1990 (10) TMI 184 - AT - Central Excise

Summary

Issues:
Benefit of transformation loss on generation in auxiliary plants and transmission loss incidental to the sale to agricultural consumers.

Analysis:

Issue 1: Transformation Loss of 2% on Generation in Auxiliary Plants
The appellants claimed exemption on 2% of generation as transformation loss. The contention was that electricity generation and consumption are simultaneous, and duty should be imposed at the point of consumption, not generation. The appellants argued that step-up transformers in generating plants are integral and should be considered part of the generating plant, allowing for the exemption of 2% loss. However, the tribunal held that duty on electricity is leviable on the quantity generated, not at the point of consumption. The losses within generating stations cannot be condoned unless proven to be lost by natural causes. The tribunal also noted that a concession of up to 10% for transformation losses was already granted under Notification No. 105/78, making additional concessions impermissible. Therefore, the tribunal rejected the claim for transformation loss benefit.

Issue 2: Transmission Loss Incidental to Sale to Agricultural Consumers
The appellants sought exemption on transmission losses of 65% incidental to the sale to agricultural consumers. The tribunal clarified that concessions under Notification No. 106/78 for agricultural purposes are permissible only if electricity is supplied for agricultural use. The tribunal emphasized that the quantity of electricity supplied for agricultural purposes should be measured at the point of generation, not reduced by assumed losses. Allowing the claimed 65% losses in transformation would result in granting exemptions beyond the intended scope of the Notification. The tribunal found no justification for reducing the measured quantity of electricity supplied for agricultural purposes. Consequently, the tribunal rejected the claim for transmission loss benefit.

In conclusion, the tribunal dismissed the appeal and cross-objections, upholding the denial of benefits for transformation loss on generation in auxiliary plants and transmission loss incidental to the sale to agricultural consumers. The tribunal emphasized that duty on electricity is leviable based on the quantity generated and measured at the point of generation, not at the point of consumption or after transformation. The tribunal's decision was based on the specific provisions of relevant notifications and the nature of electricity as a taxable good.