CESTAT Hyderabad Sets Aside Excise Demand On Unmachined Castings Used In Wind Turbines

The Hyderabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside an excise duty demand against a manufacturer of unmachined castings.

It held that castings specially designed and supplied for use in Wind Operated Electricity Generators (WOEGs) are eligible for excise exemption, even if they require further machining before assembly.

A bench of Judicial Member Angad Prasad and Technical Member P. Anjani Kumar held that Notification No. 6/2006-CE applies to goods falling under any chapter and found that the appellant's tailor-made un-machined castings qualified for the exemption.

The dispute arose after the department denied the exemption, contending that only finished wind turbine parts qualified for the benefit and not unmachined castings classifiable under a different tariff heading.

Rejecting the department's stand, the Tribunal observed that the castings were manufactured strictly according to the customers' drawings and specifications for exclusive use in wind turbines.

It noted that these castings had no alternative commercial use and were tailor-made components of the wind energy system.

The Tribunal also disagreed with the Commissioner's interpretation of the exemption notification, holding that it covers not only finished parts but also components used in manufacturing wind turbine parts.

"We are of the opinion that serial no. 21 of the List 5 is specifically provided to include the parts which further go into making of parts for WOEG. Therefore, we find that the conclusion arrived at by the Learned Commissioner is misplaced", the court ruled.

It further relied on a CBEC clarification stating that tailor-made castings used exclusively in wind turbine generators are entitled to the exemption.

"it is on record that the castings manufactured by the appellant are tailor made to use of manufacture of WOEG and have been manufactured as per their requirements. Therefore, we find that the un-machined castings are also eligible for exemption", the court held.

Accordingly, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

For Appellant: Advocate Narendra Dave,

For Respondent: B. Sangameshwar Rao, Authorized Representative