1990 (10) TMI 184 - AT - Central Excise

Tribunal Upholds Denial of Benefits for Transformation Loss on Electricity Generation

The tribunal dismissed the appeal, upholding the denial of benefits for transformation loss on generation in auxiliary plants and transmission loss ... Excise duty as levy on production of goods - point of levy for electricity - exemption for electricity supplied to auxiliary plants - treatment of transformation loss in computing quantity generated - exemption for electricity supplied for agricultural purposes - treatment of transmission losses incidental to supply to agricultural consumers - Rule 49 condonation of lossesExemption for electricity supplied to auxiliary plants - treatment of transformation loss in computing quantity generated - excise duty as levy on production of goods - Rule 49 condonation of losses - Benefit of 2% transformation loss on generation in auxiliary plants is not allowable in computing quantity of electricity liable to excise exemption. - HELD THAT: - The Notifications exempt electricity produced by a generating station and supplied to its auxiliary plants from duty; Notification No. 105/78 expressly provides that in computing quantity generated the electricity supplied to auxiliary plants shall be excluded. Excise duty is a duty on production or manufacture and is attracted at the moment goods are produced; accordingly the quantity to be assessed is the reading at the point of generation. Station transformers serve to convert voltage and are not to be treated as part of the auxiliary plant for the purpose of Notification No. 51/78. Losses occurring within the generating station are not automatically condoned; only those shown to the satisfaction of the proper officer as lost by natural causes or in stores may be condoned under Rule 49, and notification-based concessions (including the blanket transformation concession up to 10% under Notification No. 105/78) govern the allowable computation. Therefore the claimed additional 2% transformation loss on generation in auxiliary plants cannot be accepted. [Paras 7, 8]Claim for 2% transformation loss on generation in auxiliary plants disallowed.Exemption for electricity supplied for agricultural purposes - treatment of transmission losses incidental to supply to agricultural consumers - point of levy for electricity - excise duty as levy on production of goods - Claim to incorporate 65% transmission losses when computing exempt quantity for agricultural supply under Notification No. 106/78 is not permissible. - HELD THAT: - Notification No. 106/78 grants exemption for electricity supplied for agricultural purposes subject to supply being at prescribed rates and certification to the Assistant Collector. The admissible quantum is the quantity measured and fixed at the point of generation (supply). Allowing a notional reduction by 65% for transmission losses would effectively grant exemption for electricity not supplied for agricultural purposes and thus exceed the scope of the Notification. The appellants did not establish that the measured quantity at generation should be reduced by such assumed losses; consequently the claimed 65% transmission loss cannot be allowed. [Paras 7, 8]Claim for 65% transmission loss in computing exemption for agricultural supply disallowed.Final Conclusion: The appeals are rejected; the appellants are not entitled to the claimed 2% transformation loss on generation in auxiliary plants nor to the claimed 65% transmission loss in computing the exemption for agricultural supply under the relevant Notifications, and the impugned orders are sustained. Issues:Benefit of transformation loss on generation in auxiliary plants and transmission loss incidental to the sale to agricultural consumers.Analysis:Issue 1: Transformation Loss of 2% on Generation in Auxiliary PlantsThe appellants claimed exemption on 2% of generation as transformation loss. The contention was that electricity generation and consumption are simultaneous, and duty should be imposed at the point of consumption, not generation. The appellants argued that step-up transformers in generating plants are integral and should be considered part of the generating plant, allowing for the exemption of 2% loss. However, the tribunal held that duty on electricity is leviable on the quantity generated, not at the point of consumption. The losses within generating stations cannot be condoned unless proven to be lost by natural causes. The tribunal also noted that a concession of up to 10% for transformation losses was already granted under Notification No. 105/78, making additional concessions impermissible. Therefore, the tribunal rejected the claim for transformation loss benefit.Issue 2: Transmission Loss Incidental to Sale to Agricultural ConsumersThe appellants sought exemption on transmission losses of 65% incidental to the sale to agricultural consumers. The tribunal clarified that concessions under Notification No. 106/78 for agricultural purposes are permissible only if electricity is supplied for agricultural use. The tribunal emphasized that the quantity of electricity supplied for agricultural purposes should be measured at the point of generation, not reduced by assumed losses. Allowing the claimed 65% losses in transformation would result in granting exemptions beyond the intended scope of the Notification. The tribunal found no justification for reducing the measured quantity of electricity supplied for agricultural purposes. Consequently, the tribunal rejected the claim for transmission loss benefit.In conclusion, the tribunal dismissed the appeal and cross-objections, upholding the denial of benefits for transformation loss on generation in auxiliary plants and transmission loss incidental to the sale to agricultural consumers. The tribunal emphasized that duty on electricity is leviable based on the quantity generated and measured at the point of generation, not at the point of consumption or after transformation. The tribunal's decision was based on the specific provisions of relevant notifications and the nature of electricity as a taxable good.