Denial of exemption to Government Company which was not registered under Excise

PJ/Case Laws/2011-12/1562

Case: Indian Oil Corporation Ltd. Vs Commissioner of C. EX. Vadodara

Citation: 2012(276) E.L.T. 145 (S.C.)

Issue:- Denial of exemption under Notification No. 75/84-CE to assessee which is a government company and was not registered with Department – whether justified.

Non-availability of registration certificate – whether only a technical ground and registration certificate can be said to be a procedural requirement for availment of exemption under the Notification?

Brief Facts:- Appellant produces Reduced Crude Oil (for short "RCO"). By Notification No. 75/84-CE., dated 1-3- 1984, the Central government in exercise of its powers under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 exempted goods scribed in Column 3 of the table annexed to the notification from so much of the duty of excise as is specified in the notification subject to the intended use, or the conditions, if any, laid down in Column 5 of the table annexed to the notification. One of the goods exempted from excise duty by the notification was RCO, if produced only from indigenous crude oil subject to intended use as fuel for generation of electrical energy by electricity undertakings owned or controlled by the Central Government or any State Government or any State Electricity Board or any local authority or any licensee under Part-II of the Indian Electricity Act, 1910 except those who produce electrical energy not for sale but for their own general consumption or for supply to their own undertakings. The proviso in the notification stated two conditions subject to which the exemption was granted and one of the conditions was that where the intended use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Rules is followed.

Rule 192 in Chapter X of the Rules provided that where the Central Government has by notification under Rule 8 sanctioned the remission of duty on excisable goods other than salt used in a specified industrial process and it is necessary for this purpose to obtain an excise registration certificate, he should submit the requisite application along with the proof of payment of the registration fee and shall then be granted a registration certificate in the proper form. Rule 192 further provided that the concession shall, unless renewed by the Collector, cease on the expiry of the registration certificate

The Ahmedabad Electricity Company Ltd. had obtained a registration certificate in Form CT-2 under Rule 192 of Chapter X of the Rules and on the strength of such registration certificate, purchased RCO from the appellant availing the exemption from excise duty under Notification No. 75/84 dated 1-3-1984. The registration certificate obtained by the Ahmedabad Electricity Company Ltd. expired on 31-12-1995 and a fresh registration was granted in its favour on 26-6-1996. After issuing two show-cause notices, the Assistant Commissioner of Central Excise passed two orders demanding excise duty of Rs. 32,35,485/- from the appellant for RCO supplied to the Ahmedabad Electricity Company Ltd. during the period 1-1-1996 to 25-6- 1996 on the ground that the said company did not have a registration certificate in Form CT-2 under Rule 192 of Chapter X of the Rules during this period and, therefore, the RCO supplied by the appellant to the Ahmedabad Electricity Company Ltd. during this period was not exempt from excise duty. The appellant paid the excise duty and subsequently applied for refund contending that the registration certificate in Form CT-2 had been obtained by the Ahmedabad Electricity Company Ltd. on 26-6-1996. The refund claims were rejected by the Assistant Commissioner. Thereafter, the appellant filed appeals before the Commissioner of Central Excise (Appeals) who confirmed the demands of excise duty for the period from 1.1.1996 to 25.06.1996.

The appellant then filed three appeals before the Tribunal against the orders of Commissioner of Central Excise (Appeals) confirming demand and the order rejecting the refund claim. By the impugned order, the Tribunal dismissed the appeals saying that as the statutory requirement of conditional exemption notification had not been complied with by the appellant it was not entitled to the exemption benefit.

Hence, appellant is before the Apex Court.

