Captive consumption exemption for coal upheld where records identified use and ER-1 omission was treated as a procedural lapse.

Captively consumed coal within the mine was treated as eligible for exemption under Notification No. 67/95 where the assessee's records clearly showed production, dispatch, road sale, captive consumption and closing stock. The omission to separately disclose the captive quantity in ER-1 returns was regarded as a procedural lapse, not a substantive ground to deny the exemption. On that basis, the captive use fell within the notification and no duty or cess was recoverable on such consumption; the related demand of duty, cess and penalty was therefore unsustainable.

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Issues: Whether coal captively consumed within the mine was entitled to exemption under Notification No. 67/95 despite non-disclosure of the captive quantity in ER-1 returns.

Analysis: The records maintained by the assessee showed production, dispatch, road sale, captive consumption and closing stock, and the captive-consumption quantity was identifiable from those records. The omission to segregate duty-paid and captive-consumed quantities in the ER-1 return was treated as a procedural lapse and not as a ground to deny the exemption otherwise available. On the material placed before it, the assessee's captive use of coal was held to fall within the exemption notification, and no duty or cess was held recoverable on such consumption.

Conclusion: The assessee was held entitled to exemption for captively consumed coal, and the demand of duty, cess and penalty was not sustainable.

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