2007 (8) TMI 191 - AT - Central Excise

Captive consumption of Naptha in power plant by taking benefit of Not. 67/95 Electricity(only 1%) gets automatically loaded to the grid of APSED as a technological necessity Uploading happens automatically means without intervention of appellant Hence Sec. 3 of CEA not attracted to levy duty

Summary

Issues:
1. Duty on the removal of electricity outside the factory premises to a power transmission company.
2. Applicability of Notification No. 67/95-CE.
3. Intention of sale of electricity and liability for duty.
4. Technological necessity for uploading electricity to the grid.
5. Time bar on demands raised by the department.

Analysis:
Issue 1: The appellant, a PSU unit, faced demands of duty on the removal of electricity outside the factory premises to a power transmission company. The demands were confirmed based on show cause notices issued by the department. The Commissioner upheld the demands citing violation of a Notification. The appellant challenged this order, arguing that the duty was not recoverable due to minimal electricity outflow and other reasons.

Issue 2: The appellant contended that they were utilizing Naphtha as fuel in their cogeneration power plant and Hydrogen unit, availing benefits under Notification No. 67/95-CE. They argued that the electricity uploaded to the grid was a technological necessity and not intended for sale, thus not attracting duty liability. They also highlighted their submissions regarding the utilization of power within their refinery operations.

Issue 3: The appellant emphasized that the electricity uploaded to the grid was a small portion of the total generated, automatically done based on load conditions, without any intention of sale. They argued that no valuable consideration was received for the electricity, hence no duty liability arose. The Tribunal agreed, considering the technological necessity and lack of intentional sale, thereby accepting the appellant's contentions.

Issue 4: The Tribunal analyzed the process of electricity generation and utilization by the appellant, noting that the vast majority of electricity generated was consumed internally for refinery operations. The small portion automatically uploaded to the grid was deemed a technological necessity due to load variations. This explanation supported the appellant's position that there was no intentional removal of electricity for sale, thereby negating duty liability.

Issue 5: The Tribunal found the demands raised by the department to be time-barred, citing earlier communications and orders regarding the electricity flow to the grid. They referenced relevant judgments on captive consumption and technological necessity, supporting the appellant's case. Ultimately, the Tribunal allowed the appeal, accepting the appellant's arguments on both merits and time bar, thereby relieving them of duty liability.