2010 (7) TMI 189 - AT - Central Excise

Exemption under Notification No. 6/2002-C.E.- the appellants were engaged in the manufacture of Water Treatment Plants, Reverse Osmosis Plants, Regeneration Plants, Water Softening Plants etc. falling under sub-heading No. 8421.10 of the First Schedule to Central Excise Tariff Act, 1985 and were availing the Cenvat Credit facility on the duty paid inputs used in the manufacture of final products. Show cause notices proposing confirmation of demand on their final product, on the ground that the benefit of exemption notification is not available to them. Held that- ratio of case Triveni Engineering & Industries Ltd. Squarely applicable.The Commissioner (Appeals) has himself dropped the demand beyond the limitation period by observing that there is no positive evidence of suppression, mis-statement on the part of the assessee and by taking note of the fact that the issue was the subject matter of various decisions of the Tribunal, we find no justification in imposing the same. Accordingly, while confirming the demand of duty, we set aside the penalty imposed upon the appellant.Appeal is disposed off in above terms.

Summary

Issues:
Claim of exemption under Notification No. 6/2002-C.E., dated 1-3-02 for Water Treatment Plants & Reverse Osmosis Plants.

Analysis:
The case involved the appellants engaged in manufacturing Water Treatment Plants, Reverse Osmosis Plants, etc., availing Cenvat Credit facility. The issue arose when it was found that they cleared certain plants at Nil rate of duty under a specific notification. The contention was whether these plants qualified for exemption under Sr. No. 237 of Notification No. 6/2002-C.E., dated 1-3-02, which granted exemption to specific energy devices/systems. The appellants argued that their plants were part of Biomass Power Projects generating energy from waste, thus eligible for exemption. However, it was observed that the plants did not convert waste into energy directly, but produced treated water used in turbines to generate energy. The Commissioner (Appeals) rejected the claim, citing that the plants did not fall under the specified categories in the notification, following the precedent set by the Tribunal in a similar case.

The Commissioner (Appeals) noted that the plants did not operate on solar energy but membrane technology, thus not directly covered under the relevant provision. Additionally, it was emphasized that the plants did not directly produce energy but supplied treated water to other machines for energy production. The Tribunal's decision in a prior case was referenced, highlighting that the conversion of waste into energy occurred in a different device, not the turbine itself. Consequently, the exemption could not extend to the turbine. The appellants' submission of a certificate from the Non-conventional Energy Development Corporation was deemed insufficient to alter the Tribunal's established interpretation, leading to the confirmation of the demand for duty payment.

Regarding penalties, it was noted that since there was no evidence of suppression or misstatement by the assessee, and given the issue's complexity and prior Tribunal decisions, the imposition of penalties was deemed unjustified. Therefore, while confirming the duty demand, the penalty on the appellant was set aside. The appeal was disposed of accordingly, upholding the duty demand but waiving the penalty based on the aforementioned considerations.