Custom, Excise & Service Tax Tribunal
Kec International Limited vs Commissioner, Cgst &Amp Central Excise ... on 10 May, 2022
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Excise Appeal No. 52907 OF 2019
[Arising out of Order-in-Appeal No. 236(CRM)/CE/JPR/2019 dated 29/09/2019
passed by the Commissioner of Central Excise and Central Goods & Service Tax
(Appeals), Jaipur.]
M/s. KEC International Limited .....Appellant
14-15, Benar Road,
Industrial Area,
Jhotwara,
Jaipur - 302 012.
VERSUS
Commissioner of Central Excise and .....Respondent
Central Goods & Service Tax (Appeals)
NCRB, Statue Circle,
Jaipur - 302 005.
Appearance:
Mr. Mehul Jiwani, Chartered Accountant for the Appellant.
Shri O.P. Bisht, Authorised Representative for the Respondent.
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. ANJANI KUMAR, TECHNICAL MEMBER
Final Order No. 50404/2022
Date of Hearing: 28/02/2022
Date of Decision:10/05/2022
Per: P. ANJANI KUMAR
M/s. KEC International Limited 1 contests the impugned order
dated 02.09.2019. The contentious issue is about the applicability of
the exemption notification dated 27.02.2010 2 availed by the appellant
on the galvanised solar structure manufactured and cleared by it for
the initial setting up of solar power plants.
1. the appellant
2. the exemption notification
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2. The Order-in-Original relies on M/s. Saraswati Sugar Mills
Ltd. vs. Commissioner of Central Excise, Delhi-III 3 and M/s.
Bharti Airtel Ltd. vs. Commissioner of Central Excise, Pune-III 4.
The Commissioner (Appeals) upholds the Order-in-Original and the
finding as follows:
"8. In the light of the aforesaid discussion, I find that the reliance
of the aforesaid judgments on behalf of the Revenue is quite
appropriate. The enunciation of law as laid down in the citations clearly
goes to show that the mounting structures, supplied by the appellants,
cannot be considered as 'component' of a solar power generation
project or facility. As regards the contention of the appellant that the
demand is time barred. I find that the appellant never informed the
department about the admissibility of exemption under Notification
No.15/2010-CE and I do not find any substance in defence
submissions made by the appellant."
3. Mr. Mehul Jiwani, learned Chartered Accountant appearing for
appellant would submit that it was noticed by the department, during
an audit conducted, that the clearance of galvanised solar structure
(module mounting structure hot dip galvanized structure) falling under
Central Excise Tariff Heading 5 7308 2019 was being done by availing
the benefit of exemption notification as amended on 08.05.2012. The
appellant availed the benefit of the exemption notification after being
duly permitted by the competent authority in terms of the said
notification. The Central Excise authorities allowed clearance only after
they were satisfied that the appellant was justified in availing the said
notification.
4. The Revenue alleges that mounting structure cleared by the
appellant cannot be said to be machinery, prime movers, instruments,
3. 2011 (270) E.L.T. 465 (SC)
4. 2014 (35) S.T.R. 865 (Bom.)
5. CETH
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apparatus and appliances, control gear and transmission equipment
and auxiliary equipment (including those required for testing and
quality control) and component and thus, the benefit is not available to
the appellant.
5. Learned Chartered Accountant submits that mounting structures
are required to hold the solar power panels at a particular angle to
maximise energy generation; typically, the angle required in South
India is 10o - 15o C and in North India it is 20o - 35o C; power
generating solar panels are designed to sustain only a minor amount
of load (pressure) from nature, like wind, rain, earthquake, etc.
Therefore, the panels are required to be secured using well designed
structure.
6. Learned Chartered Accountant also submits also that the
publication "Best Practices in OPERATION AND MAINTENACE of
Rooftop Solar PV Systems in India" published by Gujarat Energy
Research & Management Institute (GERM), in Chapter 2, has described
the PV System Components. On page 30, the Module Mounting
Structure has been described to be a component of the PV System
used to secure the PV modules in particular orientation to collect
maximum sunlight. Further, MNRE has issued a publication "Best
Practice Manual for Implementation of State-level Rooftop Solar
Photovoltaic Programmes in India" wherein in paragraph 4.2 it has
discussed the design of grid-connected rooftop PV systems. Under this
paragraph, at Serial No.9, the Module Mounting Structure has been
described as one of the components of the PV system. The MNRE has
also published certain technical drawings of the Solar PV systems on
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pages 48 to 50. All the diagrams have mentioned the Module Mounting
Structure as other components of the PV System. He relies upon the
ratio of the following cases:
i. Order-in-Original 6 in the case of M/s. Pennar
Industries Ltd.
ii. Jindal Strips Ltd. vs. Collector of Customs, Bombay 7
iii. Hindustan Sanitaryware & Industries Ltd. vs.
