By TIOL News Service

MUMBAI, JAN 08, 2018: THE appellant is engaged in the manufacture of boilers [Ch. 84].

The departmental officers visited the factory and conducted investigation/enquiries which revealed that the appellant had cleared various parts/machinery of boilers by claiming and availing exemption under Notification No. 5/99-CE, 6/2000-CE, 3/2001-CE and 6/2002-CE while executing the orders in respect of various projects.

On the basis of the statements recorded during investigation, a SCN was issued wherein it was alleged that some parts of the boilers were manufactured by their vendors which showed that the appellants are not manufacturing boilers as a whole in their factory but are assembled at site out of the components/systems cleared from their own factory as well as from the vendors.

Accordingly, it was contended that the goods manufactured and cleared by the appellant are not boilers but are parts of boilers and the same is not entitled for the exemption as claimed.

The demand was confirmed along with imposition of equal penalty and interest.

The appellants are before the CESTAT.

It is inter alia submitted that by taking the overall value of the boiler, the parts supplied from outside range from 1% to 2% of the total value of the boiler; that major parts of the boiler are manufactured by the appellant and the complete boiler in CKD/SKD form is supplied by the appellant; that it is not disputed that the appellant are themselves undertaking to supply, erect and install the boiler which comes into existence; that in Section 37B Order No. 4/92 dated 19.5.1992 it was clarified that the notification No.205/88-CE which is parimateria to the Notification claimed in this case is available to the boilers, even when the same are cleared in CKD/SKD conditions provided that evidence is produced that goods cleared, form part of a complete device and the evidence is also produced for supply of such a device to the buyer and also the said goods is designed for converting agricultural and municipal waste for producing energy though conventional fuel can be used. Reliance is placed on the following decisions viz. Thermax Babcock & Wilcox Ltd. 2005-TIOL-1661-CESTAT-MUM, 2015-TIOL-125-SC-CX,  MetafabHightech (P) Ltd. - 2016-TIOL-1472-CESTAT-MUM, Thermax Babcock & Wilcox Ltd. & Thermax Ltd. Order M/94303-94304/16/EBdt.6.10.2016 - 2016-TIOL-3351-CESTAT-MUM, Shree Venkateswara Engg. Corporation - 2016-TIOL-908-CESTAT-MAD in support.

The appellant also argued that the demand is hit by limitation. Furthermore, since the impugned goods were cleared under exemption, they had followed the provisions of rule 6 of CCR and paid an amount of 8% of the value of goods which amount had not been adjusted by the adjudicating authority.

The AR submitted that the goods manufactured and cleared by the appellant do not fulfill the definition of boiler and it is not in conformity with the provisions of Maharashtra Boiler Rules 1962; therefore, they are rightly called as parts and not entitled to the benefit of the exemption.

The Bench considered the submissions and observed -

+ we find that the exemption notification No. 3/2001-CE dt. 1.3.2001 is available to the goods namely non-conventional energy device/system. In our view the objective of this exemption is to grant the exemption to such energy device/system which functions by using the non-conventional fuel such as municipal waste, agricultural waste etc. In the present case the goods supplied by the appellant is undisputedly erected and installed as boilers which is functioned with the non -conventional fuel as the same is biomass-based boiler.

+ the major parts of the boilers are manufactured by the appellant. Though some of the parts are procured either on job work or through vendor but the entire boiler is supplied by the appellant in CKD/SKD form, therefore, it cannot be disputed that the goods supplied by the appellant is non-conventional energy device/system. As per the nature of the boiler, it is invariably cleared in CKD/SKD form as the same cannot be cleared in completely assembled form. Therefore, merely because the boiler is cleared in CKD/SKD form, if the exemption notification is denied then the exemption notification will become redundant for the reason that the exemption will not be allowed in case the boiler is cleared in CKD/SKD form as there will be no case where the boiler is cleared in fully assembled form .

+ it is very pertinent to note that with all the buyers, the appellant have entered into a contract for supply of complete boiler and its erection and installation at the site of the buyer. On execution of the complete contract the appellant have supplied the complete boiler and erected and installed the same. This clearly shows that the appellant have successfully executed the contract wherein the complete boiler was supplied and installed. On the face of these undisputed facts, contention of the Revenue that the boiler does not come into existence and it is only part of boiler supplied by the appellant is far from the truth.

Adverting to the Section 37B order No. 4/92 and after extracting the decisions cited by the appellant, the CESTAT held concluded that the issue stands settled that the goods supplied in the CKD/SKD form are also eligible for exemption notification No.3/2001-CE.

On the question of limitation, the Bench observed that the appellant had bonafidely declared the goods manufactured by them in their classification list filed in 1995, thereafter, they were issuing invoices for clearance parts of boiler as a piecemeal of complete boiler under chapter heading No. 8402.10; that the facts were known to the department and, therefore no suppression of fact could be alleged against the appellant.

The impugned order was held to be unsustainable, both on merits as well as on limitation.

The appeal was allowed.

(See 2018-TIOL-100-CESTAT-MUM)