2025 (1) TMI 581 - AAR - GST

Transformers used with wind generators ruled not part of WOEG, so ineligible for notification exemption

In Re: M/s. Suzlon Energy Ltd.

AAR held that specially designed transformers performing dual step-down/step-up functions supplied with wind-operated electricity generators (WOEG) are ... Specially designed transformers for WOEG which perform dual function of Step Down and Step Up manufactured by the appellant and supplied to the customers as a part of WOEG - to be treated as part of WOEG or not - rate of duty - whether specially designed transformers for WOEG, which perform the dual function of step down and step up, supplied by the appellant along with WOEG, should be treated as a part WOEG or otherwise? - HELD THAT:- GAAR has relied on circular No. 1008/15/2015-CX dated 20.10.2015, issued by CBIC consequent to seeking clarification from Ministry of New and Renewable Energy, on the items which would constitute parts of WOEG. The GAAR has also relied on the Minutes of the Tariff Conference, held consequent to the issue of the aforementioned clarification, wherein the same was reiterated. As is evident, transformers have not been included as parts of WOEG by the Ministry of New and Renewable Energy and hence, the contention of the appellant that they are parts of WOEG is not a legally tenable argument. Failure to examine the transformer from the angle of general principles of interpretation & that they should be understood by their popular meaning/common parlance principle - HELD THAT:- The appellant has not produced any material before us which could lead us to a conclusion that transformer in terms of their popular meaning/common parlance principle, are part of WOEG. Further, when the concerned Ministry itself has not included transformer to be a part of the WOEG, the reliance on popular meaning, etc., is not a plausible argument. Applicability of order in the case of Enercon India Ltd - HELD THAT:- The matter has not been remanded back to the assessing officer but instead the appeal stands allowed by the Hon’ble Apex Court. The matter in-fact was remanded by the first appellate authority, which was upheld by both the Hon’ble Tribunal and the Hon’ble High Court. The aforementioned order dated 8.3.2016, is passed in an appeal against the order of the Hon’ble High Court. What is forthcoming is that the dispute in the said case was whether M/s. Enercon (I) Ltd. [2016 (4) TMI 483 - SUPREME COURT], would be eligible for exemption u/s 8 read with the 5th Schedule of the Karnataka Sales Tax Act. The aforementioned order of the Hon’ble Supreme Court is on an entirely different aspect relating to a different law and to an exemption, which incidentally is not a dispute in the present proceeding. The findings of the Hon’ble High Court, as quoted supra and of the Supreme Court are qua the Act and the exemption in question. In view of the foregoing, the appellant’s averment relying on the above judgement that the specially designed transformers for WOEG, which perform dual function of step down and step up, should be treated as a part WOEG, is not legally tenable. Conclusion - The specially designed transformers for WOEG, which perform dual function of step down and step up, supplied by the appellant is not a part of WOEG and hence it would not be eligible for the benefit of Sr. No. 234 and Sr. No. 201A of exemption notification No. 1/2017-CT (Rate), as amended. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question in this judgment is whether the specially designed transformers for Wind Operated Electricity Generators (WOEG), which perform dual functions of step down and step up, should be treated as part of the WOEG for the purposes of tax exemption under the relevant notifications of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017.2. ISSUE-WISE DETAILED ANALYSISIssue: Classification of Transformers as Part of WOEGRelevant Legal Framework and Precedents:The appellant sought to classify the transformers as part of WOEG under Sr. No. 234 in Schedule-I to Notification No. 01/2017-Central Tax (Rate) dated 28th June 2017, which allows for a reduced GST rate. The relevant legal framework includes the CGST Act, 2017, GGST Act, 2017, and related notifications and circulars. The appellant cited previous case law, including the Supreme Court decision in the Enercon India case, to support their position.Court's Interpretation and Reasoning:The court analyzed the definition and scope of WOEG and its components as clarified by the Ministry of New and Renewable Energy and CBIC circulars. The court noted that transformers were not listed as parts of WOEG in the circulars and relied on the principle that exemption notifications should be interpreted strictly.Key Evidence and Findings:The court considered the appellant's argument that the transformers are vital components of WOEG and should be included under the exemption. However, it found that the Ministry of New and Renewable Energy did not classify transformers as parts of WOEG. The court also referenced the Enercon India case, clarifying that the Supreme Court's decision related to a different legal context and was not directly applicable.Application of Law to Facts:The court applied the strict interpretation principle to the exemption notification, concluding that since transformers were not explicitly listed as parts of WOEG, they could not be classified as such for tax exemption purposes.Treatment of Competing Arguments:The appellant argued based on the popular meaning/common parlance principle and cited various case laws to support their position. However, the court dismissed these arguments, emphasizing the need for strict interpretation of exemption notifications and relying on authoritative circulars and ministry clarifications.Conclusions:The court concluded that the specially designed transformers for WOEG are not part of WOEG and are therefore not eligible for the tax exemption under the relevant notifications.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'Exemption notification should be interpreted strictly: the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.'Core principles established:Exemption notifications are subject to strict interpretation, and any ambiguity must be resolved in favor of the revenue.Transformers, not being explicitly listed as parts of WOEG in authoritative documents, do not qualify for tax exemption under the relevant notifications.Final determinations on each issue:The court upheld the ruling of the Gujarat Authority for Advance Ruling, determining that the transformers are not part of WOEG and are subject to the standard GST rate, rejecting the appellant's appeal.