2020 (5) TMI 504 - AT - Central Excise

Classification - Clearance of 2nd lamp with the set of Solar Power Generating System or Solar Photovoltaic Lantern to M/s Aura Solar Products Pvt Ltd - Benefit of Exemption - Notification No 6/2002-CE - recovery of Central Excise duty with interest and penalty - HELD THAT - The manner in which the goods were being cleared by the appellant was in a package comprising of two lanterns along with a solar photovoltaic panel. SPV Panel having capacity and provisions to charge both the lanterns simultaneously. The packaging and the manner of marketing the product also suggest that both the lamps in the package are marketed as solar lanterns. It is an admitted fact and a fact not in dispute that appellants do not sell the single lantern individually or separately. That being so revenue has no jurisdiction to vivisect the package and classify one lantern separately. The classification of the goods need to be determined in the form and manner in which the same is cleared and not by unbundling/ vivisecting the package into individual components to determine their classification. While the goods in the form in which it is cleared was with the SPV Panel whereas the sample was without the SPV Panel. Further the opinion clearly states that the batteries of the lamp can be charged with the solar power normally but in emergency or non availability of solar power the same can be re-charged by using the normal power source with a suitable adapter. For classifying the one of two lamps in the package revenue has relied on the fact that it can be charged with the normal power supply using suitable adaptors. While doing so they ignore the fact that the technical opinion given by the IIT Professor clearly states that the normal mode of charging the batteries in the lamps will be solar power only - Further it is not even the case of revenue that the package was being cleared with a suitable adapter to charge the batteries using normal power supply. Thus, the goods in the form and manner in which they are cleared for sale to consumers are nothing but Solar Power Generating System or Solar Photovoltaic Lantern and the exemption claimed by the appellants in respect of same under Sl No 237 of Notification No 6/2002-CE as amended (Sl No 18 of List 9) as claimed by them is admissible to the whole package. The vivisection of the package to classify a part of such package and deny exemption in respect of one lamp out of the is neither justified nor having any basis in law. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Availability of exemption under Notification No. 6/2002-CE for clearance of a second lamp with the "Solar Power Generating System" or "Solar Photovoltaic Lantern".
2. Confirmation of Central Excise duty demand and recovery.
3. Recovery of interest on delayed payment of Central Excise duty.
4. Imposition of penalties on various entities and individuals involved.
5. Clubbing of clearances for SSI exemption.
6. Classification of the product under the appropriate Central Excise Tariff Heading.

Issue-wise Detailed Analysis:

1. Availability of Exemption under Notification No. 6/2002-CE:
The primary issue was whether the benefit of Notification No. 6/2002-CE, which provides exemption for "Solar Power Generating System" or "Solar Photovoltaic Lantern," extends to the clearance of a second lamp along with the system. The adjudicating authority held that the second lamp does not qualify for the exemption as it does not meet the definition of a "Solar Lantern" and classified it separately. However, the appellate tribunal concluded that the goods should be assessed as a whole package, which includes two lamps and a solar PV module, and thus qualify for the exemption. The tribunal emphasized that the classification should be based on the form and manner in which the goods are cleared, not by unbundling the package.

2. Confirmation of Central Excise Duty Demand and Recovery:
The adjudicating authority confirmed a demand of ?36,89,995 in Central Excise duty from the appellant, arguing that the second lamp in the package does not qualify for exemption and should be taxed. The tribunal, however, set aside this demand, holding that the entire package qualifies for the exemption under Notification No. 6/2002-CE.

3. Recovery of Interest:
The adjudicating authority ordered the recovery of interest on the delayed payment of Central Excise duty under Section 11AB of the Central Excise Act, 1944. Since the tribunal found that the entire package qualifies for the exemption, the order for recovery of interest was also set aside.

4. Imposition of Penalties:
The adjudicating authority imposed various penalties:
- ?36,89,995 on the appellant under Section 11AC of the Central Excise Act, 1944, with a provision to reduce it to 25% if paid within 30 days.
- ?5,00,000 on M/s RMP Infotec Pvt Ltd.
- ?1,00,000 each on the Chairman and Director of the appellant company under Rule 26 of the Central Excise Rules, 2002.
- No penalty on M/s Hypone Industries.
The tribunal, having decided the main issue in favor of the appellant, did not find merit in these penalties and set them aside.

5. Clubbing of Clearances for SSI Exemption:
The investigation suggested that the appellant and related entities should have their clearances clubbed for the purpose of SSI exemption. The tribunal did not address this issue in detail, as the primary issue was decided in favor of the appellant.

6. Classification of the Product:
The adjudicating authority classified the second lamp under Heading No. 8513.00 of the Central Excise Tariff, treating it as a "portable electric lamp designed to function with its own source of energy." The tribunal disagreed, stating that the product should be classified in the form it is cleared—a package comprising two lamps and a solar PV module, qualifying as a "Solar Power Generating System" or "Solar Photovoltaic Lantern."

Conclusion:
The tribunal set aside the impugned order and allowed the appeals with consequential relief, holding that the entire package qualifies for exemption under Notification No. 6/2002-CE. The tribunal emphasized that the classification should be based on the form and manner in which the goods are cleared, and not by unbundling the package. The penalties and demand for duty and interest were also set aside.