2022 (11) TMI 945 - AT - Central Excise

Demand of Excise Duty - allegation of incorrect availment of the exemption Notification of 27.02.2010 - Galvanized Structure cleared by the appellant to solar power generating companies - whether mounting structures cleared by the appellant do not fall under any of the category mentioned in the Notification dated 27.02.2010? - levy of penalty - HELD THAT - The bare perusal of these Notifications clarifies that it exhaustively covers all items which are required for the initial set up of a solar power generation project. The goods manufactured and cleared by appellant is admittedly module mounting structure for solar panels. No doubt, this word specifically is not mentioned in the Notification, but from the submissions of the appellants and the data provided about the solar roof top system, it is observed that these structures are meant to hold the power generating solar panels at a particular angle. This angle is important to ensure that for a maximum time in a day the sun rays are perpendicular to these panels. In absence of these structures, the solar panels would be laid on the ground that is at Zero Degree angle which will give the least output as the sunrays shall be perpendicular to the solar panel only at one point of time during the entire day i.e. at 12 P.M. Since viability of power plant depends upon the power output and the output directly depends on the angle at which the structure holds the panel, hence, these structures are the integral component of the solar power generation plant. The solar mounting structures are covered under Notification No.15/2010 dated 27.02.2010 as amended vide Notification No.26/2012 dated 08.05.2012 - the said Notification is a conditional notification. One of the important condition is that an officer not below the rank of Secretary to the Government of India in the Ministry of New and Renewable Energy recommends the grant of this exemption indicating the quantity, description and specification thereof and certifies that the goods are required for initial setting up of a solar power generation project or the facility. The said Certificate (MNRE Certificate) was provided by the appellant to the Department even prior making the impugned clearances. As per the impugned Notification, the duty liability, if any, shall be on the promoter and not on the manufacturer. It is apparent from the amended Notification No.26/2012 dated 08.05.2012 as reproduced above, that in case of non-compliance of condition under the Notification, it is the project developer who shall be liable to pay the duty which was not paid on account of exemption at the time of clearance and that too only in case when the project developer fails to use the goods for solar power project - Commissioner (Appeals) has wrongly confirmed the duty demand upon appellant as manufacturer, for such goods which are exempted from duty. Levy of penalty - HELD THAT - It is observed that penalty has been confirmed under Section11 AC of Central Excise Act, 1944. Penalty under the said section can be levied if and only if there is an intent to evade the payment of duty. In the present case, it is apparent that appellant had intimated the Assistant Commissioner regarding the clearance of impugned excisable goods without payment of duty of the goods being the components required for solar power project eligible for exemption under Notification. The intimation was sent vide letter dated 31.12.2015 i.e. even prior the clearance of the goods. The question of evasion of duty does not at all arises that too with the malafide intent. Even penalty has wrongly been imposed by Commissioner (Appeals) on the appellants. Thus, it is held that Commissioner (Appeals) has failed to appreciate the settled position of law with respect to the issue involved. Several decisions of this Tribunal and even by the Department with respect to identical issue despite being quoted in the order have wrongly been differentiated - We are of the firm opinion that Commissioner (Appeals) has committed an indiscipline as far as judicial protocol is concerned. Appeal allowed.

Summary

Issues Involved:
1. Whether the Galvanized Structure cleared by the appellant to solar power generating companies is covered under and entitled to the benefit of exemption Notification No.15/2010-CE dated 27.02.2010 as amended by Notification No.26/2012 dated 08.05.2012.

Detailed Analysis:

Issue 1: Entitlement to Exemption Notification No.15/2010-CE as Amended by Notification No.26/2012

The primary issue in this case is whether the Galvanized Structure cleared by the appellant qualifies for exemption under the specified notifications. The appellant argued that these structures are integral components of solar power generation projects, supported by MNRE certificates and purchase orders specifying their use in solar projects. The appellant had previously notified the Assistant Commissioner about the duty-free clearance of these goods and provided the necessary MNRE certificates.

The Tribunal examined the relevant notifications, which exempt machinery and components required for the initial setup of solar power projects from excise duty, provided certain conditions are met. These conditions include certification from a competent authority in the Ministry of New and Renewable Energy (MNRE) and an undertaking from the manufacturer or project developer regarding the use of the goods.

The Tribunal noted that the term "component" is not defined in excise law, but dictionary definitions and previous judicial interpretations, such as in the case of Jindal Strips Ltd vs. Collector of Customs, Bombay, support a broad understanding of the term. The Tribunal concluded that the module mounting structures are essential components of solar power plants, as they are necessary to position solar panels at an optimal angle for maximum energy generation.

The Tribunal also referred to a letter from the MNRE clarifying that module mounting structures are considered components of solar power plants and are covered by the exemption notifications. The Tribunal emphasized that the MNRE certificate provided by the appellant, which was not disputed by the Department, satisfied the conditions for the exemption.

The Tribunal highlighted previous favorable rulings for the appellant on similar issues, including a decision by the same Tribunal and an order involving another manufacturer, M/s. Pennar Industries Ltd., which recognized the exemption for similar goods.

The Tribunal criticized the Commissioner (Appeals) for relying on inapplicable case law, such as M/s. Saraswati Sugar Mills and M/s. Bharti Airtel Ltd., which involved different types of goods and contexts. The Tribunal stressed that the present case pertains to renewable energy production, where the government has provided specific exemptions to promote environmentally friendly projects.

The Tribunal also noted that, according to the amended notification, any duty liability in case of non-compliance should fall on the project developer, not the manufacturer. The Tribunal referred to a similar observation in a previous order involving M/s. Pennar Industries.

Conclusion:
The Tribunal concluded that the Commissioner (Appeals) erred in confirming the duty demand and penalty against the appellant. The Tribunal set aside the order under challenge, allowing the appeal and emphasizing the importance of judicial discipline and adherence to higher forum rulings. The Tribunal reiterated that the appellant had complied with the exemption conditions and that the goods in question were indeed components necessary for solar power projects, qualifying for the duty exemption.