CESTAT Bangalore Allows Excise Exemption for Pole Shoes Used in WOEG

Commissioner of Central Excise Vs Pearl Insulations Pvt. Ltd. (CESTAT Bangalore)

The Revenue filed an appeal against Order-in-Original No.15/2015 dated 29/06/2015 passed by the Commissioner of Central Excise, Bengaluru-II Commissionerate, after the adjudicating authority dropped a demand of Rs.28,59,13,906/- relating to pole shoes manufactured and cleared by the respondents during December 2009 to June 2014. The Revenue alleged that the respondents had wrongly claimed exemption under Sl.No.84 of Notification No.6/2006-CE dated 01/03/2006 and Sl.No.332 of Notification No.12/2012-CE dated 17/03/2012.

The principal dispute before the CESTAT Bangalore was whether pole shoes manufactured by the respondents and supplied to M/s. Enercon (India) Ltd. for use in rotor assemblies of wind operated electricity generators (WOEG) qualified for exemption under Sl.No.13 of List 5/List 8, which covered “wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller”.

The Revenue contended that the pole shoes were first used in rotor assemblies and that the relevant rotor assembly was manufactured outside the respondents’ factory. It therefore argued that the exemption under Sl.No.13 was unavailable and that the parts provision under Sl.No.21 was applicable. The Revenue also relied upon Board Circular No.1008/15/2015-CX dated 20/10/2015 and several judicial decisions.

The respondents submitted that the pole shoe was a part of the generator rotor assembly, which in turn was a part of the WOEG. They relied upon technical explanations, the Commissioner’s findings, the meaning of “components” and various judicial precedents concerning parts of wind operated electricity generators. They also raised alternative submissions concerning valuation, quantification, limitation and CENVAT credit.

The Tribunal noted that the undisputed position was that the respondents manufactured pole shoes which were supplied to M/s. Enercon (India) Ltd. and used in the rotors of a WOEG. The Tribunal considered the technical report of the jurisdictional Range Officer and the consulting engineer’s certificate, which explained that the pole shoes formed part of the generator rotor assembly located inside the generator and were functionally different from the main rotor situated outside the generator.

The Tribunal found merit in the Commissioner’s reasoning. It held that the Revenue had proceeded on a factual misconception by treating the generator rotor assembly as the same as the rotor located outside the generator. Since the pole shoe formed part of the generator rotor assembly, which was itself part of the wind turbine generator, the pole shoe was covered by Sl.No.13 of List 5/List 8.

The Tribunal also distinguished the decision relied upon by the Revenue in Raydean Industries, observing that it concerned module mounting structures forming part of a solar power generating system and involved different facts. Consequently, the Tribunal found no merit in the Revenue’s appeal, upheld the impugned order and dismissed the Revenue’s appeal. Since the appeal was decided on merits, ancillary issues relating to CENVAT credit reversal and quantification of demand were treated as academic and were not analysed.

Facts and Background

The respondents were engaged in the manufacture and clearance of excisable goods including enamelled copper wire, insulated copper strips, bare copper, Nomex aluminum, ENDGC copper coils and pole shoes, falling under Chapters 85 and 74 of the Central Excise Tariff Act, 1985.

Following an audit of the respondents’ records, the Revenue alleged that pole shoes had been manufactured and cleared without payment of duty during December 2009 to June 2014 by wrongly claiming exemption under Sl.No.84 of Notification No.6/2006-CE dated 01/03/2006 for the period December 2009 to 15/03/2012 and under Sl.No.332 of Notification No.12/2012-CE dated 17/03/2012 thereafter.

A show-cause notice dated 05/01/2015 was issued proposing recovery of duty of Rs.28,59,13,906/- along with interest and penalty. The Commissioner dropped the demand. The Revenue challenged that order before the Tribunal.

Revenue’s Submissions

The Revenue argued that the pole shoes cleared to M/s. Enercon (India) Ltd. were used for assembling rotor assemblies, which in turn formed part of the WOEG. According to the Revenue, the pole shoes were not directly used in the WOEG and were not consumed within the factory of production.

On that basis, the Revenue submitted that the exemption under Sl.No.13 of List 5/List 8 was unavailable and that Sl.No.21, concerning parts consumed within the factory of production for manufacture of specified goods, was relevant.

