Secondary fuel for power plant start-up can qualify for electricity-generation exemption when integral to the generation process.

LSHS used as a secondary fuel for start-up and ignition of a furnace in a power plant was treated as fuel intended for use in the generation of electrical energy. The analysis emphasises that start-up, flame-stabilisation, and commissioning operations are integral to electricity generation, so a fuel used for those functions can fall within the exemption under Notification No. 6/2002-CE. The commentary also notes reliance on the appellant's earlier case and the statutory recognition of the entity as a generating company. On that reasoning, denial of exemption, and the related demand, interest, and penalty, were considered unsustainable.

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Issues: Whether Low Sulphur Heavy Stock (LSHS) used as a secondary fuel for start-up and ignition of the furnace in a power plant was eligible for exemption under Notification No. 6/2002-CE dated 01.03.2002.

Analysis: The exemption covered fuel intended for use in generation of electrical energy. The record showed that LSHS was not a standalone primary fuel but was used to light up coal, start ignition of the furnace, and enable commissioning and sustenance of the generating process. The earlier decision in the appellant's own case, following the principle that start-up and flame-stabilisation operations are integral to electricity generation, was relied upon. The post-amendment position also recognised the appellant as a generating company within the relevant statutory framework.

Conclusion: LSHS used as a secondary fuel for start-up and ignition was intended for use as fuel for generation of electricity, and the denial of exemption was unsustainable; the issue was decided in favour of the assessee.

Final Conclusion: The impugned demand, interest, and penalty could not be sustained, and the appeal was allowed with consequential relief.

Ratio Decidendi: Fuel used as a secondary or start-up input, when integral to the generation process of electricity, is covered by an exemption for fuel intended for use in generation of electrical energy.

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