2019 (1) TMI 247 - AT - Central Excise

Manufacture of bearings and supply to various wind mill manufacturers - benefit of N/N. 12/2012-CE - benefit denied on the ground that the bearing manufactured by them and used by wind mill manufacturers is not a part of wind mill and, thus, not eligible to the benefit of notification - also, for the period beyond 11.07.2014, the benefit is sought to be denied on the ground that the appellant have not followed the condition prescribed under Sr. No. 332(A) of the notification. Held that - N/N. 12/2012-CE exempts non conventional energy devices or systems specified in list 8 from Central Excise duty. Serial no. 13 of the said list covers wind operated electricity generators, its components and parts thereof including rotor and wind turbine controller . The said exemption continued even after amendment of notification on 11/07/2014. It is seen that not only wind turbine electricity generators but its components and parts are exempted by virtue of notification 12/2012-CE, irrespective of place where they are used. In the instant case, the bearings manufactured by the appellant are used as component of wind operated electricity generators and there is no dispute that the product is directly supplied to manufacturers of wind operated electricity generators and is used as component of the wind turbine - In the instant case, it can be said that the bearing is an essential component of wind mill without which it cannot function. In these circumstances, a bearing can be called a component of the wind mill and therefore, exempted under N/N. 12/2012-CE. Failure of the appellant to observe condition no. 2 prescribed in respect of following Central Excise (Removal of goods at Concessional Rate of duty for manufacture of Excisable goods) Rules, 2001 - Held that - Since, it has been held that a bearing is a part of wind mill, the place of use becomes irrelevant as the exemption is available to the said bearing under Serial no. 332 of the notification itself. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of notification benefit and demand of duty.
2. Eligibility of bearings as parts of wind mill for exemption under notification.
3. Failure to follow conditions under Sr. No. 332(A) of the notification.

Analysis:
1. The appellant, a bearing manufacturer, claimed exemption under notification no. 12/2012-CE for supplying bearings to wind mill manufacturers. The notification exempts wind operated electricity generators, components, and parts thereof. The amendment on 11.07.2014 added parts consumed within the factory for manufacturing goods specified in List 8. The appellant argued that bearings are essential components of wind mills, citing legal precedents and a CBEC circular supporting bearings as parts of automobiles. The Tribunal noted that bearings are crucial for wind mill functioning, akin to essential components in other products, thus qualifying for exemption.

2. The Tribunal referenced the Apex Court's observation on essential parts in a different context to establish bearings' essential role in wind mills. The notification's wording exempts wind mill components and parts, regardless of their place of use. As the bearings were integral to wind operated electricity generators and directly supplied to wind mill manufacturers, they were deemed eligible for exemption under the notification. The Tribunal's decision aligned with legal principles emphasizing the importance of essential components in the functioning of a product.

3. Regarding the failure to comply with condition no. 2 under the Central Excise Rules, the Tribunal ruled that since bearings were considered parts of wind mills eligible for exemption under the notification itself, the condition's relevance based on place of use diminished. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the essential nature of bearings in wind mills for exemption eligibility. The detailed analysis considered legal interpretations, precedents, and the specific wording of the notification to support the appellant's claim effectively.