The Revenue also relied upon Board Circular No.1008/15/2015-CX dated 20/10/2015 and contended that a WOEG comprised various components including the tower, nacelle, rotor and controller. It argued that a generator was an identifiable essential component of a WOEG and that the pole shoe was an essential part of the generator rather than a separately identifiable part of the WOEG.

The Revenue further relied upon the decision in Raydean Industries Vs. Commissioner of CGST [Final Order No.50361/2022] and contended that the earlier case law relied upon by the Commissioner had to be considered in light of the Supreme Court’s decision in CC (Import), Mumbai Vs. Dilip Kumar & Company reported in 2018(361) ELT 577 (SC).

Respondent’s Submissions

The respondents submitted that the pole shoe was a part of the generator rotor assembly and that the generator rotor assembly was itself a part of the WOEG. They therefore contended that the exemption covering the WOEG, its components and parts thereof extended to the pole shoe.

The respondents explained the functioning of the generator and submitted that the windmill coils or pole shoes formed part of the generator rotor assembly. They distinguished the generator rotor assembly from the main rotor of the wind turbine and relied upon technical material to explain their respective functions.

They further submitted that the exemption under Sl.No.13 of List 5/List 8 applied directly and that there was consequently no need to rely upon Sl.No.21, which dealt with parts consumed within the factory of production for manufacture of goods specified in the preceding entries.

The respondents relied upon several decisions, including Gemini Instratech pvt. Ltd. Vs. CCE [2014(300) ELT 446 (Tri. Mum.)], Pushpam Forgings Vs. CCE [2006(193) ELT 334 (Tri. Mum.)], Rakhoh Enterprises Vs. CCE [2016(338) ELT 449 (Tri. LB)], SKF India Ltd. Vs. CCE [(2023) 2 Centax 131 (Tri. Ahmd.)] and Fag Bearings India Ltd. Vs. CCE&ST [2019-TIOL-609-CESTAT-AHM].

They also relied upon the Commissioner’s technical findings, the jurisdictional Range Officer’s report and the consulting engineer’s opinion. Alternative submissions were made on valuation, quantification, limitation and eligibility for CENVAT credit if the demand were ultimately sustained.

Issues Before the Tribunal

The Tribunal identified the issue as whether the respondents were entitled to the benefit of Sl.No.84 read with Sl.No.13 of List 5 of Notification No.5/2006-CE dated 01/03/2006 and Sl.No.332 read with Sl.No.13 of List 8 of Notification No.12/2012-CE dated 17/03/2012.

The order reproduced the relevant exemption entries and noted that Sl.No.84 of Notification No.6/2006-CE and Sl.No.332 of Notification No.12/2012-CE were almost identically worded. Sl.No.13 of the respective lists covered “Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller”.

Technical Nature and Use of Pole Shoe

The Commissioner had directed the jurisdictional Assistant Commissioner/Range Officer to visit the factory and study the manufacturing process and usage of pole shoes in the WOEG.

The report recorded that pole shoes were manufactured by winding enamelled copper strip on a polestack. Approximately 60 pole shoes were mounted on a circular mould to form a generator rotor assembly, which was connected to the rotor. The generator rotor assembly was placed within the stator assembly and rotated within it.

The report further stated that the primary role of the pole shoe was that of a coil in the generator and that it was responsible for generation of electricity when mechanically rotated in a magnetic field.

Distinction Between Rotor and Generator Rotor Assembly

The Commissioner found that the generator rotor assembly was different from the rotor located outside the generator. The main rotor, rotor hub and rotor blades were involved in generating mechanical energy using wind power, whereas the generator rotor assembly operated inside the generator together with the generator stator assembly for generation of electricity.

The Commissioner therefore concluded that the pole shoe was a part of the generator rotor assembly, which was itself a part of the wind turbine generator, and was not a part of the rotor as alleged in the show-cause notice.

CESTAT’s Findings

The Tribunal agreed with the Commissioner’s observations, noting that they were based on technical opinion and a detailed study of the manufacturing process and ultimate use of the pole shoe. The Tribunal observed that these findings had not been contradicted by the Revenue in the grounds of appeal.

The Tribunal found a fallacy in the Revenue’s approach because the rotor assembly used inside the WOEG was different from the rotor placed outside the generator. The Tribunal accepted that the pole shoe formed part of the generator rotor assembly and that the generator rotor assembly was part of the WOEG.

The Tribunal further observed that Sl.No.13 specifically covered the WOEG, its components and parts thereof, whereas Sl.No.21 dealt with parts consumed within the factory of production for manufacture of the goods specified in the preceding entries.

