2024 (6) TMI 1005 - AT - Central Excise

100% EOU - Demand of duty - Allegation that the amount of furnace oil consumed in the generation of electricity as per the Input-Output Norms - non-compliance with the condition no. 7 laid of N/N. 22/2003-CE dated 31.03.2003 - HELD THAT - Admittedly, the appellant was granted permission for generation of power with an annual capacity of 6.2 MW by the Development Commissioner of CSEZ; also granted permission to transfer excess power of 3.5 MW into DTA subject to the Input-Output Norms as recommended by the Central Electricity Authority. In absence of any diversion of the furnace oil and solely on the ground of less generation of electricity from the quantity of furnace oil consumed, the demand cannot be sustained. The impugned order is set aside - appeal is allowed.

Summary

Issues:
Determining compliance with Notification No.22/2003-CE dated 31.03.2003 regarding demand of duty on furnace oil allegedly not used in electricity generation.

Detailed Analysis:

1. Facts of the Case:
- The appellant, a 100% EOU engaged in cotton yarn manufacture, faced a demand for excise duty on shortfall of electricity generation due to alleged furnace oil consumption based on Input-Output Norms.
- The demand was confirmed with interest and penalty, upheld by Commissioner(Appeals), leading to the present appeal.

2. Appellant's Contentions:
- Appellant had necessary permissions for captive power plant and DTA power transfer, complying with Input-Output norms for duty payment on DTA supply.
- Argued compliance with NFE criteria and export obligations, reversing/paying duty on DTA supply as per approved norms.
- Cited Gujarat High Court and Madras High Court judgments emphasizing input-output norms as indicators, not sole grounds for duty demands.

3. Revenue's Stand:
- Revenue supported Commissioner(Appeals)'s findings without additional arguments.

4. Court's Analysis:
- Central issue: Whether demand of duty on unutilized furnace oil breaches Notification conditions.
- Notification No.22/2003-CE Condition No.7 allows surplus power sale/transfer with duty payment based on Input-Output norms.
- Appellant had permissions for power generation and transfer, following approved Input-Output norms for duty payment.
- Discrepancy in electricity generation vs. audit calculations challenged by appellant, citing compliance with NFE and export obligations.
- Court referenced Gujarat and Madras High Court judgments on excess wastage not warranting duty demand without diversion evidence.
- Absence of diversion and mere shortfall in electricity generation from furnace oil usage deemed insufficient for duty demand.
- Order set aside demand, allowing appeal with any consequential relief as per law.

5. Conclusion:
- The Tribunal overturned the demand for duty on unutilized furnace oil, emphasizing compliance with Notification conditions and approved norms.
- Citing precedents, the Court ruled that mere deviation from input-output norms without diversion evidence does not justify duty imposition, leading to the appeal's success.