ESSAR STEEL LTD. Vs. COMMISSIONER OF CENTRAL

JUDGEMENT

(1.) ESSAR Steel Ltd., Hazira was engaged in the manufacture of hot briquetted iron, hot rolled coils and other products of iron and steel. The electricity required for running the mill was provided by Essar Power Ltd., Hazira located nearby, the power being generated by the turbines which were fuelled by natural gasoline liquid or naphtha. Essar Steel ltd. (ESL for short) purchased NGL and naphtha and supplied it to Essar Power Ltd. (EPL for short). it took the credit of the duty paid on the fuel after furnishing to the department the intimation to this effect required by Sub -rule (3) of Rule 57F.

(2.) THE notice dated 2.5.2001 issued to ESL alleged that it had incorrectly taken credit to the extent of Rs. 24.55 crores during the period from April, 1996 to January, 2001 of the duty paid on quantities of NGL for the reason that it had not been consumed by EPL to produce electricity which was utilized, as required by the rules, in the manufacture of final product by ESL. It categorized these quantities of NGL into three. The first alleged that a quantity of NGL, involving duty of about Rs. 17.02 crores, had not been utilized at all in the manufacture by EPL of electricity that it supplied to EPL. The second ground, involving credit of Rs. 2.46 crores, was that some part of the NGL was utilized to generate electricity that was required to keep in operation of the power plant of EPL, and hence not utilized in generation of electricity utilized by the appellant. The third ground was that part of the electricity generated by EPL was fed into the grid of the Gujarat Electricity Board. The notice invoked the extended period of limitation contained in Rule 571 on the ground of suppression of the fact of non -utilisation of electricity on these counts, and proposed penalty. In the order impugned in this appeal, the Commissioner has confirmed the demand stated in the notice and imposed a penalty of Rs. 24.5 crores. Hence this appeal.

(3.) THE figures which from the basis for the demand of the major amount of duty are set out in Annexure A to the notice, and the Commissioner has adopted the figures in the annexure with some minor modifications, incorporating them into his order in the annexure to it. We will therefore consider the figures in this order. (Although the headings in a column of this annexure refer to NGL and naphtha, it is clarified by the representative of for the appellant, and not disputed by the departmental representative, that it was only NGL that was in dispute.) The annexure derives the quantity of NGL which was consumed in order to produce the quantity of electricity that was supplied to ESL in the following manner. it sets out the quantity of electricity received in every month by ESL, the quantity of NGL required for producing that electricity, the credit that could be taken on this quantity of NGL, credit actually taken, and thus arrives at figures of credit taken in excess. The total credit wrongly taken has been determined by adding up the figures of excess credit calculated for each month. The following example for April 1996 will make the position clear.