2011 (4) TMI 437 - AT - Central Excise

Demand , interest and penalty - inputs were obtained without payment of Central Excise Duty/CVD under Notification No.03/2001 dated 1.3.2001 and 06/2002 dated 1.3.2002 - a portion of the electricity was consumed partly in the plant itself and partly in the mine and was not sold and, therefore, the LSHS used for the generation of such portion of electricity will not be held to be intended for use as fuel for the generation of electrical energy for sale. M/s. NLC are liable to pay duty on this quantity of LSHS procured by them during August, 1998 to October, 2002 and August, 2003 to January, 2004.

Summary

Issues:
1. Eligibility for exemption under Central Excise Duty/CVD Notifications for inputs used in generating electricity for internal consumption.
2. Interpretation of the term "intended for use" in the Notifications.
3. Applicability of duty demand for inputs used in auxiliary units.
4. Invocation of larger period of limitation for demanding duty.

Eligibility for Exemption:
The case involved M/s. Tata Power Company Ltd. (TPCL) procuring inputs for generating electricity without paying Central Excise Duty/CVD under specific Notifications. The dispute arose regarding TPCL's eligibility for exemption for the portion of inputs used for internal consumption. The Tribunal referred to a previous decision involving Nayveli Lignite Corporation Ltd. (NLC) to analyze the issue. The Tribunal held that the exemption was not applicable to inputs used for generating electricity for internal consumption, supporting its decision with legal interpretations and precedents. Consequently, the duty demand was confirmed against TPCL.

Interpretation of "Intended for Use":
The Tribunal delved into the interpretation of the term "intended for use" in the Notifications to determine the applicability of the exemption. By analyzing the language of the relevant entry in the Notifications and comparing it with the facts of the case, the Tribunal concluded that the exemption did not cover inputs used for generating electricity not meant for sale but for internal consumption. The Tribunal cited a High Court judgment to support its interpretation, emphasizing that inputs used for electricity consumed internally were not eligible for the exemption.

Applicability of Duty Demand for Auxiliary Units:
The duty demand in this case pertained to inputs consumed in auxiliary units for generating electricity. The Tribunal aligned its decision with the NLC case, ruling that the duty demand was valid for inputs used in auxiliary units. However, the Tribunal rejected the demand for the extended period beyond the normal limitation period, citing the interpretation of Notifications and lack of willful misdeclaration by TPCL. The Tribunal held that the demand for the extended period was not sustainable, ultimately allowing the appeal on this ground.

Invocation of Larger Period of Limitation:
Regarding the invocation of a larger period of limitation for demanding duty, the Tribunal found that TPCL had not willfully misdeclared details related to input consumption. The Tribunal emphasized the different interpretations of the term "intended for use" and noted that NLC's exemption supported TPCL's case. Consequently, the Tribunal rejected the demand for the extended period, deeming the whole demand time-barred and allowed the appeal on this basis.