2017 (9) TMI 295 - AT - Central Excise

Benefit of N/N. 6/2002-CE dated 1.3.2002 - availing of Low Sulphur Heavy Stock (LSHS) falling under Heading 27.13 of CETA without payment of duty availing the exemption - denial of exemption on the ground that the appellant being a private limited company are not controlled or owned by the TNEB is not eligible for the benefit of exemption, and also on the ground that as lignite is primary fuel for generation of electricity and LSHS was not used as a fuel for generation of electricity, they are not eligible for the exemption - Held that - The Tribunal has followed the judgment in the case of Neyveli Lignite Corporation 2006 (9) TMI 443 - CESTAT, CHENNAI , in which the said issue has been discussed in detail - In the present case, without such LSHS, the appellant cannot commission or start up the ignition of the furnace. That therefore it is an essential fuel for generation of electricity for the appellant. Therefore, denial of benefit of notification is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Interpretation of exemption notification for Low Sulphur Heavy Stock (LSHS) under Central Excise rules for power generating companies using lignite-based power plants.

Analysis:
The case involved a power generating company registered with the Central Excise Department seeking exemption for LSHS under a specific notification. The dispute arose when the department contended that the company, being privately owned, did not qualify for the exemption as it was not controlled or owned by specified entities. Additionally, the department argued that since lignite was the primary fuel for electricity generation and LSHS was used for auxiliary purposes, the company was not eligible for the exemption. A show cause notice was issued, leading to the imposition of duty, interest, and penalties by the original authority.

Interpretation of Notification:
The appellant's counsel argued that LSHS was indeed intended for use as fuel for the generation of electricity, as it was crucial for igniting the furnace, even though coal was the primary input for electricity generation. Reference was made to a previous Tribunal decision and an amendment to the notification post which the appellant would qualify for the exemption. The counsel highlighted that the Tribunal had previously ruled in favor of companies using LSHS as a secondary fuel for electricity generation.

Arguments and Counterarguments:
The appellant's position was that LSHS was essential for starting up the furnace and, therefore, should be considered fuel for electricity generation. On the other hand, the department argued that the use of LSHS for unloading, testing, and start-up did not constitute its use as fuel for electricity generation.

Tribunal Decision:
The Tribunal referred to a previous case involving Neyveli Lignite Corporation, where it was established that LSHS used as a secondary fuel for flame stabilization in thermal power stations was considered fuel for electricity generation. The Tribunal concluded that the denial of the exemption to the appellant was unjustified, as LSHS was essential for the appellant's electricity generation process. Consequently, the impugned order was set aside, and the appeal was allowed.

Conclusion:
The Tribunal's decision was based on the interpretation of the exemption notification and the essential role of LSHS in the appellant's electricity generation process. By considering LSHS as a secondary fuel for electricity generation, the Tribunal ruled in favor of the appellant, overturning the original authority's decision to deny the exemption.