CESTAT Kolkata Allows Customs Exemption on Solar PV Module Manufacturing Machinery

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 30.09.2026

CESTAT Kolkata Allows Customs Exemption on Solar PV Module Manufacturing Machinery

In a significant ruling concerning the solar photovoltaic manufacturing sector, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has granted substantial relief to M/s Sova Solar Limited, holding that machinery used sequentially for creating the electrical circuit architecture of solar PV modules is eligible for customs-duty exemption under Sl. No. 12 of Notification No. 24/2005-Customs dated 01.03.2005.

The Tribunal also ruled that the expression “multilayered sheets with tedlar base” in Sl. No. 18 of Notification No. 25/1999-Customs cannot be restricted only to material manufactured by or authorised by DuPont. PVF-based Solar PV Backsheets satisfying the substantive description of the exemption were held eligible for the benefit.

The appeal was decided by a Division Bench comprising Judicial Member R. Muralidhar and Technical Member K. Anpazhakan.

Background of the Dispute

• Sova Solar Limited is engaged in the manufacture of Solar Photovoltaic (PV) Cells and Solar Photovoltaic Modules at its manufacturing unit in Durgapur, West Bengal. The dispute arose after the Directorate of Revenue Intelligence (DRI), Hyderabad Zonal Unit analysed the company’s import data from March 2021 onwards.
• The investigation gave rise to three separate customs issues.
• The first related to exemption from Basic Customs Duty claimed on machinery imported for manufacturing solar PV modules under Notification No. 24/2005-Cus. The second concerned alleged short-payment of IGST due to the rate/classification adopted on certain imported goods. The third related to exemption claimed on imported Solar PV Backsheets under Notification No. 25/1999-Cus.

Issue I: Customs Exemption on Solar PV Manufacturing Machinery

Sova Solar had imported machinery including:

• MBB-PV Cell Soldering Stringer;
• Auto-Layup Machine;
• Auto-Bussing Machine; and
• Laminator Machine.

The machinery was classified under CTH 84862000, and the company claimed exemption under Sl. No. 12 of Notification No. 24/2005-Cus., which covers:

• “Apparatus for the projection or drawing of circuit patterns on sensitized semiconductor materials.”
• The disputed machinery was imported through six Bills of Entry.
• Customs denied the exemption and raised a differential duty demand of ₹2,93,47,918, including BCD, SWS and IGST.

Revenue’s Interpretation: “Drawing” Meant Photolithography

• The Customs authorities took the view that the imported machinery did not perform the function of projection or drawing contemplated by the notification.
• According to the adjudicating authority, drawing or projection of circuit patterns in semiconductor manufacturing was ordinarily undertaken through photolithography, involving processes associated with semiconductor fabrication. On that reasoning, equipment performing stringing, lay-up, bussing and lamination in solar-module manufacturing was treated as falling outside the exemption.
• Sova Solar challenged this interpretation as excessively restrictive.

“Projection or Drawing” Creates Two Alternative Routes to Exemption

• One of the crucial interpretative questions before CESTAT was the use of the word “or” in the expression “projection or drawing of circuit patterns.”
• Sova Solar argued that the exemption was framed disjunctively: an apparatus could qualify either because it performs projection of circuit patterns or because it performs drawing of circuit patterns. Both functions need not be performed simultaneously.
• The Tribunal accepted this approach.
• It held that the notification did not qualify “drawing” by requiring it to occur through photolithographic exposure. Nor did the notification require the circuit pattern to be a microscopic circuit of the kind associated with integrated circuits or printed circuit boards.
• The Tribunal reasoned that strict interpretation of an exemption notification cannot become a basis for adding words or technological limitations that the notification itself does not contain.
• Importantly, reading “drawing” merely as another expression for optical “projection” would make the separate word “drawing” redundant.

