Uniflex Cables Ltd vs Commnr., Central Excise, Surat-Ii

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5870 OF 2005

UNIFLEX CABLES LTD. .....APPELLANT.

VERSUS

COMMISSIONER, CENTRAL EXCISE,

SURAT-II .....RESPONDENT.

J U D G M E N T

ANIL R. DAVE, J.

1. This is an appeal under Section 35-L (b) of the Central Excise Act,

1944 (hereinafter referred to as `the Act'), against the Judgment and Order

no A/1326/WZB/2005/C-iii dated 7.7.05 in Appeal No. E/1893/01, passed

by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal

Branch, Mumbai.

2. The material facts are that the appellant is engaged in the manufacture

of insulated wires and cables falling under Central Excise Tariff Sub-

2 Heading No.8544.00. The appellant claimed benefit under Notification no.

205/88 - C.E. dated 25.05.88 as amended by Notification no. 57/95. The

said notification grants exemption from payment of central excise duty in

respect of manufacture of wind mills, parts of wind mills and any specially

designed devices which run on wind mills. As the appellant had received

orders from various wind mill manufacturers for specially designed

electrical cables, which were to be used in the manufacture of wind mills,

the appellant filed a declaration under Rule 173-B of the Central Excise

Rules, 1944 (hereinafter referred to as `the Rules') claiming nil rate of duty

so as to avail benefit under the aforestated notification for the insulated

cables manufactured by it and supplied to the manufacturers of wind mills

for using the same as part of wind mills for the period commencing from

May,1995 to February, 2006. The appellant reversed the modvat credit taken

on inputs for Rs. 16,14,088.32 for availing the exemption benefit under

notification no. 205/88.

3. As the appellant had not paid excise duty on the electrical cables

supplied to the manufacturers of wind mills as stated hereinabove, three

show cause notices had been issued to the appellant by the Revenue

-Authorities for recovery of total excise duty amounting to Rs.66,92,604/-.

According to the Authorities, the electric cables were neither parts nor

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specially designed devices, which were necessary for manufacturing or

running wind mills. For the aforestated reasons, according to the authorities,

benefit under the aforestated notification could not have been availed by the

appellant. Ultimately, the Commissioner, Central Excise, Surat - II by an

order dated 20.2.1998, confirmed the demand of excise duty amounting to

Rs. 66,92,604 and imposed penalty under Rule 173Q(1) of the Rules. The

said order was challenged before the Tribunal and the Tribunal allowed the

appeal by remanding the matter to the Commissioner. After hearing the

appellant, the Commissioner again took the same view by his order dated

22.3.2001.

4. Being aggrieved by the aforestated order dated 22.3.01, the appellant

preferred an appeal before the Tribunal which was dismissed. The Tribunal

relied on its earlier order passed in NICCO CORPORATION LIMITED v.

COMMISSIONER OF CENTRAL EXCISE, CALCUTTA, whereby an

analogous issue was adjudicated and decided against the concerned assessee.

Aggrieved by the said order dated 7.7.2005, the appellant has preferred the

appeal before this Court.

5. The order passed by the Tribunal in NICCO CORPORATION

LIMITED (supra) was appealed against in C.A. No 1118/2001 before this

Court. This Court, vide its order dated 22.3.06 dismissed the appeal and held

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that insulated electrical cables designed for use in wind mills would not be

eligible for exemption under notification no 205/88 as amended. The said

judgment is now reported as Nicco Corporation Ltd. v. Commissioner of

Central Excise, Calcutta 2006 (203) ELT 362(S.C.). During the pendency of

the proceedings, the Authorities had issued a notice of demand directing the

appellant to pay central excise duty and penalty amounting to Rs 1, 33,

85,208. The appellant, in compliance of the said notice, deposited a sum of

Rs 66, 92,604 towards the excise duty payable by it. However, the amount

of penalty has not been paid as stay has been granted against the said

demand.

6. We have heard the learned counsel appearing for the concerned

parties. It has been mainly submitted on behalf of the appellant that the

electrical cables supplied to the manufacturers of wind mills were

specifically designed for use in wind mills. They were special type of

cables, without which the wind mills could not have been operated and,

therefore, the revenue authorities ought to have granted exemption as stated

in the notification referred to hereinabove. The learned counsel appearing

for the appellant gave details as to how the electric cables were specially

used for running the wind mills. He further stated that without use of the

electric cables supplied by the appellant, functioning of the wind mills

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would not have been possible. He, therefore, submitted that the appellant

ought to have been given the benefit of the notification referred to

hereinabove.

7. On the other hand, Shri H.P. Raval, learned Additional Solicitor

General appearing for the respondent-authorities relied upon the judgment

delivered in Nicco Corporation Ltd. v. Commissioner of Central Excise,

Calcutta (supra) and submitted that the electric cables manufactured and

supplied by the appellant were not so indispensable that without which the

wind mills could not have been operated. He further submitted that for the

reasons recorded in the order passed by the Tribunal, the appellant is not

entitled to exemption. He further submitted that the order imposing penalty

is also just and proper as the appellant deliberately did not pay excise duty

payable by it. Thus, he submitted that the impugned order is just and proper

and, therefore, the appeal deserves to be dismissed.

8. Two issues arise for adjudication in the present case:

I. Whether the insulated electrical cables manufactured by the appellant

would be eligible for exemption under the above mentioned

exemption notification.

II. Whether imposition of penalty is justified in view of the facts and

circumstances of the case.

6 9. So far as the first issue is concerned, it is no more res integra in view

of the judgment delivered by this Court in the case of Nicco

Corporation Ltd. v. Commissioner of Central Excise, Calcutta

(supra). The facts in the said case as well as in the present case are similar

and, therefore, we need not consider the said issue again. In the

circumstances, the first issue is decided in favour of the Revenue. It is also

pertinent to note that the appellant has already paid a sum of Rs.66,92,604/-

towards excise duty. As regards the second issue about the imposition of

penalty, we are of the opinion that the said order cannot be justified in the

facts of the case.

10. So far as the second issue with regard to the imposition of penalty in

the present case is concerned, the Commissioner, himself in his order-in-

original has stated that the issue involved in the case is of interpretational

nature. Keeping in mind the said factor, the Commissioner thought it fit not

to impose harsh penalty and a penalty of an amount of Rs. 5 lakhs was

imposed on the appellant while confirming the demand of the duty.

11. It is also evident from the said order that the Commissioner also

found that except for the statement of the Excise Executive Director and

Excise Clerk of the assessee company there was no other evidence pointing

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out any accusing finger at them in dealing with offending goods knowingly.

A clear finding has been recorded by the Commissioner that it was difficult

to hold that the appellant knowingly dealt with excisable goods which were

cleared without payment of duty. Nor the department itself took it as a

formal case of offence.

12. When we take into consideration the aforesaid facts and also the fact

that the Commissioner himself found that it is only a case of interpretational

nature, in our considered opinion, no penalty could be and is liable to be

imposed on the appellant herein.

13. Therefore, in the facts and circumstances of the present case we are of

the view that penalty should not have been imposed upon the appellant.

Consequently, we quash the order of the Commissioner imposing penalty as

also the order of the Tribunal so far as it confirms imposition of penalty

upon the appellant. The appeal is allowed to the aforesaid extent leaving the

parties to bear their own costs.

................................................J.

(Dr. MUKUNDAKAM SHARMA)

....................................................J.

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(ANIL R. DAVE)

New Delhi

August 24, 2011.