Appellant’s Contention:- Appellant contended that Tribunal failed to appreciate that the RCO supplied by the appellant to Ahmedabad Electricity Company Ltd. was in 'fact used as fuel for generation of electrical energy and therefore the appellant was entitled to the benefit of the exemption of excise duty under the exemption notification. He cited the decision of this Court in Mis. Chunni Lal Parshadi Lai v. Commissioner of Sales Tax, LIP., Lucknow 1(1986) 2 SCC 501] wherein it was held that a dealer can prove by any way other than the way contemplated by Rule 12A of the U.P. Sales Tax Rules, 1948 that the goods purchased from him were for resale. According to appellant registration certificate in Form CT-2 is not the only way to prove that the goods sold by the appellant to the Ahmedabad Electricity Company Ltd. were used as fuel for generation of electricity. He also relied on Commissioner of Customs (Imports), Mumbai v. Tullow India Operations Ltd. 2005 (189) E.L.T 401 (S.C.)] wherein Court held that ONGC being a government company would get the requisite exemption, subject, of course, to its fulfilling the condition of obtaining the essentiality certificate. He argued that the appellant being a government company should not be denied the exemption on a technical ground that there was no registration certificate during the period 1-1-1996 to 25-6-1996.

Respondent’s Contention:- Revenue contended that the exemption notification stipulated in the proviso the conditions under which the exemption from excise duty would be available and if the conditions were not fulfilled, the exemption would not be available to the manufacturer. He submitted that one of the conditions was that where the goods were to be used in a place other than in the factory of production, the procedure set out in Chapter X of the Rules is to be followed. He submitted that the procedure laid down in Rules 192 to 196BB in Chapter X of the Rules, therefore, have to be followed, and if the procedure is not followed in any case, the exemption cannot be granted under the exemption notification. He submitted that since under Rule 192, the Ahmedabad Electricity Company Ltd. was required to obtain a registration certificate in Form CT-2 and the said company did not obtain a certificate for the period 1-1-1996 to 25-6-1996, RCO sup-plied by the appellant to the Ahmedabad Electricity Company Ltd. during this period was exigible to excise duty. He cited the judgment of the Constitution Bench of court in Commissioner of Central Excise, New Delhi v. Harichand Shri Gopal [2010 (260) E.L.T. 3 (S.C.)] in which it has been held that if a party wants remission of duty, he has to follow certain prerequisites, the object of which is to see that the goods are not diverted or utilised for some other purpose under the guise of the exemption notification and, therefore, a plea that the goods were meant for intended use specified in the exemption notification has to be rejected.

Reasoning of Judgment:- The Apex Court perused the Notification and referred to the Proviso of Exemption Notification and noted that the proviso makes it clear that for availing the exemption two conditions must be satisfied:

- First, that it is proved to the satisfaction of the excise officer that the goods are used for intended use specified in Column (5) of the Table annexed to the exemption notification; and

- Second, where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the Rules is followed.

It was held that the contention of the appellant that if the first condition is satisfied, i.e. it is proved to the satisfaction of the Central Excise officer that the goods are used for the intended use, the exemption has to be granted, is not tenable. Unless the second condition is also satisfied, i.e. the procedure set out in Chapter X of the Rules is followed where the use of the goods is elsewhere than in the factory of production, the exemption cannot be granted under the exemption notification. In the facts of the present case, the RCO was not to be used in the factory of the appellant but at the place of generation of electricity by the Ahmedabad Electricity Company Ltd. Hence, the second condition laid down in the proviso was also to be complied with.

The Apex Court referred to Rule 192 of Chapter X of the Rules which provides for Application for concession. It held that the language of Rule 192 of Chapter X of the Rules is clear that for availing concession from excise duty on excisable goods used in a specified industrial process, a person must obtain a registration certificate from the Collector and that "the concession shall, unless renewed by the Collector, cease on the expiry of the registration certificate". Admittedly, the registration certificate of the appellant expired on 31-12-1995. Hence, the exemption granted under the notification ceased on 31-12-1995. The fresh registration certificate in favour of the Ahmedabad Electricity Company Ltd. was issued on 26-6-1996 and the Court found on a reading of the copy of the CT-2 certificate annexed as that the registration certificate was not for any period prior to 26-6-1996. As the procedure laid down in Rule 192 of Chapter X of the Rules has not been complied with, the appellant is not entitled to avail the exemption of excise duty under the exemption notification during the period from 1-1-1996 to 25-6-1996.

Decision: - Appeal Dismissed.

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PJ/Case Laws/2011-12/1562

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