2006 (2) TMI 567 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 67/95-C.E regarding duty exemption for fuels used in electricity generation.
2. Application of penalty and invocation of extended period of limitation.

Analysis:
1. The appeal involved the interpretation of Notification No. 67/95-C.E regarding the duty exemption for fuels used in electricity generation. The appellants, engaged in manufacturing petroleum products, were using captively manufactured fuels for generating electricity consumed in their manufacturing unit. A show cause notice was issued for denying the benefit of the notification as part of the electricity was supplied to the residential colony. The Tribunal referred to a previous case, Indian Oil Corporation v. CCE, where it was held that the exemption does not apply to fuels used in electricity generation if disposed of outside the manufacturing process. Therefore, the benefit of the notification was denied in the present case due to the electricity being supplied to the residential colony.

2. Regarding the imposition of penalty, the appellant argued that duty was paid before the show cause notice and contended that the extended period of limitation should not apply as there was no intention to evade duty. However, it was found that the appellant did not disclose that part of the electricity generated was supplied to the residential colony. The Tribunal upheld the invocation of the extended period of limitation by the adjudicating authority. Citing the case of Bharat Heavy Electricals Ltd. v. Union of India, the Tribunal noted that the adjudicating authority has discretion to impose a lesser penalty when the maximum penalty is prescribed. Considering the circumstances, the penalty was reduced to fifteen lacs, while the rest of the impugned order was upheld.

In conclusion, the Tribunal clarified the interpretation of the duty exemption notification and upheld the decision to deny the benefit in the present case. Additionally, the Tribunal justified the imposition of penalty and reduced it based on the circumstances and legal precedent.