2002 (7) TMI 611 - AT - Central Excise

Transformers designed for Windmills eligible to exemption under Sl. No. 12 of Notification 205/88-C.E. - Transformers, for windmill

Issues Involved:
1. Classification of transformers used in windmills.
2. Eligibility for exemption under Serial No. 12 of Notification No. 205/88-C.E., dated 25-5-88.

Detailed Analysis:

1. Classification of Transformers Used in Windmills:

The Revenue argued that the transformer is not a part of the windmill and should be classified under Chapter Heading 8504, which covers all types of transformers, including those used for stepping up or stepping down voltage. The Revenue contended that the transformer has a separate and independent function and cannot be classified as a part of the windmill under Chapter Heading 8412.90. The Revenue cited explanatory notes to HSN and argued that the transformer, regardless of its use, falls under Heading 8504.

On the contrary, the respondent argued that the transformer is specially designed for windmill applications, performing dual functions of stepping down voltage to start the windmill and stepping up voltage to feed generated electricity to the grid. They claimed that this specific design and function make the transformer an essential part of the windmill, thus qualifying it for classification under the heading applicable to windmills.

2. Eligibility for Exemption under Serial No. 12 of Notification No. 205/88-C.E., dated 25-5-88:

The Commissioner (Appeals) had granted the benefit of Serial No. 12 of the Notification to the transformers, reasoning that they are specially designed devices used in windmills. This decision was based on previous Tribunal judgments, which held that parts of windmills should be classified under the same heading as the windmill itself.

The Revenue appealed this decision, arguing that the transformer does not qualify as a specially designed device that runs on a windmill, and thus, the benefit of Serial No. 12 cannot be extended. They emphasized that transformers are independent devices used in various applications and should be classified under Heading 8504, not as parts of windmills.

The Tribunal, after considering the submissions, noted that the notification does not restrict the benefit to items falling under any specific chapter heading. The Tribunal referenced previous decisions where similar exemptions were granted to items used in specific applications without regard to their tariff classification.

Separate Judgments Delivered:

Majority Opinion:

The majority of the Tribunal members concluded that the transformers in question are eligible for exemption under Serial No. 12 of the notification. They agreed that the transformers are specially designed for windmill applications, performing essential functions that qualify them as parts of the windmill. The majority opinion emphasized that the lack of restriction in the notification regarding specific chapter headings supports the extension of the benefit to the transformers.

Dissenting Opinion:

One member dissented, arguing that the transformer should be classified under Heading 8504 and does not qualify for the exemption. The dissenting opinion emphasized that the transformer is a general electrical device used for stepping up or stepping down voltage and is not exclusively designed for windmills. The member also noted that the absence of a certificate from the Electrical Inspectorate of Government of Tamil Nadu, confirming the transformer as a part of the windmill, weakens the respondent's claim.

Conclusion:

In terms of the majority order, it was held that the transformers in question are eligible for exemption under Serial No. 12 of the notification, and hence, the Revenue's appeal was rejected. The Tribunal concluded that the specially designed nature of the transformers for windmill applications qualifies them for the exemption, irrespective of their classification under the Central Excise Tariff.

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