RENUSAGAR POWER COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Under Tariff Item No. 11-E of the First Schedule of the Central Excise and Salt Act, 1944 (hereinafter referred to as the 'Act') the Central Excise Duty on electricity was imposed with effect from 1st March, 1978. At the same time the Central Government by notification No.52/78 dated 1st March, 1978 issued by it in exercise of the power conferred by sub rule (1) of Rule 8 of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules') exempted the electricity from duty of excise leviable under Tariff Item No. 11-E provided such electricity is used for captive consumption. The exemption Notification reads as under:- GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) New Delhi, the 1st March, 1978 10th Phalguna, 1899(Saka) NOTIFICATION CENTRAL EXCISE GSR. In exercise of the power conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts electricity falling under Item No.llE of the First Schedule to the Central Excise and Salt Act, 1944 (1 of 1944), from the whole of the duty of excise leviable thereon: Provided that it is proved to the satisfaction of the Assistant Collector of Central Excise that such electricity is produced by a genernating station, an industrial unit or an establishment (including Railways) and used in such generating station (including its auxiliary plant, if any), industrial unit or other establishment, as the case may be."

(2.) . Petitioner No.l- Renusagar Power Company Ltd.(for short 'Renusagar') a company incorporated under the Companies Act, 1956 is engaged in the business of generating electricity. The electricity so generated is supplied by Renusagar to petitioner No.2- Hindustan Aluminium Corporation Limited (for short 'Hindalco). Renusagar is wholly owned subsidiary of Hindalco. All shares of Renusagar are owned by Hindalco. Hindalco is also a company incorporated under the Companies Act and is,inter-alia, carrying on the business of manufacturing aluminium.

(3.) . The dispute arose between the petitioners and Central Excise authorities on the question whether duty of excise on electricity generated by Renusagar is payable or not. Renusagar and Hindalco were claiming exemption under the aforesaid notification. According to the Central Excise authorities petitioners were not entitled to exemption. They said that Renusagar and Hindalco are two distinct and separate legal entities and thus the electricity generated by Renusagar and supplied to Hialco cannot be treated as a case of captive consumption. Petitioners say that Renusagar and Hindalco are one and the same concern and Renusagar has no existence independent of Hindalco and in the facts and circumstances pertaining to Renusagar and Hindalco it is erroneous to treat them as separate legal entities and on that ground deny exemption.