2004 (6) TMI 128 - AT - Central Excise

Eligibility of steam turbines for exemption u/s Notification No. 6/2000-C.E. - Non-conventional energy devices/systems - Conversion of waste into energy - HELD THAT - In this project the steam will be used for running the turbine which is connected to alternator and thereby generating electric power. This Project is approved by Ministry of Non-conventional Energy Sources. The steam turbines has been specifically designed and manufactured to match the output characteristics of the bio-mass boiler. The bio-mass fuel is obtained from the agricultural and industrial waste to generate steam in the boiler. Therefore bio-mass has been used for producing heat energy which is taken by the steam. Turbine itself, does not work on bio-mass. The agricultural, industrial, municipal wastes etc., as given in the Notification is not used in the turbine for conversion of the steam into energy. The conversion of this waste into energy is only in the boiler. Energy can be converted from one form to another form. Therefore the heat energy is converted into mechanical energy, mechanical energy into electrical energy but the exemption is only for waste conversion devices producing energy from the waste material. Exemption is not for the system under this Sl. No. 16 of List 5. The waste material is used to create thermal energy. The exemption is only for these purposes and not for purposes of conversion of one form of energy into another form of energy. Therefore boiler is the only device where the agricultural, industrial etc. waste is converted into thermal energy. Thereafter this thermal energy is used. Therefore the exemption cannot be extended to turbine which converts heat energy into rotational energy (kinetic energy). Therefore, we are not convinced with the appellants plea that the turbine is eligible for nil rate of duty under Sl. No. 251 of Notification No. 6/2000, read with Sl. No. 16 of list of the said notification or under Notification 6/2002, dated 1-3-2002 read with Sl. No. 16 of List 9. We therefore do not find any merit in this appeal and the same is rejected and order of Commissioner (Appeals) is upheld.

Summary

Issues Involved:
1. Eligibility of steam turbines for exemption u/s Notification No. 6/2000-C.E., dated 1-3-2000.
2. Interpretation of the term "non-conventional energy devices/systems" in the context of the exemption notification.

Summary:

Issue 1: Eligibility of Steam Turbines for Exemption u/s Notification No. 6/2000-C.E., dated 1-3-2000

The appellants, manufacturers of steam turbines, claimed exemption from excise duty u/s Notification No. 6/2000-C.E., dated 1-3-2000, for turbines used in the Malavalli Project. The Deputy Commissioner initially approved this classification, but the Commissioner (Appeals) later denied the exemption. The appellants argued that their turbines, used in bio-mass power projects, qualify as non-conventional energy devices/systems specified in Lists 5 & 9 of the relevant notifications. They emphasized that the turbines convert heat energy from steam into mechanical and subsequently electrical energy, thus fitting the description of devices converting waste into energy. They cited previous Tribunal decisions and a Calcutta High Court ruling supporting their interpretation.

Issue 2: Interpretation of "Non-Conventional Energy Devices/Systems"

The revenue argued that the exemption applies only to devices directly converting non-conventional energy sources into usable energy. They contended that turbines use steam, which can be produced from both conventional and non-conventional fuels, and thus do not qualify as waste conversion devices. The revenue highlighted that the boiler, not the turbine, converts waste into thermal energy. The Board's clarification and previous exemptions granted to boilers, not turbines, were cited to support their stance.

Judgment:

The Tribunal concluded that the exemption u/s Notification No. 6/2000-C.E., dated 1-3-2000, applies only to devices directly converting agricultural, forestry, agro-industrial, industrial, municipal, and urban waste into energy. The steam turbines, although used in bio-mass projects, do not directly convert waste into energy but rather convert thermal energy into mechanical energy. Therefore, the turbines do not qualify for the exemption. The appeal was rejected, and the order of the Commissioner (Appeals) was upheld.