1988 (7) TMI 232 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Central Excise duty on electricity generated and consumed within the plant.
2. Competence of the Collector to demand duty under Rule 9(2) and Section 11-A of the Central Excises and Salt Act, 1944.
3. Timeframe for the enforceability of duty demands, particularly whether it should be retrospective or from the date of the show cause notice.

Detailed Analysis:

1. Applicability of Central Excise Duty on Electricity Generated and Consumed Within the Plant:
The appellants argued that the electricity generated by them was consumed within their plant and thus should be exempt from Central Excise duty under Notification No. 52/78-CE dated 1.3.1978. The Collector of Central Excise, Patna, rejected this contention, stating that the electricity generated by the appellants got mixed with the electricity purchased from D.V.C. in a common grid. Consequently, the benefit of exemption could not be granted on the basis of presumption. The Collector followed the Patna High Court's judgment in the case of M/s. TISCO, which held that duty should be paid on the electricity supplied for non-industrial uses in proportion to the electricity generated and purchased. The Tribunal upheld the Collector's decision, emphasizing that the exemption could not be based on presumption and that duty should be charged proportionately.

2. Competence of the Collector to Demand Duty Under Rule 9(2) and Section 11-A of the Central Excises and Salt Act, 1944:
The appellants contended that the Collector was not competent to demand duty under Rule 9(2) as there was no clandestine removal of electricity and that the correct provision for raising the demand was Section 11-A. The Tribunal agreed that there was no clandestine removal but stated that duty was indeed demandable under Section 11-A. It was held that citing a wrong rule does not vitiate the demand if all other conditions are met. The Tribunal also noted that a superior officer, such as the Collector, could exercise the powers of a subordinate officer, such as the Assistant Collector, under Rule 6(1) of the Central Excise Rules, 1944.

3. Timeframe for the Enforceability of Duty Demands:
The appellants argued that the duty, if payable, should be enforced from the date of the show cause notice, i.e., 2.1.1982, citing various decisions that supported prospective enforcement of duty demands. The Tribunal, however, distinguished these cases from the present one, noting that there was no long-standing practice of assessment in the current case. The Tribunal followed the judgment of the Karnataka High Court, which allowed for the re-opening and re-assessment of classification lists under Section 11-A, enabling the demand for duty for a period of six months prior to the issuance of the show cause notice. The Tribunal emphasized that Section 11-A is an independent provision for the recovery of excise duty and should not be interpreted in a manner that would defeat its purpose.

Conclusion:
The Tribunal upheld the Collector's decision on the merits of the case, agreeing that the modality adopted for charging duty was reasonable and justified. The demand for duty for a period of six months prior to the show cause notice was deemed legal and valid. The appeal was dismissed, with the Tribunal concurring that the Collector had the authority to demand duty under Section 11-A and that the timeframe for enforceability could extend to six months prior to the notice.