2009 (10) TMI 945 - AT - Central Excise

UPSS supplied to research institutes qualify for exemption under Notification No.10/97-CE

Numeric Power Systems Ltd. Versus Commissioner of Central Excise, Pondicherry And Vice Versa

The Tribunal held that the Uninterrupted Power Supply Systems (UPSS) supplied to research institutes by the assessee qualified for exemption under ... - 1. ISSUES PRESENTED AND CONSIDERED 1. Whether Uninterrupted Power Supply System (UPSS) cleared to research institutions is eligible for exemption under Notification No.10/97-CE dt. 1.3.97 as 'scientific and technical instruments, apparatus, equipment (including computers)' or as 'accessories and spare parts' thereof. 2. Whether UPSS can be characterised as an accessory of computers for the purpose of the said exemption notification. 3. Whether the Commissioner (Appeals) had jurisdiction to remit matters to the original authority under Section 35A(3) of the Central Excise Act, 1944 (issue raised by Revenue) - insofar as it was argued before the Tribunal. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Eligibility of UPSS for exemption under Notification No.10/97-CE (scientific and technical instruments/equipment) Legal framework: Exemption Notification No.10/97-CE dt. 1.3.97 exempts from excise duty goods specified in the Table when supplied to specified institutions (public funded research institutions, universities, IISc, Regional Engineering Colleges) subject to conditions. Relevant entries include (a) 'Scientific and technical instruments apparatus, equipment (including computers)' and (b) 'Accessories and spare parts of goods specified in (a) above and consumables.' Precedent treatment: Parties relied on Tribunal decisions with divergent treatments of UPS/UPSS: one decision treated UPS as an accessory of computers (supporting exemption), while another held that UPS not specially designed/tailor-made for computers and thus not an accessory. Interpretation and reasoning: The Tribunal examined technical literature submitted by the assessee indicating UPSS protects sensitive equipment from spikes, surges, voltage fluctuations, blackouts and other aberrations. The Tribunal construed the phrase 'scientific and technical instruments apparatus, equipment (including computers)' in the notification to cover devices that protect, support or are integrally used with such instruments and equipment deployed in research institutions. The factual minimum requirement - that the goods were supplied to research institutes as evidenced by certificates - was not disputed. The Tribunal also noted that a Customs notification treats UPSS as accessories of computers, providing corroborative administrative treatment. Ratio vs. Obiter: Ratio - UPSS, by its function of protecting sensitive instruments and equipment used in research settings, falls within 'scientific and technical ... equipment' and thereby qualifies for exemption under the notification when supplied to the specified institutions. The discussion of administrative treatment (Customs notification) is supportive obiter but used to reinforce the constructive characterization. Conclusion: UPSS cleared to research institutes is covered by clause (a) of Sl. No.1 of the Table in Notification No.10/97-CE and the benefit of exemption is properly available. Issue 2 - Characterisation of UPSS as an accessory of computers Legal framework: The notification separately exempts 'accessories and spare parts of goods specified in (a) above.' Characterisation as an 'accessory' depends on whether the item is suitably connected or auxiliary to goods specified in (a), e.g., computers or other scientific equipment. Precedent treatment: Authorities cited both a Tribunal decision treating UPS as computer accessory (supporting exemption) and another treating UPS as not specially designed for computers (against accessory characterisation). The Tribunal considered both treatments. Interpretation and reasoning: The Tribunal accepted the position that UPSS functions as equipment that protects sensitive instruments and thus can be regarded either as equipment in its own right under clause (a) or, where appropriate, as an accessory to such equipment under clause (b). The Tribunal found no requirement in the notification that accessories must be tailor-made exclusively for computers; rather, the protective function for scientific and technical apparatus sufficed to bring UPSS within the scope of the exemption. The Customs notification treating UPSS as computer accessory offered persuasive administrative context but was not the sole basis for the conclusion. Ratio vs. Obiter: Ratio - it is unnecessary to decide exclusively whether UPSS is an accessory because UPSS is in any event covered as 'equipment' under clause (a); the accessory characterisation is ancillary (obiter) but supports a broader interpretation favoring exemption when supplied to the specified institutions. Conclusion: Even if not narrowly a tailor-made computer accessory, UPSS qualifies under the notification as equipment (and alternatively as an accessory) and is therefore exempt when supplied to the specified research institutions. Issue 3 - Power of Commissioner (Appeals) to remit matters under Section 35A(3) Legal framework: Section 35A(3) of the Central Excise Act, 1944 addresses powers of appellate authorities to remand matters; the Revenue contended that the Commissioner (Appeals) lacked power to remit. Precedent treatment: The record shows Revenue challenged a remand but the Tribunal's operative consideration focused on substantive entitlement under the notification rather than procedural remand power. Interpretation and reasoning: The Tribunal disposed of the appeals on merits by addressing the substantive exemption entitlement. Having determined UPSS falls within the notified categories and that supplies were to qualifying institutions, the Tribunal found no continuing procedural prejudice necessitating a determination of the remand power dispute. Ratio vs. Obiter: Obiter - the question of the Commissioner (Appeals)'s remand power under Section 35A(3) was not authoritatively decided; the Tribunal dismissed the Revenue appeal and allowed the assessee appeals on substantive grounds, rendering the remand-power argument moot for disposition. Conclusion: The Revenue's challenge to remand power is dismissed insofar as the substantive relief to the assessee is upheld; the Tribunal did not make a definitive pronouncement on the limits of Section 35A(3) because it resolved the matter on exemption merits. Overall Conclusion and Disposition The Tribunal held that UPSS cleared to research institutions qualifies for exemption under Notification No.10/97-CE as 'scientific and technical ... equipment' (and alternatively as an accessory), allowed the appeals filed by the assessee, and dismissed the Revenue's appeal. The Tribunal's substantive holding that UPSS falls within clause (a) of Sl. No.1 of the Table is the operative ratio for exemption in these appeals.