1990 (11) TMI 158 - HC - Central Excise

'Steam' classified as 'goods' for excise duty, exemption denied; petitioner must pay with interest.

AMBALAL SARABHAI ENTERPRISES LTD. Versus UNION OF INDIA

The Court held that 'steam' is considered 'goods' liable to excise duty under Entry 68 of the Central Excises and Salt Act, 1944. The exemption under ... Steam generated by the petitioner-company - Demand - Limitation Issues Involved:1. Whether 'steam' generated by the petitioner is liable to excise duty under the Central Excises and Salt Act, 1944.2. Applicability of Exemption Notification No. 118/75-Central Excises.3. Determination of 'steam' as 'goods' under excise law.4. Whether the demand for excise duty is time-barred.Detailed Analysis:1. Liability of 'Steam' to Excise Duty:The petitioner contended that the 'steam' generated and shared by four contributing units was not liable to excise duty as it was not 'goods' within the meaning of Entry 68 of the Central Excises and Salt Act, 1944. The Assistant Collector, Central Excise, Baroda, concluded that 'steam' is 'goods' for the purpose of levy of Central Excise duty, as it involves conversion of water into gas/vapour, creating a new substance, similar to the process of making ice.2. Applicability of Exemption Notification No. 118/75-Central Excises:The petitioner argued that even if 'steam' is considered 'goods,' it is exempt from excise duty under Notification No. 118/75-Central Excises, as it was manufactured in a factory and intended for use in the same factory. The Court found this contention without substance, stating that Sarabhai Common Services was producing 'steam' and distributing it to various companies, thus not qualifying for the exemption.3. Determination of 'Steam' as 'Goods':The Court examined whether 'steam' qualifies as 'goods' under excise law. The Supreme Court's decision in Union of India v. Delhi Cloth and General Mills was referenced, which held that 'goods' must be a new substance known to the market. The Court concluded that 'steam' is marketable and known in the market as a source of power and for manufacturing purposes, thus qualifying as 'goods.'4. Time-Barred Demand for Excise Duty:The petitioner contended that the demand for excise duty from 30th April 1975 to 31st March 1980 was time-barred. However, the Court noted that there was an interim order preventing the authority from taking action against the petitioner under the Central Excises and Salt Act, 1944. Hence, the demand was not time-barred as the authority was restrained from issuing a show cause notice during the interim period.Conclusion:The Court held that 'steam' is 'goods' liable to excise duty under Entry 68 of the Central Excises and Salt Act, 1944. The exemption under Notification No. 118/75-Central Excises was not applicable as the steam was not used within the same factory. The demand for excise duty was not time-barred due to the interim order. The petitioner was directed to pay excise duty with 12% interest. The request for a stay on the order was rejected.