Exemption for captive consumption of steam was partly recognized, but waiver was denied for electricity-linked use.

Notification No. 217/86-C.E. was considered prima facie applicable to steam used within the factory for manufacturing excisable final products, because the exemption covered goods consumed in the factory and the term "final product" was read consistently with Rule 57A. However, the position was not equally clear for steam used to generate electricity. On that basis, complete waiver of pre-deposit was refused, and the appellant was directed to deposit a part of the demand while the balance duty and penalty were stayed pending recovery.

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Issues: Whether the appellant was entitled to complete waiver of pre-deposit and stay of recovery in proceedings concerning duty on steam generated from hydrochloric acid and caustic soda under Notification No. 217/86-C.E.

Analysis: The demand arose from the use of hydrochloric acid and caustic soda in the manufacture of steam, two-thirds of which was used in the factory for manufacturing excisable goods and the remaining one-third for generating electricity. Notification No. 217/86-C.E. exempts goods consumed within the factory of production for manufacture of final products liable to duty, and the expression "final product" was taken to bear the same meaning as in Rule 57A of the Central Excise Rules. The exemption was considered prima facie applicable to the portion of steam directly used in manufacture, but the position was not considered equally clear for the portion used for generation of electricity.

Conclusion: Complete waiver was not granted. The appellant was directed to deposit Rs. 1.5 lakh, and waiver of the remaining duty and penalty was granted with stay of recovery.

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