Multifunction Protection Devices Retaining Essential Character of Relays Eligible for Excise Exemption Notification Benefit: CESTAT [Read Order]

GE Vernova T & D India Ltd., the appellant, is engaged in manufacture of electrical equipment including multifunction protection relays. The department disputed the classification adopted by the appellant and alleged that the products were advanced protection and monitoring devices and not simple relays eligible for excise exemption benefit.

A show cause notice was issued demanding differential excise duty along with interest and penalties. Penalties were also imposed on company officials. Aggrieved by the order, the appellant approached the CESTAT.

The appellant’s counsel argued that the products manufactured by the appellant essentially performed relay functions and were correctly classified as relays. It was further argued that the products satisfied the conditions prescribed under the exemption notification because the contact rating did not exceed the specified limit.

The appellant relied on technical literature and product specifications to argue that addition of monitoring and protective functions would not change the essential nature of the products as relays. The appellant also argued that multifunction relays are commonly used in modern electrical systems and continue to function primarily as relays.

The revenue argued that the products were sophisticated protection devices having additional features such as monitoring, communication and control functions and could not be treated as ordinary relays for claiming exemption benefit.

The two-member bench comprising M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member) observed that even though the products had additional features, their essential character and primary function remained that of relays.

The tribunal further observed that the exemption notification did not exclude multifunction relays merely because they contained additional monitoring or protection capabilities. The tribunal pointed out that technological advancement and incorporation of additional features would not automatically take the products outside the scope of relays.

The tribunal explained that once the products satisfied the prescribed conditions under the exemption notification, the benefit could not be denied merely because the devices were technologically advanced.

The tribunal set aside the differential duty demand and granted consequential relief to the appellant.

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