Collector of Customs , Calcutta 8
iv. Ganesh International Pvt. Ltd. vs. Commissioner of
C. Ex., Raipur 9
v. Atmasco (P) Ltd. vs. Commissioner of C. Ex. & Cus.,
Raipur 10
vi. Phoenix Construction Technology 11
vii. C.C.E., Nagpur vs. Hyundai Unitech Electrical
Transmission Ltd. 12
viii. Rakhoh Enterprises vs. Commissioner of Central
Excise, Pune 13
7. Learned Chartered Accountant submits that in terms of
notification, the liability, if any, would be on the promoter and not on
the manufacturer and in case of non-compliance of condition under the
notification, the project developer shall be liable to pay the duty which
was not paid on account of exemption at the time of clearance.
Further, as per Clause (d) of the Certificate issued by the Ministry of
New and Renewable Energy Resources, the customer of the appellant
has undertaken to pay the duty in case of non-compliance and the
Commissioner, Hyderabad vide order cited above has held that as per
the condition of the notification, the liability to pay duty is on the
customer and not on the appellant.
6. No.HYD-EXCUS-001-COM-11-14-15 dated 20.10.2014
7. 1997 (94) ELT 234 (Tribunal)
8. 1999 (114) ELT 778 (SC)
9. 2014 (308) ELT 106 (Tri.-Del.)
10. 2016 (334) ELT 122 (Tri.-Del.)
11. 2017 (359) ELT 241 (Tri.-Ahmd.)
12. 2015 (323) ELT 220 (SC)
13. 2016 (338) ELT 449 (Tri.-LB)
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8. He would submit that the case law cited by the Original or
Appellate Authority are not applicable to the facts of the present case;
in respect of Saraswati Sugar Mills Ltd., the issue before the
Supreme Court was not of the exemption notification dated
27.02.2010 and in respect of Bharti Airtel, there is a contrary
judgment by Delhi High Court which has allowed credit on towers and
shelters required for supporting antennas for effective transmission.
The Delhi High Court has also come to above conclusion after referring
to the Bombay High Court judgment in M/s. Bharti Airtel.
9. Learned Chartered Accountant submits that the show-cause
notice is for the period December 2015 to September 2016 and was
received by the appellant on 2.3.2018. The demand up to the period
31.1.2016 is barred by limitation; there was no suppression, fraud,
collusion, etc., to necessitate invocation of extended period; the
appellant had intimated the jurisdictional Assistant Commissioner, vide
letter dated 31.12.2015, regarding the clearance of excisable goods
without payment of duty for solar power project. The clearances were
on the basis of a certificate issued by Ministry of New and Renewable
Energy Resources. He relies upon the following:
i. Continental Foundation Jt. Venture vs. Commr. of C.
Ex., Chandigarh-I 14
ii. Commissioner Of Customs & Central Excise vs. ITW
India Ltd. 15
iii. Cosmic Dye Chemical vs. Collector of Central Excise,
Bombay 16
iv. CCE vs. Chemphar Drug and Liniments 17
v. Pushpam Pharmaceuticals vs. CCE, Bombay 18
14. 2007 (216) ELT 177 (SC)
15. 2011 (268) ELT 311 (AP)
16. 1995 (75) ELT 721 (SC)
17. 1989 (40) ELT 276 (SC)
18. 1995 (78) ELT 401 (SC)
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vi. Tamil Nadu Housing Board vs. Collector of Central
Excise, Madras 19
10. Shri O.P. Bisht, learned Authorised Representative, appearing for
Revenue reiterates the findings of Order-in-Original and Order-in-
Appeal and further submits that the mounting structure supplied by
the appellant cannot be considered as 'component' of a solar power
generation project or facility. Since appellant never informed the
department about the admissibility of exemption under the
notification, the contention of the appellant that the demand is time
barred is not correct.
11. Learned authorised representative submits that the contention of
the appellant that galvanised solar structure (Module mounting
structure Hot Dip Galvanised Structure) is a component since they are
used in solar power generation or solar energy production project and
is an integral part of the entire plant is not correct inasmuch as
mounting structure cannot be considered as 'component of a solar
power generation project or facility in view of the proposition of law
enunciated by the Courts in the cases cited below, which have been
relied upon by the Commissioner (A). He submits that there is a
plethora of judgments that an exemption notification has to be read
strictly. In Commissioner of Customs (Import), Mumbai vs. Dilip
Kumar and Company & Others, the Supreme Court held that
exemption notification should be interpreted strictly and the burden of
proving applicability would be on the assessee to show that his case
comes within the parameters of the exemption clause or exemption
notification. Further, when there is ambiguity in exemption notification
19. 2004 (74) ELT 9 (SC)
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which is subject to strict interpretation, the benefit of such ambiguity
cannot be claimed by the assessee and it must be interpreted in favour
of the revenue. The contention is that the above proposition of law is
also applicable to the present case and the exemption notification is
not available to the appellant.
