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Issues: (i) Whether electricity generated from duty-free furnace oil and supplied to a DTA unit after its exit from the EOU scheme attracted duty under Notification No. 22/2003-CE; (ii) Whether the supply was a mere internal job work transfer or constituted supply to DTA; (iii) Whether the extended period of limitation was invokable; (iv) Whether penalty under Section 11AC was sustainable.
Issue (i): Whether electricity generated from duty-free furnace oil and supplied to a DTA unit after its exit from the EOU scheme attracted duty under Notification No. 22/2003-CE.
Analysis: The exemption under Notification No. 22/2003-CE was conditional and required strict compliance. The third proviso to paragraph 7 and the relevant procedure provisions contemplated duty liability where power generated from duty-free inputs was supplied to the DTA. Once the recipient unit ceased to be an EOU and became a DTA unit, the special EOU-to-EOU permission no longer applied. The duty liability arose not on electricity as an excisable commodity, but from breach of the notification condition requiring duty equivalent to the duty foregone on the raw materials used for generation of such power.
Conclusion: The issue was answered against the appellant and in favour of the Revenue.
Issue (ii): Whether the supply was a mere internal job work transfer or constituted supply to DTA.
Analysis: The EOU framework operates unit-wise, not company-wise. After the recipient unit exited the EOU scheme, any electricity supplied to it could no longer be treated as transfer between EOUs. The nomenclature of the arrangement as job work did not change the statutory character of the recipient as a DTA unit. Corporate affiliation and integrated manufacture did not override the express conditions of the exemption notification.
Conclusion: The issue was answered against the appellant and in favour of the Revenue.
Issue (iii): Whether the extended period of limitation was invokable.
Analysis: The appellant continued to supply electricity to the DTA unit without obtaining fresh permission or disclosing the material fact in the manner required for assessment. Mere endorsement of the exit order did not amount to disclosure of non-compliant supply. Failure to disclose the continued DTA supply amounted to suppression of material facts with intent to evade duty, justifying extended limitation.
Conclusion: The issue was answered in favour of the Revenue.
Issue (iv): Whether penalty under Section 11AC was sustainable.
Analysis: Once suppression and wilful contravention were found, the statutory conditions for penalty were satisfied. The continued availment of exemption after the recipient unit became a DTA unit, without compliance with the notification conditions, supported imposition of penalty under the applicable provision.
Conclusion: The issue was answered in favour of the Revenue.
Final Conclusion: The impugned supply was legally treated as supply of electricity to a DTA unit in breach of the conditional EOU exemption, and the demand, interest, limitation finding, and penalty were upheld.
Ratio Decidendi: A conditional exemption for an EOU must be strictly complied with, and once the recipient unit becomes a DTA unit, supply of power generated from duty-free inputs attracts the notification's duty consequence notwithstanding internal arrangements, integrated operations, or export purpose.
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