TMI Blog2000 (9) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... the period 1-8-89 to 28-2-91, the respondents produced and removed certain quantities of LSHS for consumption in their thermal power station for generation of electricity and the same was done without payment of Central Excise duty. They did likewise during the period 1-3-91 to 31-5-91. The respondents were claiming total exemption from payment of duty on LSHS under Notification No. 75/84-C.E., dated 1-3-84 as amended. The Department objected to this and proposed to recover duty under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excises and Salt Act, by way of show cause notices alleging that the condition laid down in Column No. 4 against Sl. No. 54 of the Table annexed to Notification No. 75/84-CE ibid was not fulfilled by M/s. Indian Oil Corporation inasmuch as the fuel (LSHS) was consumed for production of electrical energy which was not intended for sale but for their own consumption or for supply to their own undertakings. On account of non-fulfilment of the condition, the Corporation was not entitled to exemption under the Notification and, therefore, the fuel was chargeable to duty under Chapter sub-heading 2713.30 of the Central Excise Tariff. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. This order of the lower appellate authority is under challenge in Appeal No. E/6108/92-C. 4. We have carefully examined the records of the two appeals. We have also heard Senior Advocate, Shri M. Chandrasekharan for the appellant-Revenue and IOC s Power of Attorney holder, Shri R. Venkataraman for the respondent-assessee. 5. The issue before us is whether LSHS used as a fuel by the respondents in their own thermal power station for generation of electricity intended partly for consumption in their refinery and partly for supply to GEB, ONGC, SBI, Railways and such other agencies on no profit no loss basis was exempt from payment of Central Excise duty under Notification No. 75/84-C.E., dated 1-3-84 as amended during the periods of dispute. 6. The lower appellate authority has held that the respondents were entitled to exemption from payment of duty in respect of LSHS under the Notification in terms of both Sl. No. 34 and Sl. No. 54 in the Table annexed to the Notification. Learned Collector (Appeals) observed that M/s. IOC used LSHS as fuel in their refinery and that the purpose for which the fuel should be used was not relevant. He, therefore, held that no duty was liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded use/Condition 34. Low Sulphar Heavy Stock Nil Intended for use as fuel in a refinery. Explanation. - Refinery mea-ns a refinery wherein refining of crude petroleum or shale or blending of non-duty paid petroleum products is carried on. 54. Residues of petroleum oils or of obtained from bituminous minerals, including heavy petro-leum stock, low sulphur heavy stock and other residual fuel oils falling under heading No. 27.13 of the said Schedule Nil Intended for use as fuel for the generation of electrical energy by electricity under-takings owned or controlled by the Central Government or any State Electricity Board or any local authority or a person licensed under Part-II of the Indian Electricity Act, 1910 (9 of 1910) to supply electrical energy or a person who has obtained sanction under section 28 of the said Electricity Act, to engage in the business of supplying electrical energy, except those who produce electrical energy not for sale but produce it for their own consumption or for supply to their own undertakings. LSHS is admittedly an excisable product under Heading No. 27.13 of the Schedule to the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember, 1966 NOTIFICATION No. CU-98/MSC-1066/4741/K :- In exercise of the Power conferred under Section 28 of the Indian Electricity Act, 1910, Govt. of Gujarat hereby accords sanction until further order to the Indian Oil Corporation Limited, Gujarat Refinery, Baroda to meet the requirements of electrical energy on no profit no loss from the Refinery Power Station for : (i) All industrial lighting and power for the Refinery and its associated auxiliaries; (ii) Refinery Railway siding and Marshalling yard; (iii) Colonies for staff connected with the Refinery including shop keepers. By order and in the name of the Governor of Gujarat sd/- (A.S. BUKHARI) Under Secretary to the Govt. of Gujarat Industries, Mines and Power Department It was argued by learned Counsel that the above sanction order only permitted M/s. IOC to use the electrical energy generated from their Thermal Power Station for meeting the requirements of (i) all industrial lighting and power for the refinery and its associated auxiliaries, (ii) refinery railway siding and marshalling yard and (iii) colonies for staff connected with the refinery including shopkeepers. Any sale of such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Notification in terms of Sl. No. 54 thereof. 