ST-CMS ELECTRIC COMPANY PVT. LTD. Vs. CCE

JUDGEMENT

(1.) THIS appeal filed by M/s. ST -CMS Electric Company Pvt. Ltd. (hereinafter referred to as 'M/s. ST -CMS' or 'the appellants') is against the Commissioner's order (in adjudication of a show -cause notice dated 16.6.2003) demanding duty of Rs. 2,36,88,392/ - for the period June 2002 to February 2003 under Section 11A of the Central Excise Act read with Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 (hereinafter referred to as 'the 2001 Rules') with interest thereon under Section 11AB of the said Act and imposing penalty of Rs. 30 lakhs under Rule 25 of the Central Excise Rules, 2002. The impugned demand is on Low Sulphur Heavy Stock (LSHS) procured by M/s. ST -CMS for use as secondary fuel in their thermal power plant for generation of electricity. The electricity so generated was supplied to the Tamilnadu Electricity Board (TNEB). The manufacturers/suppliers of LSHS had not paid duty of excise on the goods, availing the benefit of Notification No. 6/2002 -CE dated 1.3.2002 (Sl. No. 29), which provided 'nil' rate of duty for LSHS, Residual Fuel Oil etc. of Chapter 27 of the CETA Schedule, cleared for use as fuel for the generation of electrical energy by electricity undertakings owned or controlled by the Central Govt. or any State Govt. or any State Electricity Board or any local authority or a person licensed under Part - II of the Indian Electricity Act, 1910 to supply electrical energy or a person who had obtained sanction under Section 28 of the said Act to engage in the business of supplying electrical energy, except those who produced electrical energy not for sale but for their own consumption or for supply to their own undertakings. The duty -free procurement of LSHS by the appellants was on the strength of "Annexure - I Certificates" issued under the 2001 Rules by the jurisdictional Assistant Commissioner of Central Excise. These certificates were produced to satisfy the procedural conditions attached to the 'NIL' rate of duty for LSHS. The Department issued the aforesaid show -cause notice proposing to deny the benefit of the Notification to the appellants, alleging (a) that LSHS was not used as primary fuel but only used for pre -commissioning, testing and cleaning purposes; (b) that M/s. ST -CMS being a private company with 100% foreign equity investment venture were not an electrical undertaking owned or controlled by the Central Govt. or any State Govt. or any State Electricity Board or any local authority and (c) that they were neither licensed under Part - II of the Indian Electricity Act, 1910 nor possessed of sanction under Section 28 of the said Act. The allegations were denied and the demand of duty contested. In adjudication of the dispute, the Commissioner passed the impugned order.

(2.) IN the show -cause notice, the Department had also proposed to revoke the registration granted under Rule 9 of the Central Excise Rules, 2002 to M/s. ST -CMS as also to withdraw/cancel the 'Annexure - I Certificates' issued to them under the 2001 Rules. This proposal was dropped by the adjudicating authority and there is no appeal of the Revenue against this part of the impugned order.

(3.) THE learned Counsel for the appellants heavily relied on the Madras High Court's judgment dated 8.8.2007 in W.P. No. 45294/2002 [Madurai Power Corporation Pvt. Ltd. v. Deputy Commissioner of Central Excise and Ors.] wherein the question which arose for consideration was whether, without following the procedure laid down under Section 35E of the Central Excise Act, the department could issue show -cause notice under Section 11A of the Act to cancel 'Annexure - I Certificate' (issued to the company for procurement of LSHS) and to demand duty from the company on LSHS (procured duty -free under the said certificate) by denying them the benefit of exemption under Notification No. 3/2001 -CE. The Hon'ble High Court vide para 23 of its judgment held as under: