Captive-consumption exemption denied for escaped gas; complete waiver refused, with only partial stay granted pending appeal.

In a stay proceeding, gas lost during flushing and cleaning of pipelines was held not to be prima facie eligible for captive-consumption exemption under Notification No. 67/95-C.E. because it escaped into the atmosphere and was not used in the manufacture of any final product. The Tribunal found the cited precedent distinguishable on its facts and treated the Board circular as inapplicable. As no financial hardship was pleaded, complete waiver of pre-deposit was declined. The applicants were directed to deposit Rs. 1 lakh, and only the balance duty and penalty were waived and stayed pending the appeals.

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Issues: Whether, in a stay proceeding, the assessee was entitled to complete waiver of pre-deposit and stay of recovery on the claim that gas allowed to escape during flushing and cleaning of pipelines amounted to captive consumption eligible for exemption under Notification No. 67/95-C.E.

Analysis: Notification No. 67/95-C.E. grants exemption to goods used captively in the manufacture of other final products. On the facts, the gas escaped into the atmosphere and was not further used in the manufacture of any other item. The claim that such escape constituted captive consumption was not found prima facie acceptable. The reliance placed on the cited Tribunal decision was held to arise from different facts, and the Board's circular was also considered inapplicable to the present situation. No financial hardship was pleaded by the applicants.

Conclusion: Complete waiver was declined. The applicants were directed to deposit Rs. 1 lakh, and only the balance duty and penalty were waived and stayed during the pendency of the appeals.

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