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2006 (2) TMI 367 - AT - Central ExciseDuty demand - disallowance of Modvat/Cenvat credit on furnace oil use for generation of electricity - Electricity used part of the factory and partly for the township - residential colony/township can be consider as a part of the factory? - Factory of production - confiscation - Penalty - Quantum of - HELD THAT:- We find that the adjudicating Commissioner has correctly noted the provisions under the relevant rules, which allow credit of duty on furnace oil used in electricity generation provided such electricity is used for production of final products and also for other purposes so long as it is used within the factory of production. He has passed a detailed speaking order and has held that in respect of the electricity used in the residential premises/township the appellants are not eligible for the input duty credit, on the ground that such residential area is not part of the factory premises nor it can be considered to be falling within precincts of the factory premises. He has also referred to Explanation-II to the definition of ‘factory’ under the Factories Act, 1948, which states that the area where an Electronic Data Processing Unit is installed in any premises or part thereof, shall not be construed as a factory if no manufacturing process is carried on in such area. It is undisputed that neither any manufacturing nor any process connected with the production of excisable goods is carried on in such residential premises/township. Accordingly, we are of the view that the appellants are not entitled to input duty credit on furnace oil used for generation of electricity supplied to such residential premises/township. We also note that the adjudicating Commissioner has rightly recorded in his order that the appellants are not eligible for the impugned credit and yet they willfully and wrongly availed the same without any intimation to the department. Hence, we are of the view that the duty demand has been correctly confirmed by the adjudicating Commissioner applying the extended period of limitation. However, as regards the redemption fine, we are of the view that the same is not warranted in the circumstances of the case including the fact that the goods are not available for confiscation. We, therefore, set aside the redemption fine. As regards the penalty of Rs. 30 lakhs, we are of the view that the same is disproportionately high considering the amount of ineligible input duty credit involved. Hence, we reduce the penalty from Rs. 30 lakhs to Rs. 5 lakhs (rupees five lakhs) only. As regards the interest, we are of the view that the same is payable in accordance with the legal provisions in force. The appeal is partly allowed as above.
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