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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- 2 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.

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 1

 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-

 2

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 

 3

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 

 4

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 

 5

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. 

 6

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 

 7

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.

 8

 (ANIL R. DAVE)

New Delhi

August 24, 2011. 
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