UNIFLEX CABLES LTD.versusCOMMISSIONER, CENTRAL EXCISE, SURAT-II

                   (2011] 10 S.C.R. 591


                  UNIFLEX CABLES LTD.                           A
                          v.
      COMMISSIONER, CENTRAL EXCISE, SURAT-II
           (Civil Appeal No. 5870 of 2005)
                     AUGUST 24, 2011
                                                                B
           [DR. MUKUNDAKAM SHARMA AND
                  ANIL R. DAVE, JJ,]

      Central Excise - Central Excise Rules, 1944 - Rules
173Q(1) and 173-B - Exemption Notification - Benefit under C
- Entitlement to- Notification no. 205188-C.E. dated 25.05.88
as amended by Notification no.57195 granted exemption from
payment of central excise duty in respect of manufacture of
wind mills, parts of wind mills and specially designed devices
which run on wind mills - Appellant filed declaration claiming o
nil rate of duty so as to avail benefit under the aforestated
notification for the insulated electrical cables manufactured
by it and supplied to the manufacturers of wind mills for using
the same as part of wind mills - Commissioner, Central
Excise, however, confirmed demand of excise duty and also E
imposed penalty under Rule 173Q(1) - Order upheld by
 Tribunal - Two issues: 1) Whether the insulated electrical
cables manufactured by the appellant were eligible for
exemption under the said exemption notification and 2)
Whether imposition of penalty was justified in view of the facts F
and circumstances of the case - Held: The first issue is no
more res integra in view of the Supreme Court judgment in
the case of Nicco Corporation Ltd* and is decided in favour
of the Revenue - As regards the second issue about the
imposition of penalty, the Commissioner, himself in his order- G
in-original has stated that the issue involved in the case was
of interpretationa/ nature - Keeping in mind the said factor,
the Commissioner thought it fit not to impose harsh penalty
and a penalty of Rs. 5 Jakhs was imposed on the appellant

                             591                                H
    592    SUPREME COURT REPORTS               [2011] 10 S.C.R.


A  while confirming the demand of the duty - The Commissioner
   also found that it was difficult to hold that the appellant
 - knowingly dealt with excisable goods which were cleared
   without payment of duty - The Department itself also did not
   take it as a formal case of offence - In view of the aforesaid
B facts, no penalty could be and is liable to be imposed on the
   appellant - Central Excise Tariff Sub-Heading No. 8544. 00.

         The appellant is engaged in the manufacture of
    insulated wires and cables falling under Central Excise
    Tariff Sub-Heading No.8544.00. It claimed benefit under
C   Notification no. 205/88 - C.E. dated 25.05.88 as amended
    by Notification no. 57195 which granted 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. The appellant
D   filed declaration under Rule 173-B of the Central Excise
    Rules, 1944 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. As the
E   appellant had not paid excise duty on the electrical
    cables supplied to the manufacturers of wind mills, show
    cause notices were issued to the appellant by the
    Revenue-Authorities for recovery of excise duty.
    According to the Authorities, the electric cables were
F   neither parts nor 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
G   Commissioner, Central Excise confirmed the demand of
    excise duty and imposed penalty under Rule 173Q(1) of
    the Rules. The appellant preferred appeal before the
    tribunal which was dismissed. Aggrieved, the appellant
    preferred the instant appeal under Section 35-L (b) of the
H   Central Excise Act, 1944.
     UNIFLEX CABLES LTD. v. COMMISSIONER,                593
           CENTRAL EXCISE, SURAT-II

     Two issues arose for adjudication in the present           A
case: 1) Whether the insulated electrical cables
manufactured by the appellant would be eligible for
exemption under the above mentioned exemption
notification and 2) Whether imposition of penalty was
justified in view of the facts and circumstances of the         B
case.
    Partly allowing the appeal, the Court

     HELD:1. So far as the first issue is concerned, it is
no more res integra in view of the judgment delivered by        C
this Court in the case of Nicco Corporation Ltd.* The facts
in the said case as well as in the present case are similar
and, therefore, there is no need to 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   D
appellant has already paid sum towards excise duty.
[Para 9) (597-G-H; 598-A]
     * Nicco Corporation Ltd. v. Commissioner of Central
Excise, Calcutta 2006 (203) ELT 362(S.C.) - relied on.
                                                                E
     2. As regards the second issue about the imposition
of penalty, the said order cannot be justified in the facts
of the case. 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,    F
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. It is also evident from the said order that the
Commissioner also found that except for the statement           G
of the Exci~e Executive Director and Excise Clerk of the
assessee company there was no other evidence pointing
out any accusing finger at them in dealing with offending
goods knowingly. A clear finding was recorded by the
Commissioner that it was difficult to hold that the             H
    594      SUPREME COURT REPORTS                [2011] 10 S.C.R.


A   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. In
    view of the aforesaid facts and also the fact that the
    Commissioner himself found that it is only a case of
B   interpretational nature, no penalty could be and is liable
    to be imposed on the appellant. Consequently, 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 are quashed. [Paras 9 to 13) [597-H;
c   598-A-G]
                          Case Law Reference:
      2006 (203) ELT 362 (S.C.)       relied on    Paras 4, 5, 6, 9
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
D   5870 of 2005.

        From the Judgment & Order dated 7. 7.2005 of the
    Customs, Excise and Service Tax Appellate Tribunal, West
    Zonal Bench at Mumbai.
E
          Pramod B. Agarwala, Praveena Gautam, Abhishek Said
    for the Appellant.

        H.P. Rawal, ASG, K. Swami, Tanushree Sinha, B.K.
    Prasad, Anil Katiyar for the Respondent.
F
          The Judgment of the Court was delivered by

         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/
G   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
H
    UNIFLEX CABLES LTD. v. COMMISSIONER,                      595
   CENTRAL EXCISE, SURAT-II [ANIL R. DAVE, J.]

the manufacture of insulated wires and cables falling under          A
Central Excise Tariff Sub-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    B
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          c
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
                                                                     0
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     E
 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 specially
designed devices, which were necessary for manufacturing or          F
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          G
Rs. 66,92,604 and imposed penalty under Rule 1730(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.               H
    596     SUPREME COURT REPORTS                [2011] 10 S.C.R.


A        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
s   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 C.A. No 1118/2001 before this Court. This Court, vide its order
    dated 22.3.06 dismissed the appeal arid held 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.
D 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
E 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
F 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
G 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 would not have been
H
    UNIFLEX CABLES LTD. v. COMMISSIONER,                     597
   CENTRAL EXCISE, SURAT-II [ANIL R. DAVE, J.]

possible. He, thereto.re. submitted that the appellant ought fo      A
have been given the benefit of the notification referred to
hereinabove.

     7.0n the other hand, Shri H.P. Raval, learned Additional
Solicitor General appearing for the respondent-authorities
                                                                     B
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          C
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            D
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      E
            exemption under the above mentioned exemption
            notification.

      II.   Whether imposition of penalty is justified in view of
            the facts and circumstances of the case.                 F

      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      G
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
                                                                     H
    598      SUPREME COURT REPORTS                 (2011] 10 S.C.R.


A   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
8
  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
C 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 out any
o   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 giods which were cleared
    without payment of duty. Nor the department itself took it as a
E   formal case of offence.

         12. When we take inlo 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
F   herein.

          13. Therefore, in the facts and circumstances of the
    pre~ent case we are of the view that penalty should not have
  been imposed upon the appellant. Consequently, we quash the
G 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.

H B.B.B.                                     Appeal partly allowed.