11. Learned Sr. Counsel has, therefore, prayed for setting aside the orders of the Collector (Appeals). 12. Shri R. Venkataraman, arguing the respondents case, submitted that the Company was not hit by the exclusionary clause in Column 4 ibid inasmuch as they were selling electrical energy to various agencies and were billing them, which activity, according to him, amounted to business and sale . He has reiterated the oft-repeated contention of the respondents that they were holding sanction order of the Gujarat State Government under Section 28 of the Indian Electricity Act for the purpose of supply of electrical energy and that the said order enabled the company to use the electricity from their thermal power station for meeting the energy requirements of not only the refinery but also its associated auxiliaries. According to him, all those agencies such as ONGC, GEB, SBI etc. which operated in the refinery premises stood included in the expression associated auxiliaries and therefore the supply of electricity to such agencies did not overstep the sanction order of the State Government. He further submitted that the sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents in their refinery plants and the remaining quantity was supplied to various agencies viz. GEB, ONGC, SBI, P T, Railways etc. who were operating within the refinery township. It is the respondents case that the supply of electricity to these agencies, which they claimed to have effected on a no-profit-no-loss basis, amounted to sale of, or engaging in the business of supplying, electricity and that such sale/business ipso facto qualified them for the benefit of exemption under Notification No. 75/84-CE in terms of Sl. No. 54 in the Table annexed thereto. According to them, the fact that a part of the electricity generated in their thermal power station was consumed in the refinery itself was immaterial for purposes of fulfilling the condition of Sl. No. 54 ibid and even the sale of a part of the electricity so generated was sufficient fulfilment of such condition. In other words, they were not hit by the exclusionary clause in Col. No. 4 against Sl. No. 54 ibid. On a careful examination of the Notification, we are unable to accept this plea of the respondents. 16. Admittedly, the respondents engaged themselves in the, supply of electrical energy to the aforementioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 28 of the Indian Electricity Act, 1910 to engage in the business of supplying electrical energy in terms of the said Section for the periods of dispute. We think, we need not, for this purpose, examine the meaning of business . What Section 28(1) of the Act contemplates is a sanction for engaging in the business of supplying energy to the public. The Sanction Notification dated 14-12-1966 of the State Government did not authorise the respondents to engage in the business of supplying energy to the public; the respondents could use the sanction only to meet the energy requirements of themselves and their associated auxiliaries. The expression sanction under Section 28 of the Electricity Act to engage in the business of supplying electrical energy occurring in Column 4 against Sl. No. 54 of the Central Excise Notification can only be read and understood as a sanction to engage in the business of supplying electricity to the public. To treat it as a sanction for meeting the domestic energy requirements of oneself and one s associated auxiliaries would be repugnant to the provisions of Section 28(1) ibid. A condition laid down for availment of duty exemption under a Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city. The steam and electricity so produced were then used in the manufacture of petroleum products. IOC claimed exemption under Notification Nos. 74/73 and 352/77. Department objected. Under Notification No. 74/73, intermediate petroleum products produced in the refinery, falling under Item No. 11A of the Old Central Excise Tariff, if used as fuel within the refinery for the production or manufacture of other finished petroleum products, were exempt from the whole of the duty of excise leviable thereon. Under Notification No. 352/77, petroleum products falling under Item Nos. 6 to 11A produced in the refinery and utilised as fuel within the same premises for the production or manufacture of finished petroleum products were exempted from the whole of the duty of excise leviable thereon. The dispute was whether the party was entitled to the benefit of the Notifications. Department wanted to deny the exemption on the ground that steam and electricity were themselves liable to excise duty and could not be said to be products of petroleum refinery. The Tribunal held that, since the Notifications did not specify as to how a petroleum product was to be utilised for the purpose except as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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