2017 (6) TMI 999 - AT - Central Excise

Captive consumption - naptha - generation of electricity - Exemption under N/N. 67/95-CE dt. 16.3.1995 - Held that - when the captively consumed Naphtha itself is non-excisable, there is no need to pay Excise Duty by denying the benefit of N/N. 67/95 - there is no justification for imposition of penalty on the appellant - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Interpretation of Notification No.67/95-CE for captive consumption of Naphtha in electricity generation and duty implications.

Analysis:
The case involved a dispute regarding the Central Excise duty demand on a petroleum refinery for denying the benefit of captive consumption Notification No.67/95-CE for the portion of Naphtha and Refinery Fuel Oil (RFO) used in electricity generation. The appellant argued that the captively consumed Naphtha was non-commercial and not excisable, thus exempt from duty. The respondent contended that the benefit of captive consumption exemption was not available for inputs consumed in generating electricity wheeled out. The appellate tribunal considered the eligibility of the exemption under the notification for Naphtha used in electricity generation and wheeled out to T.N.E.B. The tribunal noted that when electricity generated by a captive power plant is wheeled out, the exemption and input credit are not applicable. The appellant's argument of Naphtha non-marketability was rejected based on the original authority's detailed reasoning, which highlighted the commercial nature and marketability of the product.

The tribunal upheld the duty demand on the portion of Naphtha used for generating electricity wheeled out, along with interest payment. However, the imposition of penalty was deemed unjustified given the circumstances. Thus, the penalty was set aside, and the appeal was partly allowed. The judgment emphasized the marketability of captively consumed Naphtha and the ineligibility for exemption when electricity is wheeled out, providing a comprehensive analysis of the legal and factual aspects involved in the case.