TMI Blog2008 (8) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... n of electricity. The electricity so generated was supplied to the Tamilnadu Electricity Board (TNEB). The manufacturers/suppliers of LSHS had not paid duty of excise on the goods, availing the benefit of Notification No. 6/2002-CE dated 1.3.2002 (Sl. No. 29), which provided 'nil' rate of duty for LSHS, Residual Fuel Oil etc. of Chapter 27 of the CETA Schedule, cleared for use as fuel for the generation of electrical energy by electricity undertakings owned or controlled by the Central Govt. or any State Govt. or any State Electricity Board or any local authority or a person licensed under Part - II of the Indian Electricity Act, 1910 to supply electrical energy or a person who had obtained sanction under Section 28 of the said Act to engage in the business of supplying electrical energy, except those who produced electrical energy not for sale but for their own consumption or for supply to their own undertakings. The duty-free procurement of LSHS by the appellants was on the strength of Annexure - I Certificates issued under the 2001 Rules by the jurisdictional Assistant Commissioner of Central Excise. These certificates were produced to satisfy the procedural conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bond and on furnishing a bank guarantee. The department has to follow the procedure under Section 35E for setting aside the Annexure-I certificate. Unless, the Annexure-I certificate is cancelled or rejected by the competent authority, by following the procedure under Section 35E, it is not permissible for the respondents to invoke Section 11A of the Act. Therefore, we are of the considered opinion that the issuance of show-cause notices are without jurisdiction and is liable to be struck down. The learned Counsel submitted that the above ruling of the Hon'ble High Court, rendered on a similar set of facts, was binding on this Bench of the Tribunal. In this connection reference was also made to East India Commercial Co. Ltd. v. Collector MANU/SC/0179/1962 wherein it was ruled that the law declared by a High Court was binding on all subordinate courts and tribunals. It was further pointed out that the benefit claimed by the appellants under Notification No. 6/2002-CE in the instant case was similar to the one claimed by M/s. Madurai Power Corporation Pvt. Ltd. under Notification No. 3/2001-CE. In both the cases, the benefit was availed on the strength of Annexure - I certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for this benefit, is not without jurisdiction. 5. It is not in dispute that permission was granted by TNEB to the appellants under Section 44 of the Electricity (Supply) Act, 1948 for establishing 250MW lignite-based thermal power plant. The electrical energy generated from the power plant was entirely sold to TNEB under a Power Purchase Agreement. It is the case of the appellants that their power plant was required to be run as per the control and direction of TNEB and hence they should be treated as an 'electricity undertaking controlled by TNEB', eligible for the benefit of Notification 6/2002-CE in terms of Sl. No. 29 of the Table annexed thereto. In support of this contention of the appellants, the learned Counsel referred to a letter dated 2.5.2002 of the Superintending Engineer of TNEB addressed to the Superintendent of Central Excise, wherein it was stated that, as per the terms of the Power Purchase Agreement, ST-CMS Electric Company was coming under the effective control of TNEB . The expression controlled used in the Notification should derive its meaning from the context in which it is used. It is seen as a part of the phrase, owned or controlled . Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption Notification had to be strictly construed. In this context, we have to examine the relevant entry in Notification No. 6/2002-CE, which reads as follows: S. No. Chapter or heading No. or subheading No. Description of goods Rate under the First Schedule Rate under the Second Schedule Condition No. (1) (2) (3) (4) (5) (6) 29 27 Residues of petroleum oils or of oils obtained from bituminous minerals, including heavy petroleum stock, low sulphur heavy stock and other residual fuel oils falling under heading No. 27.13 of the First Schedule, intended for use as fuel for the generation of electrical energy by electricity undertakings owned by or controlled by the Central Government or any State Government or any State Electricity Board or any local authority or a person licenced 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 Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim under Sl. No. 29 of Notification No. 6/2002-CE was not a mere procedural requirement but a substantial condition, failing which the benefit of the Notification could not be claimed. She argued that the above maxim was not applicable to a mandatory condition in any exemption Notification. The SDR also pointed out that it was open to the appellants to obtain a licence under Section 3 of the 1910 Act to supply electrical energy to TNEB inasmuch as that provision of law did not insist that a person holding the licence should supply electrical energy to the public. We have found substance in these arguments of the learned SDR. Section 3 of the 1910 Act provides for grant of licence to any person to supply energy in a specified area. The State Govt. may, on application made in the prescribed form and on payment of the prescribed fee, grant such licence to the applicant after consulting the State Electricity Board. Nowhere under this Section is there any prescription that the licensee should supply energy to the public. On the other hand, Section 28 of the Act provides that no person other than a licensee shall engage in the business of