Solar Module Is an Electrically Interconnected Semiconductor Network

• The Tribunal examined the manufacturing process as an integrated technological sequence rather than treating each machine as an isolated piece of mechanical equipment.
• The MBB-PV Cell Soldering Stringer electrically joins photovoltaic cells to form strings. The Auto-Layup Machine positions those strings in a predetermined configuration. The Auto-Bussing Machine establishes the necessary electrical interconnections using bus ribbons and soldering. Finally, the Laminator permanently integrates and protects the assembled electrical structure.
• The Tribunal thus recognised that a solar PV module is not merely a collection of solar cells enclosed in glass. It represents an electrically interconnected network of semiconductor devices, with conductive pathways arranged in a predetermined configuration for generating, conducting and delivering electrical power.
• On this reasoning, the machinery collectively gives physical expression to the electrical architecture or circuit pattern of the solar module.

CESTAT Rejects Photolithography-Only Interpretation

• CESTAT concluded that photolithography may certainly constitute one method of projecting or drawing circuit patterns, but it is not necessarily the exclusive method contemplated by the notification.
• The Tribunal further noted the technical character of photovoltaic cells as sensitised semiconductor devices and found that the machinery operates on those cells while establishing their electrical interconnections and predetermined configuration.
• Accordingly, the Tribunal held that the machinery answers the description of apparatus for the “drawing of circuit patterns on sensitised semiconductor devices/materials” under Sl. No. 12 of Notification No. 24/2005-Cus.
• The consequential differential duty demand of ₹2,93,47,918 along with interest was therefore set aside.

Issue II: Solar PV Backsheets and the Meaning of “Tedlar”

The second major dispute concerned two consignments of Solar PV Backsheets, classified under CTH 39209919, imported from a Chinese supplier.

The exemption under Sl. No. 18 of Notification No. 25/1999-Cus. covered, among other materials used for manufacturing solar cells/modules:

“multilayered sheets with tedlar base.”

The Department’s case was that “Tedlar” was a proprietary trademark associated with DuPont, USA, and because the Chinese supplier had not been shown to be authorised by DuPont, the imported backsheets could not qualify for the exemption.

On this basis, Customs demanded another ₹12,70,790 in differential duty.

Brand-Specific Restriction Cannot Be Read Into Exemption Notification

• Sova Solar argued that the notification did not say “DuPont Tedlar” or require the goods to have been manufactured by DuPont or its authorised manufacturer.
• The company pointed out that the expression appearing in the notification was simply “multilayered sheets with tedlar base.”
• It further relied on the Government’s historical use of the terminology. Earlier exemption notifications had themselves used expressions such as “Polyvinyl fluoride (TEDLAR); Tedlar; Aluminium Tedlar” in the context of materials used to manufacture solar cells/modules.
• The Tribunal accepted the substance of this argument.
• It found no condition in the notification relating to manufacturer, country of origin, trademark ownership, DuPont authorisation or procurement exclusively from DuPont.
• The Tribunal therefore rejected the attempt to convert a description of material into an origin or brand-specific condition that was absent from the notification itself.

Trade and Commercial Parlance Becomes Important

• The judgment also carries wider significance for interpretation of technical expressions in customs law.
• The Tribunal considered technical and industry materials indicating that in the solar PV industry, PVF (Polyvinyl Fluoride) and “Tedlar” are used in connection with the material layer forming part of photovoltaic backsheets.
• For this proposition, CESTAT applied the principles emerging from Union of India v. Garware Nylons Ltd. and the Supreme Court’s recent decision in Commissioner of Customs (Import) v. Welkin Foods.
• The latter was relied upon for the principle that where an expression in a taxing statute is undefined, its meaning may be understood in the sense recognised by persons dealing with the goods, encompassing trade, commercial and popular parlance depending upon the context.
• CESTAT consequently held that Revenue could not insert a manufacturer-specific restriction where the exemption notification prescribed none.
• The Solar PV Backsheets containing the requisite PVF layer were therefore held eligible under Sl. No. 18 of Notification No. 25/1999-Cus., and the differential duty demand of ₹12,70,790 plus consequential interest was set aside.

