2007 (12) TMI 69 - AT - Central Excise

Fuel used captively by availing the benefit of Not.67/95, for manufacture of electricity, a part of which was used for dutiable and also exempted goods - as per notification exemption not available to fuel which is used in mfg. of exempted final product - we find that the duty liable to be paid on the fuel was available as a credit - situation was revenue neutral, so demand is not justified - issue being of bona fide dispute, no mala fide recorded so penalty is not justified

Summary

Issues:
Confirmation of duties and penalties under Notification No. 67/95-C.E. for fuel used in captive power plant for manufacturing electricity and exempted goods.

Analysis:
The case involved four appeals, two by the appellant and two by the Revenue, with the same issue. Duties of a significant amount were confirmed against the appellant, along with penalties, for using fuel in their captive power plant under Notification No. 67/95-C.E. The dispute arose because a part of the fuel was used for manufacturing exempted final products, leading to the denial of exemption under the said notification.

The appellants were manufacturing Gas Turbine Fuel (GTF) for their captive power plant. The generated electricity was used for both dutiable and exempted goods, as well as for non-excisable activities. The dispute centered around the denial of exemption for the portion of fuel used in manufacturing electricity for exempted final products and non-excisable activities. The Revenue challenged the computation of demands, leading to the quantification issue.

During the proceedings, arguments were presented by both parties. The Revenue contended that duty was payable on the fuel used for electricity, which further contributed to manufacturing exempted products. However, the appellant argued that the situation was revenue neutral as they were entitled to credit after paying duty. The Tribunal referenced a previous decision to support the appellant's claim that the duty paid on fuel was eligible for credit, making the situation revenue neutral.

The Tribunal referred to past cases to highlight the purpose of captive consumption notifications, emphasizing that the demands in this case did not result in any revenue benefit. It was noted that a portion of the electricity generated was used for non-manufacturing activities, which would not entitle the appellant to duty credit. The Tribunal directed the Commissioner to quantify the duty on the fuel used for non-manufacturing activities.

Regarding penalties, the Tribunal found the issue to be a bona fide dispute, absolving the appellant of any penal action. The appeal on the main issue was allowed, except for the part related to fuel used for non-manufacturing activities. The Tribunal rejected the Revenue's appeals on the quantum of confirmed duty.

Given the decision on the main issue, the Tribunal did not address the appellant's plea regarding the demand's limitation period. Ultimately, all appeals were disposed of accordingly.