Accordingly, the Tribunal held that the pole shoe was squarely covered by Notification No.6/2006-CE dated 01/03/2006 and Notification No.12/2012-CE dated 17/03/2012.

Distinguishing the Revenue’s Reliance on Raydean Industries

The Tribunal considered the Revenue’s reliance on Raydean Industries and found that decision to be based on a different set of facts.

In Raydean Industries, the dispute concerned whether module mounting structures could fall within Sl.No.10, relating to “Solar power generating system”, of List 8 to Notification No.12/2012-CE dated 17/03/2012. The Tribunal in that case considered the distinction between a device and a system and held that the module mounting structure was a part of the solar power generating system.

The Tribunal held that the facts in the present appeal were different because the question before it was whether the pole shoe was a part or component of the WOEG.

Final Decision

The CESTAT Bangalore found no merit in the Revenue’s appeal and upheld the impugned order passed by the Commissioner.

The Revenue’s appeal was dismissed. Since the appeal was decided on merits, the Tribunal did not analyse ancillary issues such as reversal of CENVAT credit and quantification of the demand, treating those issues as academic.

The order was pronounced in Open Court on 15.04.2024.

Relevant TaxGuru Internal References

The dispute concerns the scope of exemption for parts of wind operated electricity generators, an issue also addressed in TaxGuru’s publication parts of wind-mill.

The respondents’ reliance on the principle concerning interpretation of beneficial exemptions is also reflected in TaxGuru’s publication Government of Kerala & Anr. Vs Mother Superior Adoration Convent. The respondents also relied upon Authority For Clarification and Advance Ruling Vs Aakavi Spinning Mills (P) Ltd., which is discussed in TaxGuru’s publication Authority For Clarification and Advance Ruling Vs Aakavi Spinning Mills (P) Ltd.

Cases Discussed

• SKF India Ltd. Vs. CCE [(2023) 2 Centax 131 (Tri. Ahmd.)]
• Authority for clarification and Advance Ruling Vs. Aakavi Spinning Mills (P) Ltd. [2022 135 taxmann.com 235 (SC)]
• Government of Kerala Vs. Mother Superior Adoration Convent [2021 126 taxmann.com 68 (SC)]
• Fag Bearings India Ltd. Vs. CCE&ST [2019-TIOL-609-CESTAT-AHM]
• CC (Import), Mumbai Vs. Dilip Kumar & Company reported in 2018(361) ELT 577 (SC)
• Rakhoh Enterprises Vs. CCE [2016(338) ELT 449 (Tri. LB)]
• Raydeen Industries Vs. Commissioner of CGST [Final Order No.50361/2022]
• Gemini Instratech pvt. Ltd. Vs. CCE [2014(300) ELT 446 (Tri. Mum.)]
• Nizam Sugars Factory Vs. CCE, AP [2006(197) ELT 465 (SC)]
• Pushpam Forgings Vs. CCE [2006(193) ELT 334 (Tri. Mum.)]
• Sun Export Corporation Vs. CC [1997(93) ELT 641 (SC)]
• Precision Rubber Industries vs. CCE [1990(49) ELT 170 (Bom.)]
• Star Paper Mills Vs. CCE [1989 4 SCC 724]

FULL TEXT OF THE CESTAT BANGALORE ORDER

This is an appeal filed by the Revenue against the Order- in-Original No.15/2015 dt. 29/06/2015 passed by Commission er of Central Excise, Bengaluru-II Commissionerate, Bengaluru.

2. Briefly stated the facts of the case are that the respondents are engaged in the manufacture and clearance of excisable goods viz. enamelled copper wire, insulated coper strips, bare copper, Nomex aluminum, ENDGC copper coils, pole shoes etc. falling under Chapter 85 and 74 of Central Excise Tariff Act, 1985 (CETA, 1985 for short). On the basis of audit of the records of the respondents, it was alleged that during the period December, 2009 to June 2014, they had manufactured <Pole Shoe= and cleared the same without payment of duty by wrongly claiming the benefit of exemption under Sl.No.84 of Notification No.6/2006-CE dt. 01/03/2006 (for the period December 2009 to 15/03/2012) and under Sl.No.332 of Notification No.12/2012-CE dt. 17/03/2012. Show-cause notice was issued to them on 05/01/2015 for recovery of duty of Rs.28,59,13,906/- with interest and penalty. On adjudication, the demand was dropped by the learned Commissioner. Aggrieved by the said order, the Revenue is in appeal.