Differential IGST of ₹22 Lakh Remains Payable

• Sova Solar did not contest the third component concerning differential IGST of ₹22,00,549.
• The amount had already been deposited and appropriated. The Tribunal therefore upheld this liability, along with consequential interest under Section 28AA of the Customs Act, 1962, if not already paid.
• This distinction is important: although Sova Solar succeeded on both substantive customs-exemption disputes, its appeal did not result in elimination of the admitted differential IGST liability.

₹1 Crore Redemption Fine and ₹10 Lakh Penalty Set Aside

• The adjudicating authority had earlier held imported goods having an aggregate assessable value of approximately ₹37.59 crore liable to confiscation under Sections 111(m) and 111(q) of the Customs Act.

It had imposed:

• Redemption Fine — ₹1 crore under Section 125
• Penalty — ₹10 lakh under Section 112(a)(ii)

CESTAT found these consequences unsustainable.

• For the goods relating to the admitted IGST differential, the Tribunal observed that there was no finding of concealment, suppression of identity, fictitious documents or importation of goods different from what had actually been declared. Acceptance of a higher tax rate subsequently could not, by itself, transform a disclosed classification or rate claim into a misdeclaration warranting confiscation.
• For the machinery and Solar PV Backsheets, the very foundation for confiscation disappeared once the Tribunal accepted the exemption claims.
• The Tribunal therefore set aside the confiscation, quashed the ₹1 crore redemption fine, and also set aside the ₹10 lakh penalty.

Key Legal Principles Emerging From the Decision

The decision is significant for customs and renewable-energy manufacturers on several fronts:

• An exemption notification must be interpreted according to the language actually used, without importing additional technological or brand-specific conditions.
• The use of “or” between two expressions ordinarily signifies alternative rather than cumulative requirements.
• “Drawing of circuit patterns” under the particular exemption could not be confined only to photolithographic processes when the notification itself contained no such limitation.
• Solar photovoltaic cells were treated in the relevant technical context as sensitised semiconductor devices, and machinery establishing their predetermined electrical interconnections could fall within the exemption.
• An exemption referring to “tedlar” could not be converted into a requirement that the material must necessarily originate from DuPont, where the notification contained no such manufacturer-specific condition.
• Trade, technical and commercial usage may assist in interpreting undefined expressions in specialised fiscal legislation.
• A disputed tax classification or rate claim does not automatically establish misdeclaration or liability to confiscation.

Why the Judgment Matters for the Solar Industry

• The ruling has particular relevance for India’s expanding solar PV manufacturing ecosystem.
• Modern solar-module manufacturing involves a technologically integrated sequence of stringing, lay-up, bussing, electrical interconnection and lamination. The Tribunal’s decision recognises that customs treatment of such equipment cannot necessarily be determined by examining individual machines in isolation or by importing technological assumptions from conventional integrated-circuit manufacturing.
• The ruling on Solar PV Backsheets is equally significant. By rejecting an unwritten manufacturer-specific condition for “Tedlar”, CESTAT has emphasised that exemption eligibility must flow from the statutory description, technical characteristics and relevant commercial context of the imported material, rather than from restrictions not stated in the notification.

Final Outcome

The appeal resulted in substantial relief to Sova Solar Limited.

CESTAT held the imported solar PV manufacturing machinery eligible for exemption under Notification No. 24/2005-Cus. and set aside the ₹2.93 crore differential duty demand and interest.

It also allowed the exemption on Solar PV Backsheets under Notification No. 25/1999-Cus., setting aside the ₹12.70 lakh demand and interest.

The ₹1 crore redemption fine and ₹10 lakh penalty were quashed. Only the ₹22,00,549 differential IGST liability, which Sova Solar had chosen not to contest, survived together with applicable consequential interest.

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Source: CESTAT Kolkata

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Ravi Shekhar Jha – Advocate, Bar Council of Delhi