Strict construction of exemption notifications bars captive power use relief, and absence of wilful suppression defeats extended limitation.

LSHS/LSWR used to generate electricity for captive internal consumption in auxiliary units did not qualify for exemption under notifications limited to fuel intended for generation of electrical energy for sale or external supply, because strict construction of exemption provisions excluded electricity not sold to others. The exemption was therefore unavailable on the quantity attributable to internal consumption. On limitation, the dispute turned on interpretation of the notifications and the expression "intended for use"; non-disclosure of the exact proportion of captive electricity use did not amount to wilful suppression, so the extended period could not be invoked and the demand was time-barred.

---

---

Issues: (i) Whether LSHS/LSWR used for generating electricity consumed for internal use in auxiliary units qualified for exemption under the relevant notifications. (ii) Whether the extended period of limitation could be invoked for the duty demand.

Issue (i): Whether LSHS/LSWR used for generating electricity consumed for internal use in auxiliary units qualified for exemption under the relevant notifications.

Analysis: The exemption notifications granted nil rate of duty to petroleum oils intended for use as fuel for generation of electrical energy by electricity undertakings. The quantity of electricity generated and consumed within the plant for auxiliary use was not electricity sold to others. On strict construction of an exemption notification, fuel used for generating electricity for captive consumption did not satisfy the requirement of being intended for generation of electrical energy for sale or external supply. The earlier Tribunal view on the same issue was followed.

Conclusion: The exemption was not available on the quantity of LSHS/LSWR attributable to electricity used for internal consumption.

Issue (ii): Whether the extended period of limitation could be invoked for the duty demand.

Analysis: The dispute turned on interpretation of the notifications and the expression intended for use. In such circumstances, non-disclosure of the exact proportion of electricity consumed in auxiliary units did not amount to wilful suppression. The earlier Tribunal view held that the extended period was not invocable on similar facts, and that view was applied.

Conclusion: The extended period of limitation was not sustainable and the demand was time-barred.

Final Conclusion: The demand failed on limitation, and the assessee succeeded in the appeal.

Ratio Decidendi: An exemption notification for fuel intended for generation of electrical energy is to be strictly construed, and fuel used to generate electricity for captive internal consumption does not qualify where the electricity is not sold; in a dispute turning on such interpretation, the extended period cannot be invoked absent wilful suppression.

---