Custom, Excise & Service Tax Tribunal
Bharat Petroleum Corporation Ltd vs Commissioner Central Goods And Service ... on 11 December, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
COURT No. 5
Excise Appeal No. 87430 of 2015
(Arising out of Order-in-Original No. 10-RN-COMMR-M-I-2015-16 dated
31.07.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Bharat Petroleum Corporation Ltd. Appellant
Mumbai Refinery, Mahul,
Mumbai 400 074.
Vs.
Commissioner of CGST, Mumbai East Respondent
th 9 Floor, Lotus, Parel, Lotus Infocentre, Near Parel Station, Parel (E), Mumbai 400 012.
WITH Excise Appeal No. 87068 of 2016 (Arising out of Order-in-Original No. 03-SRK-PC-M-II-2016-17 dated 27.05.2016 passed by the Principal Commissioner of Central Excise, Mumbai- II) Bharat Petroleum Corporation Ltd. Appellant Mumbai Refinery, Mahul, Mumbai 400 074.
Vs. Commissioner of Central Excise, Mumbai-II Respondent th 9 Floor, Piramal Chambers, Jijibhoy Lane, Lalbaug, Parel, Mumbai 400 012.
AND Excise Appeal No. 88902 of 2018 (Arising out of Order-in-Original No. 53-CGST-NM-COMMR-KV-02-2018-19 dated 31.05.2018 passed by the Commissioner of Central Tax (GST & Central Excise, Navi Mumbai) Bharat Petroleum Corporation Ltd. Appellant Mumbai Refinery, Mahul, Mumbai 400 074.
Vs. Commissioner of CGST, Navi Mumbai Respondent 10th Floor, Satra Plaza, Palm Beach Road, Sector 19D, Vashi, Navi Mumbai 400 705.
Appearance:
Shri Gopal Mundra with Ms. Ginita Bodhani, Advocates, for Appellant Shri A.K. Singh, Special Counsel, for Respondent E/87430/2015, E/87068/2016 & E/88902/2018 2 CORAM:
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) Date of Hearing: 07.10.2024 Date of Decision: 11.12.2024 FINAL ORDER NO. 87438-87440/2024 PER: ANIL G. SHAKKARWAR Above stated three appeals are taken together for decision since the issue involved in all of them is the same and the appellant is also the same.
2. Brief facts of the case are that the appellant is manufacturer of petroleum products viz. High Speed Diesel (HSD), Motor Spirit (MS), Special Kerosene Oil (SKO) and few other products falling under Chapter 27 and Chapter 25 of Schedule to Central Excise Tariff Act, 1985. Appellant was clearing the above stated different products through both road transport and through pipeline. The refinery belonging to the appellant is at Mahul which is called Mahul Refinery and goods manufactured by Mahul Refinery stated above are transported to their various depots situated at places like Manmad, Manglia, Mathura, Kota and Bijwasan through pipeline called Mumbai Manmad Bijwasan Pipeline (MMBPL). During the transportation of HSD, MS and SKO through pipeline to their depots, SKO comes into contact with HSD and MS. When the goods were continuously transported through pipeline, one product in the pipeline pushes the other product without any gap in between.