3.1 Reiterating the grounds of appeal, the learned AR has submitted that since the Pole Shoe cleared to their customer M/s. Enercon (India) Ltd to assemble rotor assembly which in turn is a part of the Wind Operated Electricity Generator(WOEG for short) is not covered under Sl.No.13 of List 5 / 8 of the Notification. But, as per Sl.No.21 of the said List 5 /8 of the relevant notifications, exemption is available to parts consumed within the factory of production of such parts for manufacture of WOEG since it is not consumed in the factory of the respondent but cleared to customers to be used ultimately in the assembly of rotor; therefore the respondents are not eligible to availed the benefit of notifications.

3.2. Further the learned AR for the Revenue submitted that as per Board9s Circular No.1008/15/2015-CX dt. 20/10/2015, it has been clarified that the following parts / components to be treated as parts and components of WOEG and accordingly eligible for exemption under Notification No.12/2012-CE dt. 17/03/2012.

i. Tower: which supports the nacelle and rotor assembly of a wing operated electricity generator.

ii. Nacelle: which contains of gearbox, generator, yaw components, flexible couplings, brake hydraulic, brake callipers, sensors, nacelle plate, nacelle cover and other smaller components.

iii. Rotor: consists of blades, hub, nosecone, main shaft, special bearings. iv. Wind turbine controller, nacelle controller, main shaft, special bearings.

From the said list of items, the term 8Wind Operated Electricity Generator= mentioned in Notifications No.6/2006 and No.12/2012 includes the entire set up i.e. the tower, the generator, the blades etc. which are used to generate electricity from wind. The term 8wind operated electricity generator9 in the notification does not refer to solely to the generator which is just one of the parts of the WOEG.

3.3. Referring to the information material available in the internet, he has submitted that the main components used in a windmill are anemometer, blade, brake, controller, gear box, generator, high speed shaft, low speed shaft, nacelle, pitch, rotor, tower, wind direction, wind vane, yaw drive and yaw motor. From the circular of the Board and the above information, it is clear that <generator= is one of the identifiable essential part/component of WOEG and pole shoe / windmill coil is not such separately identifiable part / component of WOEG. Further he has submitted that the respondent9s client M/s. Wind Worl India Ltd. through their letter dt. 06/06/2015 confirmed the usage of pole shoe in WOEG stating that pole shoes are used within the generator of the windmill for inducing magnetic field which is essential for generation of electricity. Further he has submitted that pole shoe is one of the basic / essential part of all DC generators, irrespective of whether such generators are used in windmill or not. It is his submission that pole shoes are only essential parts of the generator part of WOEG and the same may be considered as the parts used in the manufacture of generator and not the WOEG set up. In the present case, the respondent has manufactured pole shoe specifically for use within the generator part of WOEG by using raw materials supplied free of cost by their clients and the pole shoe are assemble to the generator assembly at the site of installation of windmill. It has no separate identity once attached to the generator unit of WOEG and hence treated to be internal part of the WOEG

3.4. He has further submitted that the exemption under Sl.No.13 is not available to the said pole shoe, however the sr. no.21 of list 5 /8 of respective Notification may be applicable to such sub-parts provided the said parts are consumed within the factory of production of such parts for the manufacture of goods specified at Sl.No.13. Further it is submitted by the learned AR that the entry at item Sl.No.21 has been omitted w.e.f. 11/07/2014; instead of a new exemption No.332A was inserted within condition at Sl.No.2 stating that in the event the parts are used elsewhere in the factory of product, the procedure laid down in the Central Excise (Removal of Goods at Concessional rate of Duty for Manufacture of Excisable Goods) Rules, 2001 need to be followed. Therefore, the parts manufactured by the respondent viz. pole shoe used elsewhere than in the factory of production will be covered under the new entry at Sl.No.332A w.e.f. 11/07/2014; hence it can be safely inferred that entry at item Sl.No.13 of list 8 is not applicable to them for the period earlier.

