2000 (9) TMI 694 - AT - Central Excise

Electricity generation - Low sulphur heavy stock (LSHS) - Exemption - Interpretation of statute

Summary

Issues Involved:

1. Entitlement to exemption from Central Excise duty under Notification No. 75/84-C.E.
2. Fulfillment of conditions laid down in Column No. 4 against Sl. No. 54 of the Notification.
3. Validity of the sanction under Section 28 of the Indian Electricity Act, 1910.

Issue-wise Detailed Analysis:

1. Entitlement to exemption from Central Excise duty under Notification No. 75/84-C.E.:

The respondents, engaged in manufacturing petroleum products, used Reduced Crude Oil (RCO) or Low Sulphur Heavy Stock (LSHS) as fuel in their thermal power station. They claimed exemption from Central Excise duty under Notification No. 75/84-C.E. The Department challenged this, arguing that the conditions for exemption were not met, particularly that the fuel was used for generating electricity not intended for sale but for their own consumption or supply to their own undertakings.

2. Fulfillment of conditions laid down in Column No. 4 against Sl. No. 54 of the Notification:

The Notification provided exemption for LSHS used as fuel for generating electricity by entities licensed under the Indian Electricity Act, 1910, except those producing electricity for their own consumption or supply to their own undertakings. The respondents argued that they sold electricity to various agencies on a no-profit-no-loss basis, which should qualify as a business activity. However, the Tribunal found that the respondents did not engage in the business of supplying electricity to the public but rather supplied it to agencies within their refinery premises, which did not fulfill the conditions for exemption.

3. Validity of the sanction under Section 28 of the Indian Electricity Act, 1910:

The respondents held a sanction from the Gujarat State Government under Section 28 of the Indian Electricity Act, 1910, to meet the energy requirements of their refinery and related facilities. The Tribunal noted that this sanction did not authorize them to engage in the business of supplying electricity to the public. The supply of electricity to agencies within the refinery premises was considered domestic and auxiliary, not a commercial activity. Therefore, the respondents did not qualify for the exemption under Sl. No. 54 of the Notification.

Conclusion:

The Tribunal concluded that the respondents did not meet the conditions for exemption under Notification No. 75/84-C.E. as they did not engage in the business of supplying electricity to the public. The orders of the lower appellate authority granting the exemption were set aside, and the Revenue's appeals were allowed. The Tribunal clarified that the Assistant Collector's finding that the respondents had to use the electricity for their own consumption or supply to their own undertakings to be eligible for exemption was incorrect. The correct interpretation was that the electricity had to be sold to be eligible for the exemption.