12. Having heard rival contentions and having given careful
consideration to the facts and records of the case, we turn our
attention to the analysis of the issues involved from a factual and legal
matrix.
13. The brief dispute involved in this case is as to whether the
appellant is entitled to the benefit of the exemption notification for the
galvanised solar structure it cleared to solar power generating
companies; and as to whether in case of non-applicability, duty can be
recovered from the appellant and as to whether the show-cause notice
is barred by limitation.
14. Coming to the first issue of the applicability of the notification,
we find that it would be beneficial to have a look at the text of the
notifications.
"Notification No.15/2010-CE dated 27.2.2010:
Solar power generation project or facility -- Exemption to
specified goods required therefor
In exercise of the powers conferred by sub-section (1) of section 5A of
the Central Excise Act, 1944 (1 of 1944), the Central Government, on
being satisfied that it is necessary in the public interest so to do,
hereby exempts all items of machinery, including prime movers,
instruments, apparatus and appliances, control gear and transmission
equipment and auxiliary equipment (including those required for
testing and quality control) and components, required for initial setting
up of a solar power generation project or facility, from the whole of the
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duty of excise leviable thereon which is specified in the First schedule
to the Central Excise Tariff Act, 1985 (5 of 1986), subject to the
following conditions, namely :-
(1) before the clearance of the goods from the factory, the
manufacturer produces to the Deputy Commissioner of Central Excise
or the Assistant Commissioner of Central Excise, as the case may be, a
certificate, from an officer not below the rank of a Deputy Secretary to
the Government of India in the Ministry of New and Renewable Energy
recommending the grant of this exemption and the said officer certifies
that the goods are required for initial setting up of a solar power
generation project or facility; and
(2) the manufacturer of such goods furnishes an undertaking to the
Deputy Commissioner of Central Excise or the Assistant Commissioner
of Central Excise, as the case may be, having jurisdiction, to the effect
that-
(a) the said goods shall be used only in the said
project or facility and not for any other use; and
(b) in the event of failure to observe conditions
above, the manufacturer shall pay the duty which would
have been leviable at the time of clearance of goods, but
for this exemption.".
Notification No.26/2012-CE dated 8.5.2012:
Exemption to machinery items, etc. for initial setting up of
solar power generation project or facility --
Amendment to Notification No. 15/2010-C.E.
In exercise of the powers conferred by sub-section (1) of section 5A of
the Central Excise Act, 1944 (1 of 1944), the Central Government, on
being satisfied that it is necessary in the public interest so to do,
hereby makes the following amendments in the notification of the
Government of India, in the Ministry of Finance (Department of
Revenue), No. 15/2010-Central Excise, dated the 27th February,
2010, published in the Gazette of India, Extraordinary vide number
G.S.R. 117(E), dated the 27th February, 2010, namely :-
In the said Notification, for conditions (1) and (2), the following
shall be substituted, namely: -
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(1) an officer not below the rank of a Deputy Secretary to the
Government of India, in the Ministry of New and Renewable Energy
recommends the grant of this exemption, indicating the quantity,
description and specification thereof and certifies that the goods are
required for initial setting up of a solar power generation project or
facility; and
(2) the Chief Executive Officer of the project furnishes an undertaking
to the Deputy Commissioner of Central Excise or the Assistant
Commissioner of Central Excise, as the case may be, having
jurisdiction over the factory of the manufacturer, to the effect that-
(i) the said goods will be used only in the said
project and not for any other use; and
(ii) in the event of non-compliance of sub-clause (i),
the Project Developer of such project shall pay the duty
which would have been leviable at the time of clearance
of goods, but for this exemption.";
15. In terms of the notification, exemption would be available to all
items of machinery, including prime movers, instruments, apparatus
and appliances, control gear and transmission equipment and auxiliary
equipment (including those required for testing and quality control)and
components for initial setting up of a solar power generation project or
facility; exemption is granted on the basis of a certificate issued by an
Officer not below the rank of Deputy Secretary to the Government of
India in the Ministry of New and Renewable Energy recommending the
grant of this exemption and the said officer certifies that the goods are
required for initial setting up of solar power generation project or
facility.