supplying energy to the public except with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Govt. under Section 3 of the 1910 Act to supply electrical energy on account of any hurdle caused by the Department. Moreover, the requirement of having to take out such a licence for the purpose of claiming the benefit under Sl. No. 29 of Notification No. 6/2002-CE was a mandatory requirement to be strictly complied with and not a mere procedural requirement to be dispensed with. We hold that a person (not being electrical undertaking) claiming the benefit of exemption from payment of duty on LSHS intended for use as fuel for the generation of electrical energy should, as a pre-requisite, establish that he has been licensed under Section 3 of the 1910 Act to supply electrical energy or that he has obtained sanction under Section 28 of the said Act for engaging in the business of supplying electrical energy. He should, of course, establish also that he produces electrical energy for sale and not for captive consumption. These are mandatory requirements which cannot be dispensed with. The maxim lex non cogit ad impossibilia is not available to such a person as justification for non-fulfilment of mandatory requirements which are capable of being fulfilled. The case law cited by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond Schedule Condition No. (1) (2) (3) (4) (5) (6) 29 27 Residues of petroleum oils or of oils obtained from bituminous minerals, including heavy petroleum stock, low sulphur heavy stock and other residual fuel oils falling under heading No. 27.13 of the First Schedule, intended for use as fuel for the generation of electrical energy by electricity under takings owned by or controlled by the Central Government or any State Government or any State Electricity Board or any local authority or a generating company or a person licenced under Part II of the Indian Electricity Act, 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 undertakings. Nil 4 and 5 Explanation. - For the purposes of this exemption, generating company mens rea generating compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts fell within the ambit of generating company as defined under the amended provisions of Section 2(4A) of the 1948 Act. But it was only w.e.f. 1.3.2003 that generating company could claim the benefit of Sl. No. 29 ibid. 9. Yet another contention raised by the learned Counsel was that duty if at all leviable on the LSHS in question could only be levied from the supplier. It was submitted that Section 11A of the Central Excise Act was not invocable for recovery of duty from the buyer of the excisable goods. The learned SDR countered by submitting that the appellants had executed bonds from time to time undertaking to pay duty on LSHS procured under Annexure - I certificates, in the event of failure to comply with the conditions of Notification No. 6/2002-CE. The show-cause notice was issued on this basis. The SDR also referred to the relevant records, which included copies of applications submitted by M/s. ST-CMS to the jurisdictional Assistant Commissioner of Central Excise under Rule 3 of the 2001 Rules from time to time. These applications contained their undertaking for payment of duty. The text of their undertaking contained in one such application is reproduced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain cases. - Where the subject goods are not used by the manufacturer for the intended purpose, the manufacturer shall be liable to pay the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of removal from the factory of the manufacturer of the subject goods, along with interest and the provisions of Section 11A and Section 11AB of the Central Excise Act, 1944 (1 of 1944) shall apply mutatis mutandis for effecting such recoveries. Under Rule 3, the appellants had undertaken (a) to use LSHS for generation of electricity and follow any other condition which the Notification imposed on them and (b) to pay on demand [in the event of failure to comply with (a)] an amount equal to the difference between the duty leviable on the goods (LSHS) but for the exemption under the Notification and the duty paid (if any) at the time of removal. The show-cause notice in question was issued under Rule 6 to demand duty in terms of (b) above on a ground relating to (a) above, i.e., on the ground that the party did not satisfy the mandatory condition of having to be (i) an electricity undertaking owned or cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or procurement without payment of duty during the period of dispute by virtue of exemption provided in the relevant Notifications. Accordingly, the first issue is held in favour of the assessee. 11. For the reasons already recorded, it is held that the benefit of exemption under Sl. No. 29 in the Table annexed to Notification No. 6/2002 dated 1.3.2002 was not admissible to M/s. ST-CMS who were not eligible for the benefit during the period of dispute. M/s. ST-CMS were not an electricity undertaking owned or controlled by TNEB, nor a person who had obtained licence under Section 3 or sanction under Section 28 of the 1910 Act for supply of electrical energy to TNEB. Hence they were not eligible for the benefit during the said period. Compliance with procedural conditions did not render them eligible, nor can they claim eligibility for the period of dispute on the strength of anything contained in the 1948 Act. However, with the dropping of the proposal for revocation of registration and cancellation of Annexure - I Certificate, they have been in a position to claim the benefit of the Notification from 1.3.2003 as a generating company . 12. In the result, the order of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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