Exemption for water treatment equipment denied where actual function was treated water supply, while penalty was set aside for lack of suppression.

Exemption under Notification No. 6/2002-C.E. was denied because Water Treatment Plants and Reverse Osmosis Plants were membrane-based systems for producing treated water, not specified non-conventional energy devices or systems; a certificate linking them to a biomass project did not change their actual function, so the duty demand was sustained. Penalty was held unsustainable because suppression or misstatement was not established and the matter had already been covered by prior Tribunal decisions, so the penal consequence was set aside. The result was partial relief: duty remained payable, but penalty was removed.

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Issues: (i) Whether Water Treatment Plants and Reverse Osmosis Plants were entitled to exemption under Sr. No. 237 of Notification No. 6/2002-C.E. read with Sr. Nos. 8 or 16 of List-9; (ii) Whether penalty was sustainable.

Issue (i): Whether Water Treatment Plants and Reverse Osmosis Plants were entitled to exemption under Sr. No. 237 of Notification No. 6/2002-C.E. read with Sr. Nos. 8 or 16 of List-9.

Analysis: The notification granted exemption only to specified non-conventional energy devices or systems. The goods in question were membrane-based water treatment and reverse osmosis systems, used for producing treated water and not for directly converting waste into energy. A mere certificate stating that the equipment was required for implementation of a biomass project did not alter the legal character of the goods. The reasoning applied the principle that exemption entries must be satisfied on the actual function and coverage of the goods, and the earlier precedent concerning biomass-related energy conversion was held applicable.

Conclusion: The exemption was not available and the duty demand was sustained.

Issue (ii): Whether penalty was sustainable.

Analysis: Penalty could not be justified where the demand beyond limitation had already been dropped for absence of positive evidence of suppression or misstatement, and the issue itself had been the subject of prior Tribunal decisions. In these circumstances, imposition of penalty was found unwarranted.

Conclusion: The penalty was set aside.

Final Conclusion: The demand of duty was upheld, but the penal consequence was removed, resulting in a partial relief to the appellant.

Ratio Decidendi: An exemption for specified non-conventional energy devices cannot be extended to equipment that merely supplies treated water for use in an energy project, and penalty is not sustainable where suppression or misstatement is not established.

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