Design-specific tower flanges for wind mills classified as WOEG parts under CTH 8503 0010, customs duty exemption upheld

CESTAT Chennai dismissed the revenue's appeal regarding classification of imported tower flanges. The tribunal held that design-specific flanges meant exclusively for wind mill tower erection qualify as parts of Wind Operated Electricity Generator under CTH 8503 0010, not general purpose flanges under 7307. The flanges were eligible for customs duty exemption under Notification No. 12/2012-CE. The decision relied on previous tribunal rulings establishing wind mill towers as WOEG parts and HSN explanatory notes excluding machine parts from heading 7307.

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Issues Involved:
1. Classification of imported flanges.
2. Eligibility for exemption under Notification No. 12/2012-CE dated 17.03.2012.

Summary:

1. Classification of Imported Flanges:

The primary issue is whether the flanges imported by the Respondent are classifiable under Customs Tariff Heading (CTH) 8503 as parts of Wind Operated Electricity Generator (WOEG) or under CTH 7307 as general-purpose items. The Revenue contends that the flanges are part of Wind Mill Towers and are of general use, thus should be classified under heading 7308, which covers metal structures and parts of structures. The Revenue cites the Harmonized Commodity Description and Coding System Explanatory Notes (HSN) and various rulings, including the United States International Trade Commission Rulings, to support their claim that the towers and flanges do not provide operational or mechanical interaction with the turbine generator and therefore should not be classified under heading 8503.

Conversely, the Respondent argues that the flanges are design-specific and meant only for use with Wind Mill Towers, thus should be classified under heading 8503. They cite previous decisions, including those of the Tribunal in cases like BHEL, Techno Fab Manufacturing Ltd., and Hyundai Unitech Electrical Transmission, which held that windmill towers are parts of WOEG. The Respondent also references the Tribunal's decision in Vestas Wind Technology and the Larger Bench decision in Rakhoh Enterprises, which support the classification of tower sections and parts under heading 8503.

2. Eligibility for Exemption under Notification No. 12/2012-CE:

The second issue is whether the imported flanges are eligible for the exemption benefit under Notification No. 12/2012-CE (Sl.No. 332) dated 17.03.2012. The Revenue argues that the exemption is meant only for WOEG and its components, not for the entire wind power generation system or power plants. They assert that the towers and flanges do not qualify as parts or components of WOEG and thus are not eligible for the exemption.

The Respondent contends that the flanges are integral parts of WOEG and should be eligible for the exemption. They reference various decisions, including those of the Tribunal in the cases of RRB Energy Ltd. and Pushpaman Forgings, which held that flanges used in towers are eligible for exemption as parts of WOEG. The Respondent also highlights the Tribunal's decision in Sew Eurodrive India Pvt. Ltd., which classified imported flanges under heading 8503 and granted the exemption.

Judgment:

The Tribunal found that the issue is no longer res integra, as flanges imported are design-specific and meant only for use in the erection of Wind Mill Towers, thus classifiable under CTH 8503 and not general-purpose flanges under 7307. The Tribunal relied on previous decisions, including those in BHEL, Techno Fab Manufacturing Ltd., Hyundai Unitech Electrical Transmission, and Vestas Wind Technology, which supported the classification of windmill towers and parts under heading 8503. The Tribunal also noted that the Larger Bench in Rakhoh Enterprises held that windmill towers are parts of WOEG and eligible for exemption.

After considering the facts and evidence, the Tribunal concluded that the appeal filed by the Department is without merit and cannot be sustained. The Tribunal dismissed the Department's appeal and disposed of the cross objections filed by the Respondent, affirming that the imported flanges are classifiable under heading 8503 and eligible for the exemption under Notification No. 12/2012-CE.

(Order pronounced in open court on 25.01.2024)

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