16. It is not the case of the department that the appellant or the
customers are not in the possession of such a certificate. The only
dispute that is between the appellant and the department is whether
the impugned goods are components of solar power projects or not.
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The scope of the notification is very large and exempts a variety of
goods including prime movers used in the initial setting up of solar
power generation project or facility. The appellant has successfully
demonstrated, relying upon the technical literature, that Module
Mounting Structure is a component of PV (Photo voltaic) system. The
department on the other hand would rely on the cases of Saraswati
Sugar Mills and Bharti Airtel Ltd. to arrive at the conclusion that the
structures are not components of machinery required in the initial
setting up of solar power generation project or facility. While
Saraswati Sugar Mills is about the applicability of Cenvat Credit on
iron and steel products used for fabrication of structures used in the
factory, Bharti Airtel is about the applicability of credit on towers
used for mounting the antennas.
17. The facts of both the cases, relied upon by the revenue, are
entirely different than those involved in the impugned case before us.
Availability of exemption under any notification was not the subject
matter of the cases. Applying the ratio of judgment in cases wherein
the facts are different would not be appropriate. Moreover, Bharti
Airtel has been discussed and not relied upon by Delhi High Court.
Be that as it may, it can be argued that the antennas can be fixed on
high rise buildings also. However, in the present matter, it is nobody's
case that the solar panels can be fixed to the floor on solar farms or on
the ground of the top floor of the buildings. The fabricated structures
are used not only to keep the solar panels secured form the vagaries
of nature but also to keep them in a particular angle to maximise
energy production. This being so, the Module Mounting Structures are
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essential to the initial set up and functioning of the solar system and
therefore, it has to be held that they are components of solar power
system. Under these circumstances, we find that there is considerable
force in the argument of the appellant, backed by technical literature,
that the Module Mounting Structure are essential components required
for initial setting up of solar power project or facility. Information
available in technical literature, which throws light on issues relating to
matters of technical nature, cannot be brushed aside. Technical
Literature would be of great help in understanding not only the
concepts of technology but also the language and terminology of the
same. Nomenclature adapted by technical personnel working in the
field is important in understanding such issue.
18. The appellant would submit that the Commissioner has passed
an order on similar set of facts in the case of M/s. Pennar Industries
Ltd. The Commissioner finds that:
"22. I find that the Director, Ministry of New and Renewable
Energy, New Delhi addressed a letter Ref. No.4/40/2012-13/PVSP dt.
27.2.2013 to the department, with reference to the correspondence by
clarifying that Module Mounting Structure form an essential part of the
solar power plants that they were the components of the solar power
plants and hence were covered in the Notifications issued in this
regard. If the goods cleared were components, what is the exact
meaning of component? As per the Dictionary Meaning, Component is
a noun"; a part or element of a larger whole, especially a part of a
machine or vehicle" and as an adjective "Constituting part of a larger
whole; constituent". From the dictionary meaning it is clear that
component is apart. As the subject items were parts of the solar power
facility and since they were supplied for initial setting up of the said
facility, in fact which is undisputed. I find that the subject items were
eligible for the exemption under subject notification."
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19. From the above, it is clear that experts in the field consider the
Module Mounting Structure as an integral and essential component of
the solar power systems and the Ministry implementing the projects
also considers the same as components of the solar power plants and
hence were covered by the notifications. Even by common
understanding, a component is an essential part of the system without
which the system would not function. Therefore, it is not open to the
department to deny the benefit of exemption notification. This view
get support from the decision of this Tribunal in Lotus Power Gear
Pvt. Ltd. 20. The Tribunal held that:
"3. On a careful consideration of the issue we do not find that the
Revenue has made proper grounds for appealing against the impugned
order. So long as the competent authority has certified that they are
necessary in the use of scientific and technical appliances, the
exemption cannot be denied. Moreover, the Commissioner has given
detailed justification for extending the benefit. The findings of the
Commissioner (Appeals) are reproduced below:
"The items cleared by the appellant are switch
gears and control panels and the same are cleared to
public funded research institutions against a valid
certificate issued to them by research institutions who
have made the indent for the goods. The appellant also
contends that the aforesaid items are essential parts to
the main scientific equipment. The adjudicating
authority in his findings in the impugned order have
fairly conceded that the certificates issued are valid and
are issued by public funded research institutions and the
transactions/receipt etc., are not questioned. The
adjudicating authority in his findings have clearly
concedes that the appellants have satisfied all the
requirements of the said exemption notification and
merely denied the exemption to the appellants on the
ground that the aforesaid items are not mentioned in
the Table to the said notification.
