subject to the Condition that the said parts are consumed captively within the factory of production for manufacture of goods specified at S. Nos. 1 to 20 of List 8; whereas the exemption in case (ii) above was available subject to the Condition of compliance with the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001."
(emphasis supplied) 11 E/52480/2019
16. The Principal Commissioner has rightly concluded that the serial number 10 of List 8 refers to 'solar power generating system' and not to 'module mounting structures' manufactured by the appellant and only parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20 of List 8 are exempted from payment of central excise duty.
17. The Principal Commissioner has also correctly appreciated the effect of the amendment made on 11.07.2014 to the aforesaid notification dated 17.03.2012. According to the Principal Commissioner, prior to the amendment only parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20 of List 8 were exempted, but after the said amendment the exemption is also available to parts of goods specified at serial numbers 1 to 20 of List 8 in a situation where it is consumed not only within the factory of production for the manufacture of goods specified in List 8 but also when used elsewhere than in the factory of production, subject of course to the condition that the procedure laid down in the relevant rules has been followed.
18. It is, therefore, not possible to accept the contention of learned counsel for the appellant that the 'module mounting structures' should be granted exemption from payment of excise duty in terms of the notification dated 17.03.2012 and not the 'solar power generating system'.
19. Learned counsel for the appellant placed strong reliance upon the judgment of the Madhya Pradesh High Court in Belectric Photovoltaic Tax. This judgment would not help the appellant. A writ petition was filed in the Madhya Pradesh High Court to assail the order passed by the 12 E/52480/2019 Commissioner of Commercial Tax rejecting the application filed by the petitioner therein contending that the articles used for installing 'solar power generating system' are exempted from Value Added Tax. The State Government had framed a policy providing incentives to a developer, including exemption from Value Added Tax and at serial number 10 'solar power generating system' was mentioned. The contention of the appellant was that the existence of a sub-station was an essential practical requirement of 'solar power plant' and, therefore, this was also covered under the exemption. It is in this context that the Madhya Pradesh High Court observed as follows:
"18. Even by taking into account the aforesaid judgment, this Court is of the opinion that power generating system includes all components even the grid/goods related to sub-station, without which, the system cannot work.
19. The policy framed by the State Government otherwise will have no meaning. The policy was framed keeping in view global warming and resultant climatic changes and all kinds of incentives have been provided for setting up of solar power based projects in the State of Madhya Pradesh. It is really unfortunate that instead of promoting such projects, all kind of hurdles are being created on the ground of technicalities, on the ground that exemption notification is not clear, as has been done in the present case. Once an exemption has been granted in the matter of Value Added Tax/Entry Tax for setting up solar power based projects, the exemption has to be given in respect of a complete project, as all the equipment used in the project are integral part of the project and even without one of the equipments, the project cannot function. Once the entry includes "Solar Power Project", all the material equipments used for the purposes of setting up power based project are certainly entitled for grant of exemption.
20. In the considered opinion of this Court, the Learned Commissioner, with a total non-application of mind, has passed the impugned order, and therefore, the impugned order dated 25-3-2017 passed by the Learned Commissioner deserves to be quashed and is accordingly quashed. The 13 E/52480/2019 respondents shall grant exemption under Entry No. 71(10) in respect of sub-station equipment/grid and all other equipments supplied by the petitioner during the course of execution of its works contract, as they form integral part of solar power generating system. Recovery, if any, on account of impugned order dated 25-3-2017 also stands quashed. The petitioner shall be entitled for all consequential benefits."
20. The Madhya Pradesh High Court was examining a policy framed by the State Government which was different from what is contained in the notification dated 17.03.2012 under consideration. It is seen that the notification dated 17.03.2012 while describing the excisable goods refers to 'non-conventional energy devices or systems specified in List 8'. Entry 21 of List 8 deals with 'parts consumed within the factory of production of such parts for the manufacture of goods specified at serial numbers 1 to 20'. It is only such parts which are exempted from payment of central excise duty. Such an entry is not contained in the policy of the State Government that was being examined by the Madhya Pradesh High Court.
21. An exemption notification has to be strictly construed, as was observed by the Supreme Court in Commnr. of Customs (import), Mumbai versus M/s. Dilip Kumar and Ors. 8 and in Larsen & Toubro Ltd. versus Commissioner of Central Excise, Hyderabad 9.
22. The distinction sought to be drawn by the learned counsel for the appellant between 'devices' and 'systems' is not of relevance to the present case because both non-conventional energy devices or systems specified in List 8 are covered by the description of excisable goods.
8. 2016 (5) TMI 185 - Supreme Court
9. 2015 (324) E.L.T. 646 (S.C.) 14 E/52480/2019
23. There is, therefore, no infirmity in the impugned order dated 15.07.2019 passed by the Principal Commissioner. The appeal is, accordingly, dismissed.
(Order pronounced on 22.04.2022) (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER (TECHNICAL) JB/Shreya