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.  

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