By TIOL News Service

MUMBAI, OCT 27, 2014 : THE exemption notifications which are the subject matter of the appeals are No. 6/2006-CE and notification No. 12/2012-CE.

In the case of the first appellant it was held by the Commissioner that the exemption was limited to Wind Operated Electricity Generators (WOEG) and their components and parts. Although some components namely rotor and wind turbine controller were specifically included in the scope of the notifications from 1.3.2006, even applying the basic principles of interpretation ejusdem generis, the scope of the entry can by no stretch of imagination include the whole WOEG system/windmill including the tower and foundations parts thereof. As the anchor ring and load spreading plates are used in the foundation of wind mill tower, they cannot be said to be components of WOEG. According to the Commissioner, WOEG is not the entire wind mill system but is only one of the parts of the Wind Mill system. The Commissioner also held that the appellant had suppressed the facts and, therefore, penalty was justified.

In the case of the second appellant, it was held by Commissioner (Appeals) that wind mill doors cannot be considered to be part of WOEG as the doors do not take part in any way in generation of electricity by WOEG; the wind mill can function without the doors and the doors are fitted at the bottom of the tower for security and convenience only. Reliance was also placed on the decision in Nicco Corporation Ltd. - 2006-TIOL-163-SC-CX.

The Bench observed -

++ The notifications No. 6/2006 and 12/2012 exempt non-conventional energy devices/systems specified in List-5/8 of the notfs. respectively. The corresponding goods specified in List-5/8 are "wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller". It would be relevant to mention that the earlier notifications namely 6/2002, 3/2001, 6/2000 described the goods were exempted in lists under the respective notification as "wind operated electricity generator, its components and parts thereof." However, under Notification 6/2006, the exemption became available to "wind operated electricity generator its components and parts thereof, including rotor and wind turbine controller". Thus, it is clear that it was the intention of Government to specifically include rotor and wind turbine controller as parts to which the exemption should also be available from 1 st March 2006 vide Notification No. 6/2006. These parts are related more closely to, in fact, they are directly integrated to, the process of generating electricity whereas the tower and foundation are not at all related to the actual process of generating electricity. If the intention was to include towers and foundation for exemption, they would have found specific mention too in Not. 6/2006. But it is not so.

++ The wind mill or wind turbine as it is sometimes called consists of rotors, shafts, nacelle (containing generator), tower, foundation etc. The appellants have painstakingly argued that the tower doors, anchor rings and LSP are part of the WOEG. We are unable to agree with this view because the word ‘generator' in common parlance means nothing but the generator, itself, which in the present case is a specific part of nacelle that converts the wind energy into electrical energy through the shaft and gearbox. At most, the parts like shaft and electronic parts in nacelle could be considered as part of the generator. To view that the tower itself may be considered as part of the WOEG is a farfetched view. As explained by the appellant themselves, the tower provides stability for the load of the components mentioned above. In the present case, the parts in question namely Anchor rings, LSP and tower doors have nothing to do with the electricity generating system . The door at the base of the tower only facilitates entry to the tower for maintenance of the machinery etc. The LSP and anchor rings are only parts of the foundation on which the tower is fixed. It is inconceivable that the foundation and its parts namely anchor rings and LSP are parts of WOEG.

++ In case the intention of Govt. was to exempt towers and foundation and its parts, then the notification would have specifically exempted non-conventional energy systems/devices as a whole. Rather, the notification exempts only those non-conventional energy devices/systems which are specified in List-5. And list-5 mentions only wind operated electricity generator, its components and parts. A notification has to be construed by the language its uses. And the language of the present notification is clear. It does not require an extrapolated interpretation.

At the same time the Bench noted that the Tribunal had in the case of the second appellant Gemini InstratechPvt. Ltd. [2013-TIOL-738-CESTAT-MUM] allowed their appeal by extending the benefit of the exemption notification observing - CX - Windmill doors are used with tower on which wind operated electricity generators are installed - Revenue is not denying benefit of notification 3/2001 & 6/2002 in respect of tower, hence doors which are part of tower are also entitled for exemption - appeal allowed: CESTAT

Taking a stand that the present Bench respectfully disagrees with the view taken in the aforementioned case it was further observed that although the Bench could have decided this case finally on the basis of its present findings, as a matter of judicial discipline, the matter needs to be placed before the President for constitution of a Larger Bench on account of contrary view taken by a Co-ordinate Bench in the matter of the same assessee for a different period.

So, the issue to be considered by Larger Bench is framed as below:

Whether a manufacturer is entitled to claim the benefit and exemption from central Excise duty on ‘wind mill doors' under Notification No. 6/2006 dt.1.3.2006 which grants exemption to "wind operated electricity generator, its components and parts thereof including rotor wind turbine controller.

As for the appeal of the first appellant Rakhoh Enterprises , the plea of the demand being hit by limitation was negated. It was also observed that the demand in the case of the second appellant Gemini InstratechPvt. Ltd. was within the normal period of limitation.

Conclusion -

++ In the case of Rakhoh Enterprises the duty demand along with interest is upheld. However, penalty is set aside.

++ In the case of Gemini Instratech Pvt. Ltd. the issue is to be considered by a Larger Bench.

(See 2014-TIOL-2110-CESTAT-MUM)