On perusal of the table to the said Notification, I find that it
reads as follows: -
(a) Scientific and technical instruments, apparatus,
equipment (including computers);
20. 2009 (248) E.L.T. 919
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(b) Accessories and spare parts, of goods specified in (a)
above and consumables
(c) computer software.
From the above table it is seen that the broad heading is mentioned at
(a) and their parts, accessories and consumables are mentioned at
(b). There is no specific mention of any specific equipments,
instruments or apparatus at (a) nor in respect of spares, accessories
or parts in (b), above. This gives the meaning that the intention of the
Government is to allow exemption to all the scientific and technical
equipments, instruments, apparatus and all the spare parts,
accessories and consumables to the equipments, as long as it is
indented by specified research institutions mentioned in the
notification. The Table of items for the exemption is not exhaustively
listed but all-inclusive in the sense if any item comes under the broad
heading of scientific and technical instruments, and parts for the same
are eligible for the exemption irrespective of any item specifically
mentioned or not. Hence the basic criteria for the exemption is to
confirm whether the items are coming under (a) or (b), irrespective of
any specific mention of any such items, which I find is not the purpose
of the exemption. Further, I find from the careful reading of the said
notification that the emphasis is on supply of items to specified
scientific & research institution. In this case, there is no dispute with
regard to supply of items by the appellant other than specified
institutions as per the said notification. The main condition in the
notification being issue of certificate by the specified institutions
confirming the requirement of such exempted items in their institutes,
and this was satisfied in the instant case as could be seen from the
findings of the adjudicating authority in the impugned order. I agree
with the contention of the appellants that certificate issued by
competent authorities cannot be questioned as held by CESTAT
Bangalore Bench in their recent judgment [Andhra Sugars Ltd. v. CCE
Guntur - 2005 (71) RLT 659]. Further in a similar case involving items
viz., controllers and switches for making a Dusk dawn system for
street lights, recently the CESTAT, Delhi have allowed the exemption
under GOI Notification No. 6/2002 [Rajasthan Electronics &
Instruments Ltd. v. CCE, Jaipur - 2005 (68) RLT 352]. The same
analogy can be drawn to the present case and exemption benefit can
be allowed to the appellant which they are eligible. Therefore, the
appellant is eligible for the exemption for the impugned clearances
under the said notification".
The Order appears to be well reasoned. Hence, we uphold the same
and reject the Revenue's appeal."
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20. The issue of availability of exemption to support steel structures
is no longer res integra. The Ahmedabad Bench of the Tribunal has
gone into the very same issue in Phenix Construction
Technology 21. The Bench examined as to whether the structures are
'components' of solar power project/facility and held that support steel
structures for mounting / holding reflectors/mirrors is to be considered
as 'components' of reflectors/mirrors; they being required for initial
setting up of solar power generation project are eligible for benefit of
exemption available under notification dated 27.2.2010. The Bench
observed as follows:
"16. We do not find substance in the observations of the learned
Commissioner, inasmuch as there is no evidence on record to show
that any of these items have been used for execution of civil work to
construct buildings, storage tanks, etc. On the other hand, the same
are used as detailed in the above technical literature, to hold the
reflector one of the main parts of the solar power generation system.
Also, it is evident from the following photographs submitted by the ld.
Advocate for the appellant during the course of hearing.
27. The meaning of 'components' and 'parts' has been explained by
five Member Bench of this Tribunal in the case of Jindal Strips Ltd. v.
Collector of Customs, Bombay - 1997 (94) E.L.T. 234 (Tribunal) while
drawing distinction between 'parts' & 'component' in the context of
exemption Notification No. 77/90-Cus., dated 20-3-1990 as :
21. 2017 (358) ELT 241 (Tri.-Ahmd.)
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"12. "Part" is defined in Black's Law Dictionary Sixth
Edition at page 1117 as under: -
"An integral portion, something essential belonging to a
larger whole; that which together with another or others
makes up a whole ........ a portion, share or purport".
In Chambers 20th Century Dictionary, the meaning
given for "component" is as under: -
"One of the parts or elements of which anything is made
up, or into which it may be resolved".
In Oxford Dictionary the meaning of "component" is: -
"Contributing the composition of whole"
In Webster's Dictionary the meaning given is
"A part; a constituent, an ingredient."
In our view, the common parlance meaning of the
expression "component" is also the same, that is, one of
the parts or elements of which anything is made up or
into which it may be resolved or a constituent. The
meaning in common parlance has to be looked into since
the notification itself does not contain any definition of
the expression.
