Captive power plant exemption limited to factory consumption; wheeled-out electricity falls outside the qualifying manufacturing use.

Exemption or credit linked to fuel used in a captive power plant is confined to electricity captively consumed within the factory for manufacture and allied in-house purposes. Electricity wheeled out of the factory or used for non-manufacturing purposes does not qualify for the benefit. On that basis, the demand required fresh examination to separate admissible from inadmissible use and to re-quantify the liability. The matter was therefore remanded to the original authority for reconsideration and fresh quantification of the eligible and ineligible portion.

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Issues: Whether the exemption benefit in respect of fuel used in the captive power plant extends to electricity generated for non-manufacturing purposes and wheeled out of the factory, and whether the demand required re-examination and re-quantification.

Analysis: The electricity generated in the captive power plant was used partly within the refinery for manufacture and allied in-house purposes, and partly wheeled out. The controlling principle applied was that credit or exemption is available only to the extent inputs are used for captive consumption within the factory for manufacture of final products. Electricity cleared outside the factory or used beyond manufacturing activity does not qualify for the benefit. In view of that legal position, the adjudication required fresh examination of the extent of eligible and ineligible use and consequent re-quantification of the demand.

Conclusion: The benefit was not available to the extent electricity was wheeled out or otherwise used outside the qualifying manufacturing use, and the matter was required to be reconsidered by the original authority.

Final Conclusion: The appeal succeeded only to the extent of remand for fresh consideration and quantification of the admissible and inadmissible portion of the demand.

Ratio Decidendi: Exemption or credit linked to fuel used for generation of electricity is confined to electricity captively consumed within the factory for manufacture, and does not extend to electricity wheeled out or otherwise used outside that qualifying sphere.

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