3.5. Distinguishing the case law referred to by the learned Commissioner, the learned AR has submitted that the said judgment was passed before the Larger Bench judgment in the case of CC (Import), Mumbai Vs. Dilip Kumar & Company reported in 2018(361) ELT 577 (SC). By the said judgment, the Hon9ble Supreme Court has overruled earlier decision in the case of Sun Export Corporation Vs. CC [1997(93) ELT 641 (SC)]. Also, he has referred to the recent decision of the Principal Bench at New Delhi of this Tribunal in the case of Radyeen Industries Vs. Commissioner of CGST [Final Order No.50361/2022] and submitted that it is squarely applicab le to the facts of the present case.

4.1. The learned Senior Advocate for the respondent has submitted that the pole shoe manufacture by the respondent is a part of generator rotor assembly, and generator rotor assemble is in turn a part of the 8Wind Operated Electricity Generator9(WOEG); in other words, pole shoe is a part of a part of WOEG. The exemption under Sl.No.13 of List 5/8 of exemption notification includes exemption to components and parts of WOEG and pole shoe being a part of the wind operator generator, exemption is available to pole shoe as well.

4.2. Explaining the usage of pole shoe, the Senior Advocate has submitted that the generator consists of two magnets which remain static (referred as stators) which are placed in a opposite direction & coil is placed in between the two magnets. The coil which is placed in between the magnets are made to rotate (referred as rotors) by application of mechanical energy; the rotation of coils within the magnets generates electro-magnetic force, which is connected to a load and electricity is generated. The same principle is also adopted in assembly of wind turbine generator or WOEG. The main parts of generators / generator assembly consist of generator rotor assembly and generator stator assembly and pole shoe.

4.3 Further, explaining the functioning of generator assembly, he has submitted that the generator rotor assembly is placed inside the generator stator assembly; the generator assembly is made to rotate by the shaft which is connected to the rotor which in turn is rotated by the rotor blades through rotor hub; the windmill coils/pole shoes are part of generator rotor assembly and the generator rotor assembly is the main part of the windmill and the generator rotor assembly along with the stator assembly and pole shoes together as a component help to generate the electricity. It is his contention that the rotors referred by the Department is different from rotor assembly manufactured by respondent which is inside the generator along with generator-stator assembly for generation of electricity.

4.4. He has further submitted that windmill coils/pole shoes manufactured by respondent is eligible for exemption from duty for the period December 2009 to 16/03/2012 under Sl.No.84, which reads as <any chapter for non-conventional energy devices / systems specified in List 5 and List 5, Sl.No.13 – Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller and for the period 17/03/2012 to June 2014 under Sl.No.332 read with List 8, exemption is for any chapter for non-conventional energy devices / systems specified in List 8. It is their contention that exemption is available for WOEG and its components and parts. It is also their argument that windmill coils / pole shoe is a component and generator rotor assembly and in turn generator rotor assembly is an essential part of WOEG. In support, they have referred to the dictionary meaning of components and the judgment of Hon9ble Supreme Court in the case of Star Paper Mills Vs. CCE [1989 4 SCC 724], Precision Rubber Industries vs. CCE [1990(49) ELT 170 (Bom.)]. Also they have submitted th at parts or components of WOEG has been held to be admissible in the following judgments:-

i. Gemini Instratech pvt. Ltd. Vs. CCE [2014(300) ELT 446 (Tri. Mum.)]

ii. Pushpam Forgings Vs. CCE [2006(193) ELT 334 (Tri. Mum.)]

iii. Rakhoh Enterprises Vs. CCE [2016(338) ELT 449 (Tri. LB)]

iv. SKF India Ltd. Vs. CCE [(2023) 2 Centax 131 (Tri. Ahmd.)]

v. Fag Bearings India Ltd. Vs. CCE&ST [2019-TIOL-609- CESTAT-AHM]

4.5. Further he has submitted that the Commissioner in the impugned order has recorded a clear finding that pole shoe is an essential part of wind turbine generator based on the report of the jurisdictional Range Officer. Also, he has submitted that experts opinion relied on by the Commissioner cannot be brushed aside. It is also submitted that the present issue i s covered by the Circular No.1008/15/2015-CX dt. 20/10/2015. Further they have submitted the interpretation of exemption Notification should be in conjunction with its purpose and objective of exemption. In support they have referred to the judgment in the case of Government of Kerala Vs. Mother Superior Adoration Convent [2021 126 taxmann.com 68 (SC)] and Authority for clarification and Advance Ruling Vs. Aakavi Spinning Mills (P) Ltd. [2022 135 taxmann.com 235 (SC)].