13. Several decisions of High Courts containing
reference to "part", "component" or spares have been
placed before us in the course of submissions. In C.S.T.
v. Amar Radio Cabinet Works - 1968 (22) STC 63 (Bom
HC) entry No. 65 in the Bombay Sales Tax Act referring
to wireless apparatus, radiographs, loudspeakers, etc.
and spare parts of wireless equipments and radiographs
was considered. The question was whether radio
cabinets sold by a dealer would attract entry 65 or the
residuary entry 22. It was held that while the word
"part" has a general sense, "spare part" takes colour
from the word "spare", that is a part which would
require replacement in ordinary course on account of
wear and tear and would not have the amplitude of the
word "component". It was indicated that the owner of
radio will not ordinarily keep an extra cabinet spare and,
therefore, cabinet cannot be regarded as a spare part,
though it is a component of radio and, therefore, entry
No. 65 would not apply. In Commissioner of Sales Tax v.
Pritam Singh - 1968 (22) STC 414 (All. HC) the question
arose in the context of manufacture of bodies of motor
vehicles. Item 24 of the exemption notification referred
to motor vehicles and component parts of motor
vehicles. It was held that a component part of an article
is an integral part necessary for the constitution of the
whole article and without it the article will not be
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complete and body of a motor vehicle being an integral
part of the motor vehicle has to be regarded as a
component part. In Sujan Singh & Another v. A.A.C.
Sales Tax - 1969 (24) STC 504 (Delhi HC) the question
was whether the body of motor vehicle is a spare part
within the meaning of the entry "motor vehicles
including chassis of motor vehicles, motor tyres and
tubes and spare parts of motor vehicles" under item 1 of
first schedule to the Bengal Finance (Sales Tax) Act. It
was held that spare part is an extra part kept for use in
emergency for replacement, that every component will
not be a spare part and no owner of vehicle would keep
a body of motor vehicle as spare part and, therefore, it
cannot be regarded as a spare part. In Bajoria
Halwasiya Service Stn. v. The State of Uttar Pradesh -
1970 (26) STC 108 (All. HC) a similar question arose
under the provisions of the U.P. Sales Tax Act and a
notification issued thereunder. It was held that body of a
motor vehicle is not a spare part, though it is a
component since a spare part means a part kept in
readiness for use in emergency and no owner of vehicle
will keep body of a vehicle in readiness for use in
emergency. It was held that every component part need
not be a spare part while every spare part will
necessarily be a component part.
14. In Paul Lazar v. State of Kerala - 1977 (40) STC
437 (Kerala HC) it was held that copper wire used in
manufacture of transformers is not a component part
thereof. It was indicated that component part has to be
an identifiable object and copper wire used in the
manufacture of transformer is not an identifiable object.
15. In Ghaziabad Engg. Co. (P) Ltd. v. Commr. of Sales
Tax - 1991 (80) STC 243 (Delhi HC) under the
provisions of the Bengal Finance (Sales Tax) Act, the
Court considered entry 1 of first schedule of Bengal
Finance (Sales Tax) Act, namely, motor vehicles,
including motor vehicles tyres and tubes and spare parts
of motor vehicles and held that fuel injection pump,
which is a part of diesel engine is a component part of
the diesel engine and not a component part of the motor
vehicle and, therefore, the fuel injection pump sold as a
spare part would not be a spare part of motor vehicle. In
Khoday Distilleries (P) Ltd. v. Commr. of Commercial
Taxes, Karnataka - 1991 (82) STC 251 (Karnataka HC)
it was held that molasses used in the manufacture of
Ethyl alcohol can be identified by chemical test and,
therefore, is a component part of the end product. The
Supreme Court in State of Madras v. R.M.K.
Krishnaswami Naidu and Others - 1970 (26) STC page
42 has taken a similar view. In State of Tamil Nadu v.
Tube Investments of India Ltd. - 1992 (85) STC 245
(Madras HC) it was held that dynamo of a cycle is not a
component part but an accessory of cycle. In Televista
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Electronics v. Commr. of Sales Tax - 1992 (87) STC 410
(Delhi HC) in considering the entry relating to wireless
receiving instruments and spare parts and accessories in
the schedule to the Bengal Finance (Sales Tax) Act, it
was held that a spare part is always a component part
but the converse may not be invariably true.
15. In Star Paper Mills Ltd. v. Collector of Central
Excise - 1989 (43) E.L.T. 178 (S.C.), the Supreme Court
held that paper core used for rewinding of paper in rolls
is a component part within the meaning of Notification
No. 201/79. The Court relied on the dictionary meaning
of the word "component" as "a constituent part". Since
use of paper core is necessary for rewinding of paper if
delivered to the customers in rolls, it should be a
component part within the meaning of the Notification.
