Integrated industrial use can support electricity exemption, while finalised assessments bar reopened duty demands without suppression.

Electricity consumed in a settling tank pump house can qualify as use within an industrial unit for exemption under Notification No. 52/78 where the pump house is an essential and integral part of the unit, even if some water is later diverted for township or allied supplies. Finalised RT-12 assessments also limited reopening of the matter: in the absence of suppression or misstatement, a duty demand under Rule 9(2) could not be sustained, and the related penalty likewise failed. The commentary states that the exemption applied and the demand and penalty were not maintainable on these facts.

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Issues: (i) whether electricity consumed in the settling tank pump house qualified as use within the industrial unit so as to attract the exemption under Notification No. 52/78; and (ii) whether the duty demand and penalty were sustainable in view of finalised RT-12 assessments and the absence of suppression or misstatement.

Issue (i): Whether electricity consumed in the settling tank pump house qualified as use within the industrial unit so as to attract the exemption under Notification No. 52/78.

Analysis: The exemption applied to electricity produced internally by an industrial unit and used for such industrial unit, subject to satisfaction about actual use. The settling tank pump house was treated as an essential and integral part of the industrial unit because the unit could not operate without it. The fact that some water from the tank was diverted for township and allied supplies did not change the character of the electricity consumption in the pump house as consumption within the industrial unit.

Conclusion: The exemption was admissible and the finding denying it was unsustainable, in favour of the assessee.

Issue (ii): Whether the duty demand and penalty were sustainable in view of finalised RT-12 assessments and the absence of suppression or misstatement.

Analysis: After RT-12 returns had been finalised over a long period, the Department could not reopen the matter for a duty demand under Rule 9(2). The role of the settling tank pump house was not something unknown to the Department, so the allegation of misstatement was not accepted. On these facts, the demand was also held to be time-barred, and the penalty could not stand.

Conclusion: The duty demand and penalty were not sustainable, in favour of the assessee.

Final Conclusion: The appeal succeeded in full and the excise demand and penalty were set aside.

Ratio Decidendi: For an exemption tied to use of electricity within an industrial unit, an essential and integral facility within the unit remains part of the industrial unit even if it serves some ancillary external supply, and a demand based on reopening finalised assessments cannot survive absent suppression or misstatement.

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