2017 (6) TMI 1018 - AT - Central Excise

Non-conventional Energy Devices/Systems - N/N. 6/02-CE dated 1.3.2002, Sl.N0.237 List 9(16) - whether the parts of the boilers of Biomass Energy Producing Systems being manufactured by the respondent are devices producing energy in terms of Sr. No. 16 of List 9? - whether the said parts, and which are not consumed within their factory but are used elsewhere in the factory of ISGEC, Yamunanagar, Haryana, would be eligible for exemption under N/N. 6/2002-C.E.? - Held that - As the scope of entry against S. No. 237 non-conventional energy device/systems specified in List 9 is confined by what is mentioned in List 9, there is no scope for interpreting the word device in this entry so as to cover parts of non-conventional energy system within this entry. By no stretch of imagination, parts can be termed as a conversion device producing energy. Hence, these are not covered in Sr. No. 16 of List 9 of the notification. In List 9, since S. No. 21 cover parts, the parts of non-conventional energy systems would not be covered by S. Nos. 1 to 20 of the List 9. But S. No. 21 covers only those parts which are captively used in manufacture of complete conventional energy systems. Therefore, in our view, the parts of the Non-conventional Energy Devices/Systems would be eligible for full exemption from duty under this notification only when such parts are used within the factory in which the same have been manufactured for manufacture of non-conventional energy producing systems. As the appellant is neither manufacturing Biomass Energy Producing Device/System nor using the manufactured parts for manufacture of Biomass Device/System within the factory premises, they are not eligible for benefit of the notification. Since the demand of duty against the respondent is being upheld without extending the benefit of exemption, the impugned goods are no longer exempted goods. As a consequence thereof, the appellant will go out of the purview of the Rule 6(3) (b) of Cenvat Credit Rules, 2004 and the Cenvat Credit reversed by them @ 8% would no longer required to be reversed. Hence the same is required to be adjusted against the total demand of duty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Notification No. 6/2002-CE regarding duty exemption for non-conventional energy devices/systems under List 9; Eligibility of parts of Biomass Energy Producing Systems for duty exemption under the notification; Responsibility for payment of duty on exempted goods; Applicability of case laws in determining duty liability.

Analysis:
The case involved a dispute regarding duty exemption under Notification No. 6/2002-CE for non-conventional energy devices/systems specified in List 9. The appellant, a manufacturer of fabricated items for Biomass Energy Producing Systems, availed full duty exemption under the said notification. The issue arose as to whether the parts of Biomass Energy Producing Systems manufactured by the appellant were eligible for exemption under the notification.

The appellant contended that the exemption applied only to parts consumed within the factory of production for Biomass Energy Producing Systems. However, the parts in question were used at the site of erection by the buyer, not within the appellant's factory. The Tribunal analyzed the notification and held that the exemption was applicable only to parts manufactured in a factory and captively used for non-conventional energy devices/systems production within the same factory.

Referring to a Supreme Court judgment in a similar case, the Tribunal emphasized that to claim exemption, the manufacturer must either produce the energy device/system or its parts consumed within the factory. Since the appellant did not manufacture the Biomass Energy Producing Systems nor used the parts within their factory for such systems, they were deemed ineligible for the exemption.

Regarding the responsibility for duty payment on exempted goods, the Tribunal ruled that the clearance of goods without meeting exemption conditions obligated the manufacturer to pay duty. The responsibility for proper end-use of the exempted goods lay with the buyer post-clearance, not affecting the duty liability at the time of removal from the factory.

In conclusion, the Tribunal set aside the Commissioner's order, upholding the duty demand against the appellant and directing adjustment of the reversed Cenvat credit against the total duty liability. The judgment clarified the scope of duty exemption under the notification and emphasized the requirement for parts consumption within the manufacturing factory for eligibility.

This detailed analysis of the judgment highlights the key legal interpretations and conclusions reached by the Tribunal in resolving the issues raised in the case.