4.6. Further assailing the ground of appeal by the Department relating to Sl.No.21 of List 5/8 of the notification, when parts are consumed in the factory of production, it is submitted that windmill coils / pole shoe is a part of the WOEG covered under sl.No.13 of list 5/8 of the exemption notification. Since it is covered under the said Sl.No.13, there is no necessity to mention sl.No.21 of the List 5/8 as it only deals with parts of items referred in Sl.No.13. further the amendment brought to Notification No.12/2012-CE is prospective in nature and therefore the above procedure is not applicable to their case.

4.7. On the issue of valuation, it is submitted on behalf of the appellant that once the windmill coils / pole shoe manufactured by the appellant is exempted, then the question of valuation does not arise. Alternatively, it is submitted that since they were carrying out the manufacturing of pole shoe on job work basis using the copper supplied by the customer as one of the raw materials and the manufactured pole shoe transferred to the principal manufacturer; therefore valuation under Rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 not applicable, but Rule 10A would be applicable under which the principal manufacturer is liable to pay duty on the final products.

4.8. Further they have raised the issue of quantification of the demand by pointing out that various discrepancies in the computation of the demand which need to be considered. Further they have submitted that if demand is sustainable, the appellant would be entitled to claim cenvat credit on the inputs used in the manufacture of pole shoes.

4.9. On the issue of limitation, the learned advocate for the respondent has submitted that they have been clearing the pole shoes from the year 2005-06 and the Department has recorded this fact in the show-cause notice dt. 16/06/2006 and Order-in- Original No.1/2007 dt. 27/02/2007 was passed; hence extended period could not be invoked. As the first show-cause notice issued, all the relevant facts were within the knowledge of the authorities; therefore subsequent notices, extended period cannot be invoked. In support, they have referred to the judgment of the Hon9ble Supreme Court in the case of Nizam Sugars Factory Vs. CCE, AP [2006(197) ELT 465 (SC)].

5. Heard both sides and perused records

6. The issues involved in the present appeal for determination are whether the respondents are entitled to the benefit of Sl.No.84 read with sl.no.13 of List 5 of Notification No.5/2006-CE dt. 01/03/2006 and Sl.No.332 read with Sl.No.13 of List 8 o f Notification No.12/2012-CE dt. 17/03/2012.

7. Undisputed facts are that the respondents are engaged in the manufacture of 8Pole Shoes9 and supplying to M/s. Enercon (India) Ltd. who in turn uses the same in the rotors a part of the wind operated electricity generator (WOEG). In 2004, a proceeding was initiated against the respondent alleging use of credit in the manufacture of pole shoes which is exempted under Notification No.6/2006-CE dt. 01/03/2006. In the present proceedings, a show-cause notice was issued by the Revenue alleging that since pole shoe is a part of rotor being not used inside the factory for manufacture of WOEG, benefit of notification is not admissible. The adjudicating authority taking note of the earlier proceedings as well as the technical opinion on the subject dropped the demand notice against the respondent. The respondent9s contention is that referring toconsidering pole shoe as parts is irrelevant as the entry No.13 of List 5 / List 8 of the respective notifications allows exemption to “wind operated electricity generator”, its components and parts thereof including rotor and wind turbine controller. It is their contention that since pole shoe is a component of the WOEG, exemption of notifications is admissible to them.

8. Before analysing the rival contentions, it is necessary to reproduce the relevant portion of the disputed notifications, which are as follows:-

Notification No.6/2006-CE

List 5 (See S.No.84 of the Table)

(1) Flat plate solar Collector

(2) Black continuously plated solar selective coating sheets (in cut length or in coil) and fins and tubes

(3) Concentrating and pipe type solar collector

(4) Solar cooker

(5) Solar water heater and system

(6) Solar air heating system

(7) Solar low pressure steam system

(8) Solar stills and desalination system

(9) Solar pump based on solar the rmal and solar photovoltaic conversion

(10) Solar power generating system

(11) Solar photovoltaic module and panel for water pumping and other applications

(12) Solar crop drier and system

(13) Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller

(14) Water pumping wind mill, wind aero-generator and battery charger

(15) Bio-gas plant and bio-gas engine

(16) Agricultural, forestry, agro-industrial, industrial, municipal and urban waste conversion device producing energy

(17) Equipment for utilising ocean waves energy

(18) Solar lantern

(19) Ocean thermal energy conversion system

(20) Solar photovoltaic cell

(21) Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20 above.

