2010 (5) TMI 309 - AT - Central Excise

Power Generation Plant - the respondents are seeking concessional rate @ 5% applicable to power generation projects whereas revenue contended that they have imported a captive power plant which is chargeable to duty @ 20%. Held that - power project put up for generating and supplying power to entity having total control over functioning of respondent assessee. Order allowing 5% duty benefit not sustainable.

Summary

Issues:
Interpretation of applicability of duty rates for a captive power plant, distinction between power generation projects and captive power plants, impact of registration under Project Import Regulations on assessment.

Analysis:
The case involved a dispute regarding the duty rate applicable to a power plant set up by the respondent, which was claimed to be a captive power plant. The Department argued that the plant should be charged duty at 20% instead of the concessional rate of 5% applicable to power generation projects. The Department contended that the power plant was considered captive due to the ownership structure and relationship with another entity, which consumed the generated electricity. Citing legal precedents, including a Supreme Court decision and a Tribunal ruling, the Department emphasized the criteria for determining a captive power plant and the obligation to apply the correct duty rate during final assessment.

The respondent, on the other hand, maintained that they were registered under Project Import Regulations as a power generation project and should not be subjected to a higher duty rate at the final assessment stage. They argued that the entities involved were separate legal entities, and the power plant should not be classified as captive based on the ownership structure. The respondent also referred to a customs notification to support their position that the power plant did not qualify as a captive power plant under the relevant regulations.

The Tribunal, after considering the arguments from both sides and the legal precedents cited, analyzed the distinction between a power generation project and a captive power plant. Referring to the Supreme Court's decision, the Tribunal highlighted the criteria for identifying a captive power plant, emphasizing that such plants are intended for dedicated consumption rather than general supply. The Tribunal noted that the respondent's power plant was specifically established to cater to a single entity, which held a significant share in the respondent-company and controlled its operations. Based on the ownership structure and consumption patterns, the Tribunal concluded that the power plant met the criteria to be classified as a captive power plant.

Regarding the impact of registration under Project Import Regulations, the Tribunal clarified that registration did not prevent the Department from determining the correct duty rate during final assessment. The Tribunal emphasized that provisional assessment required the application of the appropriate duty rate before any appeal could be made. Considering the specific circumstances of the case and the control exerted by the consuming entity over the respondent-company, the Tribunal set aside the lower appellate authority's decision to allow the 5% duty benefit and reinstated the original authority's order charging duty at 20%. The Department's appeal was allowed, and the Tribunal pronounced its decision on 5th May 2010.