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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5870 OF 2005
UNIFLEX CABLES LTD. .....APPELLANT.
VERSUS
COMMISSIONER, CENTRAL EXCISE,
SURAT-II .....RESPONDENT.
J U D G M E N T
ANIL R. DAVE, J.
1. This is an appeal under Section 35-L (b) of the Central Excise Act,
1944 (hereinafter referred to as `the Act'), against the Judgment and Order
no A/1326/WZB/2005/C-iii dated 7.7.05 in Appeal No. E/1893/01, passed
by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal
Branch, Mumbai.
2. The material facts are that the appellant is engaged in the manufacture
of insulated wires and cables falling under Central Excise Tariff Sub-
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Heading No.8544.00. The appellant claimed benefit under Notification no.
205/88 - C.E. dated 25.05.88 as amended by Notification no. 57/95. The
said notification grants exemption from payment of central excise duty in
respect of manufacture of wind mills, parts of wind mills and any specially
designed devices which run on wind mills. As the appellant had received
orders from various wind mill manufacturers for specially designed
electrical cables, which were to be used in the manufacture of wind mills,
the appellant filed a declaration under Rule 173-B of the Central Excise
Rules, 1944 (hereinafter referred to as `the Rules') claiming nil rate of duty
so as to avail benefit under the aforestated notification for the insulated
cables manufactured by it and supplied to the manufacturers of wind mills
for using the same as part of wind mills for the period commencing from
May,1995 to February, 2006. The appellant reversed the modvat credit taken
on inputs for Rs. 16,14,088.32 for availing the exemption benefit under
notification no. 205/88.
3. As the appellant had not paid excise duty on the electrical cables
supplied to the manufacturers of wind mills as stated hereinabove, three
show cause notices had been issued to the appellant by the Revenue
-Authorities for recovery of total excise duty amounting to Rs.66,92,604/-.
According to the Authorities, the electric cables were neither parts nor
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specially designed devices, which were necessary for manufacturing or
running wind mills. For the aforestated reasons, according to the authorities,
benefit under the aforestated notification could not have been availed by the
appellant. Ultimately, the Commissioner, Central Excise, Surat - II by an
order dated 20.2.1998, confirmed the demand of excise duty amounting to
Rs. 66,92,604 and imposed penalty under Rule 173Q(1) of the Rules. The
said order was challenged before the Tribunal and the Tribunal allowed the
appeal by remanding the matter to the Commissioner. After hearing the
appellant, the Commissioner again took the same view by his order dated
22.3.2001.
4. Being aggrieved by the aforestated order dated 22.3.01, the appellant
preferred an appeal before the Tribunal which was dismissed. The Tribunal
relied on its earlier order passed in NICCO CORPORATION LIMITED v.
COMMISSIONER OF CENTRAL EXCISE, CALCUTTA, whereby an
analogous issue was adjudicated and decided against the concerned assessee.
Aggrieved by the said order dated 7.7.2005, the appellant has preferred the
appeal before this Court.
5. The order passed by the Tribunal in NICCO CORPORATION
LIMITED (supra) was appealed against in C.A. No 1118/2001 before this
Court. This Court, vide its order dated 22.3.06 dismissed the appeal and held
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that insulated electrical cables designed for use in wind mills would not be
eligible for exemption under notification no 205/88 as amended. The said
judgment is now reported as Nicco Corporation Ltd. v. Commissioner of
Central Excise, Calcutta 2006 (203) ELT 362(S.C.). During the pendency of
the proceedings, the Authorities had issued a notice of demand directing the
appellant to pay central excise duty and penalty amounting to Rs 1, 33,
85,208. The appellant, in compliance of the said notice, deposited a sum of
Rs 66, 92,604 towards the excise duty payable by it. However, the amount
of penalty has not been paid as stay has been granted against the said
demand.
6. We have heard the learned counsel appearing for the concerned
parties. 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 referred to hereinabove. The learned counsel appearing
for the 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
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would not have been possible. He, therefore, submitted that the appellant
ought to have been given the benefit of the notification referred to
hereinabove.
7. On the other hand, Shri H.P. Raval, learned Additional Solicitor
General appearing for the respondent-authorities relied upon the judgment
delivered in Nicco Corporation Ltd. v. Commissioner of Central Excise,
Calcutta (supra) and submitted that the electric cables manufactured and
supplied by the appellant were not so indispensable that without which the
wind mills could not have been operated. He further submitted that for the
reasons recorded in the order passed by the Tribunal, the appellant is not
entitled to exemption. He further submitted that the order imposing penalty
is also just and proper as the appellant deliberately did not pay excise duty
payable by it. Thus, he submitted that the impugned order is just and proper
and, therefore, the appeal deserves to be dismissed.
8. Two issues arise for adjudication in the present case:
I. Whether the insulated electrical cables manufactured by the appellant
would be eligible for exemption under the above mentioned
exemption notification.
II. Whether imposition of penalty is justified in view of the facts and
circumstances of the case.
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9. So far as the first issue is concerned, 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, Calcutta
(supra). 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 of Rs.66,92,604/-
towards excise duty. As regards the second issue about the imposition of
penalty, we are of the opinion that the said order cannot be justified in the
facts of the case.
10. So far as the second issue with regard to the imposition of penalty in
the present case is concerned, the Commissioner, himself in his order-in-
original has stated that the issue involved in the case is of interpretational
nature. Keeping in mind the said factor, the Commissioner thought it fit not
to impose harsh penalty and a penalty of an amount of Rs. 5 lakhs was
imposed on the appellant while confirming the demand of the duty.
11. 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
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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.
12. When we take into consideration the aforesaid facts and also the fact
that the Commissioner himself found that it is only a case of interpretational
nature, in our considered opinion, no penalty could be and is liable to be
imposed on the appellant herein.
13. Therefore, in the facts and circumstances of the present case we are of
the view that penalty should not have been imposed upon the appellant.
Consequently, we quash the order of the Commissioner imposing penalty as
also the order of the Tribunal so far as it confirms imposition of penalty
upon the appellant. The appeal is allowed to the aforesaid extent leaving the
parties to bear their own costs.
................................................J.
(Dr. MUKUNDAKAM SHARMA)
....................................................J.
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(ANIL R. DAVE)
New Delhi
August 24, 2011.
