1980 (4) TMI 117 - HC - Central Excise

Court rules steam used for captive power generation not liable for excise duty

The court ruled in favor of the petitioner, a cement manufacturing company, in a case concerning the liability to pay central excise duty on steam ... Steam - Liability to duty Issues:1. Exemption from excise duty on steam production for captive use.2. Liability to pay central excise duty on steam production.3. Interpretation of notification regarding exemption from excise duty.Analysis:The petitioner, a cement manufacturing company, generated electric power for captive use in its power house using a boiler. The Central Government issued a notification granting exemption from excise duty on goods produced for captive use. Respondent issued a notice to pay central excise duty and penalty on steam production without a license. The petitioner contested the liability, but the respondent ordered payment of excise duty and penalty. The petitioner did not appeal but challenged the order through a petition.The petitioner enjoyed exemption from duty on steam and electric power since May 1975. However, for the period between March and April 1975, a different notification exempted goods falling under Item 68, including 'Electric, Light and Power.' The question arose whether steam was also exempt under this notification.While electric power was produced exclusively for captive use, steam was not an independent product but an intermediate part of the process. The court held that since steam was produced solely for generating electric power and light, it was not taxable under Item 68 as it was part of the final product. The court emphasized that the taxability under the Central Excises and Salt Act applies to the final product, not the production process.Consequently, the court quashed the impugned order, ruling in favor of the petitioner. The petition succeeded, and the rule was made absolute with costs.