List 8 (see S.No.332)

(1) Flat plate solar Collector

(2) Black continuously plated solar selective coating sheets (in cut length or in coil) and fins and tubes

(3) Concentrating and pipe type solar collector

(4) Solar cooker

(5) Solar water heater and system

(6) Solar air heating system

(7) Solar low pressure steam system

(8) Solar stills and desalination system

(9) Solar pump based on solar thermal and solar photovoltaic conversion

(10) Solar power generating system

(11) Solar photovoltaic module and panel for water pumping and other applications

(12) Solar crop drier and system

(13)Wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller

(14) Water pumping wind mill, wind aero-generator and battery charger

(15) Bio-gas plant and bio-gas engine

(16) Agricultural, forestry, agroindustrial, industrial, municipal and urban waste conversion device producing energy

(17) Equipment for utilising ocean waves energy

(18) Solar lantern

(19) Ocean thermal energy conversion system

(20) Solar photovoltaic cell

(21) Parts consumed within the factory of production of such parts for the manufacture of goods specified at S. Nos. 1 to 20.

9. Sl.No.84 of Notification No.6/2006-CE dt. 01/03/2006 and Sl.No.332 of Notification No.12/2012 CE dated 17.3.2012 are almost identically worded. Also, the relevant Sl.No.13 of List 5 and List 8 of the said Notifications are identically worded which discloses that WOEG, its components and parts thereof would be including a rotor and wind turbine controller are exempted from payment of duty.

10. The principal contention of the Revenue is that since 8pole shoe9 is not directly used in the WOEG but first used in 8rotors9 which in turn used in the WOEG and the whole process of manufacture of 8rotor9 and WOEG being outside the factory premises; hence not admissible under sr. No.13 of the said exemption Notification.

11. The learned Commissioner disagreeing with the Department9s view taking note of the report of the jurisdictional Range Officer and the method of manufacture of 8pole shoe9 and the certificate by the consulting engineer came to the conclusion that the windmill coils/pole shoe is an essential part of wind turbine generator as they are used as coil attached to the generator rotor assembly so as to rotate within the generator stator assembly within generator in the wind turbine generator. He has further observed that the generator rotor assembly is totally different from the rotor which is located outside the generator of wind turbine generator; hence he concluded that pole shoe manufactured is a part of the generator rotor assembly which in turn part of the wind turbine generator and not a part of the rotor assembly as alleged in the show-cause notice.

12. The relevant portion of the findings of the learned Commissioner is reproduced as below:-

26. In the above background, the primary issue to be determined is whether the 8Pole shoe9 manufactured by the asessees is a part of the 8Rotor9 as alleged in the SCN or a part of the generator. For a proper understanding of the use and function of 8Pole shoe9, the jurisdictional Assistant Commissioner/Range Officer was directed to visit the factory and conduct a study of the manufacturing process of 8Pole shoe9 and its usage in the 8Wing operated electricity generator9. Accordingly, the JRO visited the factory on 22-06-2015 and submitted the following report.

”Pole Shoe is manufactured by the assesses by winding enamelled copper strip (approx.. 10 layers) on a polestack – a steel base. Polestack is primarily a multilayer 8steel stack9 punched iinto the required size after tag-welding. Steel sheets of required size are purchased and sent to the jobworker for manufacturer of polestack. On receipt from the jobworker, the polestack is subjected to quality check, preheated to remove oil particles and is then weather coated with paint to avoid rusting. The copper strips and insulation supplied by the customer M/s. Wind World (formerly known as M/s. Enercon) is wound on the polestack to form a pole shoe. About 60 numbers of Pole shoes are mounted on a circular mould to form 8rotor assembly9 which is in turn connected to the 8rotor9. The entire 8rotor assembly9 is placed within a 8stator assembly9 and as the name suggests, the rotor assembly rotates within the static 8stator assembly9. The Electrical Generator is primarily a combination of 8rotor assembly9 and stator assembly9. The 8rotor9 which is a hub of combination of rotor blades placed outside the 8electrical Generator9 is driven by the mechanical force induced by the rotor blades by using wind energy. The mechanical energy is then transferred by the rotor to the 8rotor assembly9 causing circular rotation resulting in creation of electro magnetic force(emf) when the coils (pole shoes) cut through the flux and thereafter electrical energy is generated when the 8Generator assembly9 is connected to a load (resistance) through an Electrical Controller. The primary role of the Pole shoe is that of a coil in a 8generator9 and is responsible for generation of electricity when mechanically rotated in a magnetic field (also called flux)”.