16. Notifications 246/76, 77/90 and 112/87 do not
define the word "component part" with the result that
one has to go by the meaning the word carries in
common parlance. The dictionary meaning of
"component" is "one of the parts or elements of which
anything is made of or into which it may be resolved", or
"a constituent part" and this meaning has been accepted
by the Supreme Court in Star Paper Mills Ltd. - 1989
(43) E.L.T. 178. Much is sought to be made out of the
meaning stated as "constituent part". The suggestion is
that it must be a part in the initial constitution of the
manufactured product. This suggestion is merely based
on a priori assumption. "Constituent", according to
Chambers 20th Century Dictionary means: -
"constituting or forming; essential; elemental;
component; electing; constitution-making - n. an
essential or elemental part; one of those who elect a
representative, esp. in parliament; an inhabitant of
one's constituency."
Thus, "constituent" only means an essential part or
component. Use of the words "component parts" or
"constituent parts" is an example of tautology.
"Constituent" and "component" essentially mean the
same thing, that is, an essential part of which anything
is made of or into which it may be resolved. When parts
are put together to create an end product, they are
regarded as component parts. When an assembled
product is dismantled, it gives rise to component parts.
Whatever be the stage, that is, before assembling, after
assembling and after dismantling, such essential are
[integral] part is a component, when a component part
is damaged or is worn out and therefore requires
replacement and is replaced, the replacing part does not
cease to be a component part because it was not
present in the initial assembly and had been put in the
place of a damaged or worn-out component part. The
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much wider meaning given to the expression
"component" in Khodey Distilleries (P) Ltd. v.
Commissioner of Commercial Taxes, Karnataka and
Others - 1991 (82) STC 251 (Kar. HC) and in State of
Madras v. R.M.K. Krishnaswami Naidu & Ors. - 1970
(26) STC 42 (S.C.) does not affect this position. A spare
is a replacement part, to replace a damaged or worn out
component; nevertheless it is a component part.
17. "Component" is the genus and "spare" is a species
that is, component which is used for replacement. If all
that is available is the use of the expression
"component" or "component part", the usage must be
understood in its normal connotation, in the absence of
any specific qualification or restriction. There are several
notifications where such qualifying or restrictive words
have been used to suggest that the component part
must have been used in the initial assembly or in the
manufacture of the final product thereby excluding
"spare" from the ambit of the expression "component
part". There are no such qualifying or restrictive words
used in the notifications under consideration. Hence,
with respect, it is not possible to agree with the view
taken in some of the decisions of the Tribunal that
"component" implies parts used in the initial assembly or
manufacture and excludes "spares". The amplitude and
significance of the word "component" cannot be cut
down in the absence of clear words indicative of any
intention to restrict its meaning and operation. The view
taken in Vaz Fowarding Pvt. Ltd. - 1989 (43) E.L.T. 358
(Tribunal) was not followed in Metal Impacts Pvt. Ltd. -
1993 (64) E.L.T. 286 (Tribunal), but the distinction
drawn based on the fact that the words "component
parts" occur in isolation and not in conjunction with the
final product is a distinction without difference. The
amplitude of the words "component part" is not in any
way restricted by using the words in conjunction with
the article of which they are component parts."
28. The aforesaid decision of the Tribunal was later upheld by
Hon'ble Supreme Court in the case of Hindustan Sanitaryware &
Industries Ltd. v. Collector of Customs, Calcutta - 1999 (114) E.L.T.
778 (S.C.).
29. The Tribunal in the case of Ganges International Pvt. Ltd. v. CCE,
Raipur - 2014 (308) E.L.T. 106 (Tri.-Del.), while considering the goods
viz. General Fabrication Structures, Auto Welded Beams and Boxes for
Thermal Power Project, in the context of its eligibility to exemption
under Notification No. 6/2006-C.E., dated 1-3-2006, mentioned at Sr.
No. 13 of the table annexed to the Notification, has observed as
follows :-
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"7 .........In our view, even if the General Fabrication
Structures, Auto Welded Beams and Boxes cleared by
the appellant are meant to be used as Supporting
Structure for some machinery, the same would have to
be treated as component parts of that machinery as the
description of goods against Sl. No. 91B of Notification
No. 6/2006-C.E., Sl. No. 338 of Notification No.
12/2012-C.E. covers all components whether finished or
not and raw materials for the manufacture of the items
of machinery, prime movers, instruments, apparatus,
appliances, control gear, transmission equipments, etc.
In view of this, the impugned order denying exemption
to the goods supplied to Prayagraj Super Thermal Mega
Power Project is also not sustainable."
