TaxTMI 
TaxTMI 
2016 (10) TMI 819
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....n Trade, Jaipur under a communication dated 10.10.2012. Being aggrieved by the communication aforesaid and the decision of the Board of Approval, this petition for writ is preferred. FACTS OF THE CASE - The petitioner, a company incorporated under the Companies Act, 1956, claimed benefit of deemed export, as provided under para 8.3 of the FTP, on the electricity consumed by its hundred percent export oriented unit/Hydro-1. The claim aforesaid was made on the count that the Domestic Tariff Area (hereinafter referred to as 'DTA') Unit of the petitioner is having a captive power plant which supplies electricity to the export oriented unit (100%) that manufactures zinc. The zinc manufactured in the export oriented unit consumes electricity manufacturing process to obtain zinc. The claim of the petitioner, at the first instance, under a letter dated 1.6.2010, was objected on following counts - (a) no duty drawback on electricity in the past period, (b) as to how the unit can claim deemed export benefit, when duty drawback on supply of electrical energy is NIL, and (c) electrical energy is not tangible goods, how and under which provision a unit can claim benefit of deemed e....
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....terial to para 6.5.1 of HBP) of the Hand Book of Procedure Volume-I. After receiving the communication aforesaid, the petitioner submitted a detailed representation dated 28.10.2010 explaining that the electrical energy is a "consumable" item in the manufacturing process of zinc and, therefore, is entitled to procure the same duty free and further to demand deemed export benefits. The Deputy Director General of Foreign Trade, under a letter dated 10.12.2010, informed the petitioner that his case was thoroughly examined in consultation with the Department of Revenue and found that no approval from Board of Approval was taken, therefore, the claim as made to have duty free procurement of electricity cannot be extended. The petitioner them submitted a detailed representation dated 3.10.2011, to the Chairman and Secretary, Board of Approval for Export Oriented Unit, Ministry of Commerce and Industries, which was responded by the Ministry of Commerce and Industries with information that the Board of Approval, in its meeting dated 28.11.2011, considered the representation and rejected the same. The petitioner then preferred a review petition before the Board of Approval, which came to....
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....s as in HBP Vol.I. (iv) Para 9.15 of FTP : "Consumable" means any item which participates in or is required for a manufacturing process, but does not necessarily form part of end product items, which are substantially or totally consumed during a manufacturing process, will be deemed to be consumables. (v) Para 6.6.1 of the HBP Vol.I : Goods permitted to be imported/procured from DTA shall include: (a) Raw materials components, consumables, intermediates, spares and packing materials. .................... .................... (f) Any other items not mentioned above with approval of Board of Approval (hereinafter referred to as BoA.)" The Director General of Foreign Trade, under a policy circular No.23 dated 28.7.2008, clarified that export benefits as per Chapter VIII of the FTP shall be given to the DTA suppliers in respect to permissible goods under para 6.6.1 of HBP-I. The claim of the petitioner is that it is 100% export oriented unit and for production of exportable goods i.e. zinc, electricity is an integral "consumable",therefore, is entitled to have benefits as per Chapter VIII of the FTP. ARGUMENTS ADVANCED IN SUPPORT OF THE PETITIONER'S CLAIM....
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....ted in two induction melting furnaces and casted through Automatic Zinc Casting machine and wherein equipments and machines like conveyor belts inductor, casting conveyor motor, robot, cooling and seed conveyor, cooling pumps etc. are run on electric energy. 3) Leaching & Purification - Process Brief - The calcine produced in Roaster Section is leached in the leaching section. This leached solution is sent to purification plant where impurities are removed and ZnS04 (purified zinc sulpahte) solution is sent to cell House operation mentioned above. Leaching plant is having chain conveying system (electrically motor operated) wherein calcine is being transferred to day bins and then this calcine is transferred to various tanks & reactors where electrically operated equipments like agitators & pumps are being substantially used. In the entire process, electric energy is being consumed for the motorized equipments mentioned above being an integral part of the manufacturing process. Concentrate is transferred from RMH section to Roaster day bin through motorized conveying system run on electric energy and sent to roaster furnace. The air flow is given in the roaster furnace through ....
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....of Fuel (HSD and Furnace Oil) in the AIR and brand rate fixation. (e) In view of the above cited clarification, power cannot be considered as 'goods' for the purpose of deemed export benefits." Learned counsel, while relying upon the explanation extended by the drawback Directorate, Department of Revenue, emphasised that the electrical energy is certainly a goods, but not entitled to have duty drawback benefits which are available only for supply of certain restricted goods mentioned in para 6.6.1 of HBP-I. Para 6.6.1(b) of HBP-I nowhere mentions electricity. The term "consumable" also, as per learned counsel, is not open to be widened to include an intangible item i.e. electrical energy in it. According to learned counsel the exclusion of electrical energy in para 6.6.1 and inclusion of electricity generated equipments, such as DG sets, captive power plant and transformer, clearly indicates that it was never intended under DTP to treat the electrical energy as a "consumable". APPRECIATION OF THE ISSUE BY US - Precisely, the issue under consideration is that whether in production of zinc, the electricity power is a "consumable" as defined under para 9.15 of the FTP an....
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.... passed continuously through tanks containing a series of alternate aluminium cathode (blanks) and lead anodes. Current is passed between the anodes and cathodes and metallic zinc is plated onto the cathodes by a reduction reaction; in electrolysis there always has to be an opposing oxidising reaction at the anode and, in this case, it is the liberation of oxygen gas. Periodically the cathodes are removed and the metallic zinc is harvested i.e. peeled away from the aluminium blanks, which are then replaced in the tanks for another cycle. For electrolysis alone the electric power requirement is approximately 3300kWh per tonne of zinc produced for sale and including other electrical requirements of the smelter the total requirement is approximately 4000kWh per tonne. The metallic sheets peeled from the aluminium cathode blanks are finally melted in a furnace and then cast into ingots for sale. The process, discussed above, clearly indicates that the electrolytic process is necessary to have final produce i.e. zinc. For electrolytic process the essential input is electricity. It is not in dispute that the electricity is a goods and that goods, though intangible, is consumed in obtain....