27. The above report of the JRO when read together with the certificate given by the Consulting Engineer (as given in Para 22) clearly indicates that the 8windmill coils/Pole shoe9 is an essential part of Wind Turbine Generator since they are used as coils attached to the 8Generator rotor assembly9 within the 8Generator9 in the Wind Turbine Generator. The stator assembly9 within the 8Generator9 in the Wind Turbine Generator. The 8Generator rotor assembly9 is totally different from the 8ROTOR9 which is located outside the Generator of Wind Turbine Generator. The Rotor is the rotating part of the Turbine to which rotating blades are fixed and also has a 8controller9. The Pole shoe on the other hand is used in 8Generator rotor assembly9 which is located inside the Wind Turbine Generator. The 8Generator rotor assembly9 is made to rotate by the shaft which is connected to the 8Rotor9 which in turn is rotated by the 8rotor blades9 through 8rotor hub9. Even though the main 8Rotor9, 8rotor hub9 and 8rotor blades9 have the similar name as that of 8Generator rotor assembly9, they are functionally different as the main 8Rotor9 along with the rotor blades is that part of the wind mill which generates mechanical energy using wind power, whereas, 8Generator rotor assembly9 is used inside the generator along with 8Generator stator assembly9 for generation of electricity. Therefore, it is evident that the 8Pole shoe9 manufactured by the assesses is a part of the 8Generator rotor assembly9 which is in turn a part of the Wind Turbine Generator and not a part of the 8Rotor9 as alleged in the SCN.

13. Analysing the relevant entries finally the learned Commissioner has observed that rotor and controller are items which are distinctly different from the generator being located outside the generator which are essential for generation of electricity; hence covered under Sl.No.13 of List 5/8 whereas 8pole shoe9 on the other hand is a part of the generator rotor assembly which rotates inside the generator stator assembly and converts mechanical energy into electrical energy resulting into generation of electricity. In other words, 8pole shoe9 is a part of the WOEG and hence eligible to exemption Notification No.6/2006-CE dated 01.3.2006 and Notification No.12/2012CE dated 17.3.2012.

14. We find merit in the observation of the learned Commissioner which is based on technical opinion and also the detailed study of the manufacturing process of 8pole shoe9 and its ultimate use in the generator which has not been contradicted in any manner by the Revenue in the grounds of appeal. The Revenue in the grounds of appeal has simply stated the pole sole is part of rotor which in turn parts of the WOEG, implies that any part of the parts of the WOEG is covered under Sl.No.21 of the said list and not sr. no. 13 of the said List 5/8 of the Notification.

15. We find that there is a fallacy in the approach of the Revenue in appreciating the facts, inasmuch as the 8rotor assembly9 used inside the WOEG is different from the 8rotors9 which is placed outside the generator, but an essential part of the wind mill and accordingly allowed exemption. A close analysis of the items mentioned in List 5/ 8 of the Notification, it can be noticed that only in the along with WOEG, its components and parts under Sl.No.13 are allowed the exemption; for all other items, their parts fall under Sl.No.21 of the said List. Therefore, 8pole shoe9 being part of the rotor assembly which in turn used in the generator and a part of the WOEG, hence squarely covered by the Notification No.6/2006CE dated 01.3.2006 and No.12/2012CE dt 17.3.2012.

16. The Judgement cited by the learned AR for the Revenue viz. Raydean Industries case (supra) is on different set of facts and hence not applicable to the present case. In the said case, the issue involved was whether module mounting structures be part of the Sl.No.10 i.e. <Solar power generating system= of List 8 of the said Notification 12/2012CE dt. 17.3.2012. After analysing the facts, the Tribunal concluded that there is a difference between device and system and upholding the finding of the Commissioner, held that module mounting structure is a part of solar power generating system, hence not covered under the said entry. In contrast to the facts of the said case, in the present case, we are concerned with the question whether 8pole shoe9 is a part or component of WOEG.

17. In view of the above, we do not find merit in the appeal filed by the Revenue. Consequently, the impugned order is upheld and the Revenue9s appeal being devoid of merit is liable for dismissal. Since, we have decided the appeal on merit, other ancillary issues like reversal of cenvat credit and quantification of demand etc. become academic; hence not analysed. Revenue9s Appeal dismissed.

(Order pronounced in Open Court on 15.04.2024)