2023 (4) TMI 1128 - AT - Central Excise

Benefit of Exemption - Manufacture of Tubular Plate Lead Acid Batteries for use in solar photovoltaic modules/ system - under N/N. Entry 10 of List 9 of the Notification 6/2002 dated 01/03/2002 and Entry 10 0f List 5 of Notification 6/2006 dated 01/03/2006 - levy of penalty - time limitation - cum-duty benefit - HELD THAT - It is observed that Entry 10 of List 9 of the Notification 6/2002 dated 01/03/2002 and Entry 10 0f List 5 of Notification 6/2006 dated 01/03/2006, exempts Solar Power Generating Systems. Entry 21 in the above said Lists exempts Parts of all the preceding Entries in the said Lists. Thus, from the above Notifications, it is clear that the intention of the Government is to promote non conventional Energy systems and for that both the Systems/Devices as well as its parts were exempted. However, as per Entry 21, the Parts are exempted only if they are used within the factory of production. In this case the Batteries manufactured by the Appellant is a special type of battery used in solar PV systems. This has been confirmed by the Certificates and Expert Opinions submitted by them. However, there is no specific Exemption available to Batteries as such in the said Notifications. The Ld. Advocate for the Appellant stated that as there were contrary decisions on the subject matter, the issue was referred to the Larger Bench, in the case of M/S. REED MEDWAY PACKAGING CO. OF INDIA PVT. LTD. VERSUS CCE, DELHI-IV 2017 (5) TMI 93 - CESTAT NEW DELHI . In that case, the Larger Bench held that there was no conflict in the said two decisions referred to Larger Bench. Both deals with different issues while considering the Exemption under the same Notification - From the decision of the Larger Bench, it is observed that if the part/device manufactured by the Appellant can be considered as an integral part of the non-conventional Energy systems, then the exemption under Notification 6/2002, dated 01/03/2002 as amended, is available. On the other hand, if it is only a part of the system which has no independent function on its own which cannot be called a device with independent function and cannot be called an integral part of the System, then the exemption would available only if the part is manufactured and consumed within the factory. In the present case, Exemption is provided to Solar Power Generating Systems. The Appellant manufactured Batteries and supplied the same to the two manufacturers of Solar Power Generating Systems. The Experts Opinions submitted by the Appellant clearly indicate that they are specially made Batteries to store electricity generated by solar cells and an integral part of the solar Photovoltaic Module. They have an independent function on its own and hence can be called as a Device on its own for the purpose of the Notification 6/2006 dated 01/03/2006 and hence as per the Larger Bench decision cited the exemption can be made available to the Batteries. From the decision of the Hon ble Supreme Court in COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. 2018 (7) TMI 1826 - SUPREME COURT , it is observed that a statute must be construed according to the intention of the Legislature. In the present case, there is no doubt that the Legislature wants to extend the benefit of Exemption to Non-Conventional Power Generating Systems. It is a policy decision of the Government to promote Renewable sources of energy - It is practically impossible to bring into existence a fully finished system within the factory. Just because the fully finished system comes into existence only at the site, the benefit of exemption available to the System cannot be denied to the parts , which are an integral part of the system. Thus, the Batteries manufactured by the Appellant, which are an integral part of the Solar Power Generating System, are eligible for the benefit of exemption Notification 6/2002 dated 01/03/2002 as amended. Hence, the demand confirmed in the OIO is not sustainable - Since the demand itself is not sustainable, penalty imposed on Sh Kalyan Das is also not sustainable - Since the Appellant is eligible for the benefit of the above said exemption Notifications, and the demand is not sustainable, other aspects of Limitation and availability of Cum Duty benefit raised by the Appellant not examined. Appeal allowed.

Summary

Issues Involved:
1. Eligibility for Exemption Notification.
2. Invocation of Extended Period of Limitation.
3. Imposition of Penalty.
4. Cum-Duty Computation.

Summary:

1. Eligibility for Exemption Notification:
The appellant, engaged in manufacturing Tubular Plate Lead Acid Batteries, claimed exemption under Notification No. 6/2002-CE and 6/2006-CE for batteries used in solar photovoltaic modules. The Department contested the eligibility, arguing that the batteries were compatible with multipurpose applications and not exclusively for solar power systems. The Appellant provided expert opinions and certificates to support their claim that the batteries were integral to solar photovoltaic systems. The Tribunal, referencing various judgments, concluded that the batteries, being an integral part of the solar power generating system, qualified for the exemption.

2. Invocation of Extended Period of Limitation:
The Appellant argued that they acted under a bonafide belief that the exemption was rightly claimed, supported by various legal precedents. They contended that there was no suppression of information or intent to evade tax, and mere non-registration and non-filing of returns should not justify the extended period. The Tribunal agreed, noting that the Department failed to prove any positive act of suppression by the Appellant.

3. Imposition of Penalty:
The Tribunal held that since the demand itself was not sustainable, the penalty imposed on the Appellant and the personal penalty on Appellant No. 2 were also not sustainable. The Tribunal referenced the decision in Kamdeep Marketing Pvt Ltd., which set aside personal penalties on proprietors when penalties were already imposed on the firm.

4. Cum-Duty Computation:
The Appellant claimed that the benefit of cum-duty computation should be permitted if the exemption was disallowed. The Tribunal, referencing the judgment in Lubrizol Advanced Materials India Pvt. Ltd., agreed that the price paid for excisable goods should be deemed to include the duty payable.

Conclusion:
The Tribunal set aside the Order-in-Original, allowing the appeal filed by the Appellant with consequential relief, recognizing the batteries as eligible for the exemption under Notification 6/2002-CE and 6/2006-CE.