2016 (4) TMI 443 - AT - Central Excise

Duty liability - Denial of exemption Notification No.67/95-CE dated 16.03.1995 - Manufacture of Sponge Iron - Char/dolochar produced in the process are captively consumed for generation of electricity but most of the electricity so produced are not used in appellant s factory - Held that - the electricity generated in the respondent unit is not solely using char/dolochar. Out of three boilers, 2 are working on heat recovery of waste gases coming out of the sponge iron kiln for production of steam, the third one is a combustion type in which solid fuels like coal, coal fires, char/dolochar are used to produce steam. So there is no substance in the demand made by the department to deny the above mentioned exemption. The respondent claims that char/dolochar constitutes only 14-18% of the inputs used for generating electricity. 25% of total electricity is used for manufacture of sponge iron. There is no comment or contest on these assertion by the Revenue in the appeal. The Original Authority and Appellate Authority are right in holding against the demand of duty. - Decided against the revenue

Summary

Issues:
1. Eligibility for exemption under notification no.67/95-CE for char/dolochar used in the generation of electricity.
2. Classification of char/dolochar under heading 2621.00.
3. Interpretation of the decision of the Hon'ble Supreme Court in Ahmedabad Electricity Co. Ltd.
4. Captive consumption of char/dolochar in the manufacture of sponge iron.
5. Duty liability on char/dolochar.

Analysis:

1. The case revolves around the eligibility of the respondents for exemption under notification no.67/95-CE for char/dolochar used in electricity generation. The Revenue challenged the order of the Commissioner (Appeals) upholding the exemption. The Revenue argued that since most of the electricity generated was not used in the factory, the exemption should be denied.

2. The Department contended that char/dolochar falls under heading 2621.00 and is not eligible for the exemption. It was emphasized that the char/dolochar is a product emerging from raw materials used in the manufacture of sponge iron, making it an excisable commodity.

3. The interpretation of the Hon'ble Supreme Court's decision in Ahmedabad Electricity Co. Ltd. was crucial. The Department claimed that the Commissioner (Appeals) erred in relying on this decision, stating that the facts of the present case differed as coal was used as a raw material, not as a fuel.

4. The issue of captive consumption of char/dolochar in the generation of electricity was examined. It was noted that most of the electricity generated in the respondent's unit was not solely produced using char/dolochar. The respondent argued that only a percentage of char/dolochar was used for electricity generation, with a significant portion used for sponge iron production.

5. The Tribunal's previous decision in the respondent's case held that char/dolochar is not liable to excise duty, aligning with the Supreme Court's decision in Ahmedabad Electricity Company Ltd. This further supported the respondent's position in the current appeal.

In conclusion, the Appellate Tribunal CESTAT NEW DELHI dismissed the Revenue's appeal, affirming the exemption for char/dolochar used in electricity generation based on the captive consumption and the proportion of inputs utilized. The decision also highlighted the consistency with previous rulings and the application of relevant legal precedents.