2011 (8) TMI 63 - SC - Central Excise

Exemption denied on wind mill cables under Notification 205/88, but penalty quashed absent evidence of conscious evasion

SC held that insulated electrical cables supplied for use in wind mills were not eligible for exemption under Notification No. 205/88, following its ... Central Excise - Wire and cables - modvat credit taken on inputs for availing the exemption benefit under notification no. 205/88 - imposition of penalty - Whether the insulated electrical cables manufactured by the appellant would be eligible for exemption under the above mentioned exemption notification - HELD THAT:- 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. 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 would not have been possible. He, therefore, submitted that the appellant ought to have been given the benefit of the notification. 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, [2006 (3) TMI 48 - SUPREME COURT]. 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 towards excise duty. 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 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. No penalty could be and is liable to be imposed on the appellant herein - we are of the view that penalty should not have been imposed upon the appellant. Issues:I. Eligibility for exemption under the notification for insulated electrical cables.II. Justification of penalty imposition.Eligibility for Exemption:The appellant, engaged in manufacturing insulated wires and cables, sought exemption under Notification no. 205/88 - C.E. for specially designed electrical cables used in wind mills. Revenue authorities issued show cause notices for non-payment of excise duty, leading to a demand of Rs. 66,92,604. The Tribunal upheld the demand, citing a previous case judgment. The Supreme Court referenced a similar case and held that the appellant's cables were not indispensable for wind mills, denying exemption eligibility. The appellant had paid the excise duty amount.Penalty Imposition Justification:Regarding penalty imposition, the Commissioner acknowledged an interpretational issue and imposed a penalty of Rs. 5 lakhs along with confirming the duty demand. The Commissioner found no concrete evidence of deliberate wrongdoing by the appellant. The Supreme Court, considering the interpretational nature of the case and lack of evidence of deliberate offense, deemed the penalty unjustified. Consequently, the Court quashed the penalty imposition and allowed the appeal, with each party bearing their own costs.