30. Also, we find that recently the Larger Bench of the Tribunal in the
case of Rakhoh Enterprises (supra), while considering the eligibility of
the items viz. 'doors of windmills' under the exemption under
Notification No. 6/2006-C.E. as amended observed that these are parts
of 'Wind Operated Electricity Generator' (WOEG) and eligible to the
benefit of notification. Similar findings are also recorded in the case of
items viz. anchor rings and load spreading plates as parts of the tower
specifically designed for wind operated electricity generator and
accordingly eligible to Notification No. 6/2006-C.E., dated 1-3-2006.
31. Therefore, considering the meaning of component elucidated in
the aforesaid judgments, the technical literatures and other evidences
produced by the appellant, we find merit in the contention of the
learned Advocate for the appellant that the items in question definitely
be considered as 'components' of the reflector, undisputedly used being
required for initial setting up of a solar power generation project or
facility, hence eligible to the benefit of exemption Notification No.
15/2002C.E., dated 27-2-2010, as amended."
21. Now we turn our attention to the other issues involved. The
appellant has vehemently submitted that they have cleared the goods
on the basis of the exemption notification on a certificate to this effect
having been issued by the Competent Authority in the Ministry of New
and Renewable Energy Resources. They have submitted the certificate
to the jurisdictional Central Excise authorities before effecting the
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clearance and therefore, no suppression or misrepresentation can be
alleged and the extended period cannot be invoked. They submit that
for this reason, the demand prior to 31.1.2016 is beyond the normal
period of limitation.
22. There is force in the submission of the appellant. When the
clearances are intimated to the department, it is not open to the
department to invoke the extended period as no fraud, collusion,
suppression, etc., has been brought on record, as held in the cases of
Bombay Chemicals Pvt. Ltd. and LAPP Pvt. Ltd. When the
competent authority in the Ministry has issued a certificate stating that
exemption is available, exemption under said notification cannot be
denied.
23. The appellant has also argued that in terms of the notification, in
case of any non-compliance of subclause (1), the liability to pay the
duty is on the project developer and not the appellant. As per the
discussion above, it has to be held that the impugned goods are
components required for initial setting up of solar power generation
project or facility and to that extent, there is no violation of the
substantial compliance of the notification.
24. Coming to the procedural compliance, it is not the case of the
department that the appellant did not produce the requisite certificate
from the competent authority. In such circumstances, in terms of the
notification in the event of non-compliance, the project developer of
such project shall pay the duty which would have been leviable at the
time of clearance of goods, but for this exemption.
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25. The department has relied upon the decision in Saraswati
Sugars Ltd., Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar
vs. Commissioner of Central Excise and Service Tax, Alwar 22 and
Dilip Kumar and Company. The wordings of the notification being
clear, there is no scope for any interpretation, strict or liberal in the
instant case. Therefore, the ratio of the cases is not applicable to the
facts of the present case. In fact, these cases would help the cause of
the appellant rather than the department. When the notification
provides unambiguously that duty foregone, if any, is to be recovered
from the project developer and not from the appellant-manufacturer;
it is not open to the Revenue to demand duty from the appellant. As
far as the appellant is concerned, the clearances are made in
accordance with the provisions of the notification and on the strength
of a certificate issued by the competent authority. No demand can be
raised against the appellant without getting the said certificates
cancelled. For this reason, also the demand is not sustainable.
26. In the result, the impugned order does not survive on merits and
limitation in view of our discussion above. The same is, therefore, set
aside and the appeal is allowed with consequential relief, if any.
(Order Pronounced on 10.05.2022)
(JUSTICE DILIP GUPTA)
PRESIDENT
(P. ANJANI KUMAR)
MEMBER (TECHNICAL)
22. 2022 Live Law (SC) 203
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Excise Appeal No. 52907 OF 2019
[Arising out of Order-in-Appeal No. 236(CRM)/CE/JPR/2019 dated 29/09/2019
passed by the Commissioner of Central Excise and Central Goods & Service Tax
(Appeals), Jaipur.]
M/s. KEC International Limited .....Appellant
14-15, Benar Road,
Industrial Area,
Jhotwara,
Jaipur - 302 012.
VERSUS
Commissioner of Central Excise and .....Respondent
Central Goods & Service Tax (Appeals)
NCRB, Statue Circle,
Jaipur - 302 005.
Appearance:
Mr. Mehul Jiwani, Chartered Accountant for the Appellant.
Shri O.P. Bisht, Authorised Representative for the Respondent.
CORAM: HON'BLE MR. P. ANJANI KUMAR, TECHNICAL MEMBER
Date of Hearing: 28/02/2022
Date of Decision:10/05/2022
ORDER
Order Pronounced (P. ANJANI KUMAR) MEMBER (TECHNICAL)