Pole Shoe is Internal Part of WOEG, Eligible for Excise Duty Exemption: CESTAT dismisses Revenue's Appeal [Read Order]

The Bangalore bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has dismissed the Revenue's appeal, ruling that the pole shoe is an internal part of Wind Operated Electricity Generators ( WOEG ) and is  eligible for excise duty exemption.

 The respondents M/s. Pearl Insulations Pvt. Ltd are engaged in the manufacture and clearance of excisable goods viz. enameled copper wire, insulated copper strips, bare copper, Nomex aluminum, ENDGC copper coils, pole  shoes etc. falling under Chapter 85 and 74 of Central Excise Tariff Act, 1985.

On the basis of audit of the records of the respondents, it was alleged that during the period December, 2009 to June 2014, they had manufactured “Pole Shoe'' and cleared the same without payment of duty by wrongly claiming the benefit of exemption under Sl.No.84 of Notification No.6/2006-CE dt. 01/03/2006 (for the period December 2009 to 15/03/2012) and under Sl.No.332 of Notification No.12/2012-CE dt. 17/03/2012. Show-cause notice was issued to them on 05/01/2015 for recovery of duty of Rs.28, 59, 13,906/- with interest and penalty.

Mr. K. Vishwanatha, representing the appellant submitted that since the Pole Shoe cleared to their customer M/s. Enercon (India) Ltd to assemble rotor assembly which in turn is a part of the Wind Operated Electricity Generator (WOEG for short) is not covered under Sl.No.13 of List 5 / 8 of the Notification. But, as per Sl.No.21 of the said List 5 /8 of the relevant notifications, exemption is available to parts consumed within the factory of production of such parts for manufacture of WOEG since it is not consumed in the factory of the respondent but cleared to customers to be used ultimately in the assembly of rotor; therefore the respondents are not eligible to availed the benefit of notifications.

Further submitted that as per Board’s Circular No.1008/15/2015-CX dt. 20/10/2015, it has been clarified that the following parts / components to be treated as parts and components of WOEG and accordingly eligible for exemption under Notification No.12/2012-CE dt. 17/03/2012.

Mr. V. Raghuraman, representing the respondent submitted that the pole shoe manufacture by the respondent is a part of generator rotor assembly, and generator rotor assemble is in turn a part of the ‘Wind Operated Electricity Generator’ (WOEG); in other words, pole shoe is a part of a part of WOEG. The exemption under Sl.No.13 of List 5/8 of exemption notification includes exemption to components and parts of WOEG and pole shoe being a part of the wind operator generator, exemption is available to pole shoe as well.

He has further submitted that windmill coils/pole shoes manufactured by respondent is eligible for exemption from duty for the period December 2009 to 16/03/2012 under Sl.No.84, which reads as “any chapter for non-conventional energy devices / systems specified in List 5 and List 5, Sl.No.13 – Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller and for the period 17/03/2012 to June 2014 under Sl.No.332 read with List 8, exemption is for any chapter for non-conventional energy devices / systems specified in List 8. It is their contention that exemption is available for WOEG and its components and parts. It is also their argument that windmill coils / pole shoe is a component and generator rotor assembly and in turn generator rotor assembly is an essential part of WOEG

The bench  found merit in the observation of the commissioner which is based on technical opinion and also the detailed study of the manufacturing process of ‘pole shoe’ and its ultimate use in the generator which has not been contradicted in any manner by the revenue on the grounds of appeal. The revenue in the grounds of appeal has simply stated the pole sole is part of rotor which in turn parts of the WOEG, implies that any part of the parts of the WOEG is covered under Sl.No.21 of the said list and not sr. no. 13 of the said List 5/8 of the Notification.

Further found that there was a fallacy in the approach of the revenue in appreciating the facts, inasmuch as the ‘rotor assembly’ used inside the WOEG is different from the ‘rotors’ which is placed outside the generator, but an essential part of the wind mill and accordingly allowed exemption. A close analysis of the items mentioned in List 5/ 8 of the Notification, it can be noticed that only in the along with WOEG, its components and parts under Sl.No.13 are allowed the exemption; for all other items, their parts fall under Sl.No.21 of the said List. Therefore, ‘pole shoe’ being part of the rotor assembly which in turn used in the generator and a part of the WOEG, hence squarely covered by the Notification No.6/2006 CE dated 01.3.2006 and No.12/2012 CE dt 17.3.2012.

The two member bench of the tribunal comprising DM Misra ( Judicial member ) and R, Bhagya Devi (Technical member) found merit in the appeal filed by the revenue. Consequently, the impugned order was upheld and the revenue’s appeal being devoid of merit is liable for dismissal. Since, CESTAT have decided the appeal on merit, other ancillary issues like reversal of cenvat credit and quantification of demand etc. become academic; hence not analysed. Revenue’s appeal dismissed

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