Due to technical reasons SKO is positioned in between MS and HSD. Since one product pushes the other product in the pipeline, small quantity of SKO either gets mixed up with MS or gets mixed up with HSD. Such mixed goods are called as intermixed goods. The said goods such as MS, HSD and SKO are pumped through pipeline after they are cleared from the refinery on payment of duty. In respect of SKO if the same is for ultimate sale through public distribution system, the same is exempted from central excise duty under serial No.20 of Notification No. 04/2006-CE dated 01.03.2006 and subsequently under serial No.72 of Notification No.12/2012-CE dated E/87430/2015, E/87068/2016 & E/88902/2018 3 17.03.2012. The wording in the notification is "kerosene for ultimate sale through public distribution system". It appeared to Revenue that in the intermixed quantity of goods SKO cleared at nil rate of duty after availing above stated exemptions loses its identity and gets mixed up in the intermixed product which is either cleared as HSD or as MS by the appellant. The same is not ultimately consumed by public under public distribution system and, therefore, such quantity of SKO that got mixed in intermixed product should not enjoy the benefit of nil rate of duty and, therefore, for demanding central excise duty on such quantity of SKO which got mixed into intermix, three show cause notices were issued to the appellant. The first show cause notice was covering the period from January 2010 to December 2014. The said show cause notice was issued on 30.01.2015. The said show cause notice is subject matter of appeal No. E/87430/2015. The said show cause notice dated 30.01.2015 was issued by invocation of sub-section (4) of Section 11A of Central Excise Act, 1944 by invoking extended period of limitation by stating in para 23 of the said show cause notice that the appellant had willfully suppressed and misdeclared actual facts and circumstances with ulterior motive to defraud government exchequer by evading payment of duty on the quantity of SKO which was cleared from refinery for intended purpose of distribution under PDS (Public Distribution System) but could not be received at the receiving end and not distributed under PDS. Therefore, central excise duty of Rs.87,99,77,467/- was demanded. The second show cause notice was issued on 27.01.2016 for the period from January 2015 to November 2015 demanding central excise duty of Rs.18,50,53,906/-. The said show cause notice dated 27.01.2016 was also on the similar grounds and for issue of the said show cause notice, sub-section (4) of Section 11A of Central Excise Act, 1944 was invoked in para 18 of the said show cause notice and it was stated in para 18 of the said show cause notice that the appellant had willfully suppressed and misdeclared actual facts and circumstances with ulterior motive to defraud government exchequer by evading payment of duty on the quantity of SKO which was cleared from refinery for intended purpose of distributing under PDS but could not be received at E/87430/2015, E/87068/2016 & E/88902/2018 4 the receiving end and not distributed under PDS. The third show cause notice for the period from December 2015 to January 2017 was issued on the same grounds on 22.12.2017 demanding central excise duty of Rs.47,87,05,326/-. For issue of the said show cause notice dated 22.12.2017 in para 18 of the said show cause notice, sub-section (4) of Section 11A of Central Excise Act, 1944 was invoked by stating that the appellant had willfully suppressed and misstated and misdeclared actual facts and circumstances with ulterior motive to defraud government exchequer by evading payment of duty on the quantity of SKO which was cleared from refinery for intended purpose of distributing under PDS but could not be received at the receiving end and not distributed under PDS. The show cause notice dated 30.01.2015 on contest was decided through order-in- original dated 31.07.2015 by relying on CBEC circular bearing No.636/27/2002-CX dated 22.04.2002 wherein demand of central excise duty of Rs.43,70,13,942/- was confirmed and equal penalty was imposed and the appellant was ordered to pay interest on the same. Aggrieved by the said order, appellant is before this Tribunal in appeal No. E/87430/2015. The above stated show cause notice dated 27.01.2016 was decided on contest through order-in-original dated 27.05.2016. Before the original authority the appellant had contended that the said circular dated 22.04.2002 was not valid after the warehousing provisions were withdrawn in 2004. Further, the appellant had relied on Hon'ble Apex Court judgment in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. reported at 2004 (178) ELT 13 (SC). Learned original authority has held through para 35 of the said order-in-original dated 27.05.2016 that the facts of this present case are totally different from the facts in Dalmia Dadri Cement Ltd. case. By holding so and again relying on the CBEC circular, he has confirmed the demand of central excise duty of Rs.18,21,22,714/- and appropriated the amount of Rs.15,73,47,663/- and imposed penalty equal to duty and ordered to pay interest. Aggrieved by the said order, appellant is before this Tribunal in appeal No. E/87068/2016. The above stated show cause notice dated 22.12.2017 was also contested by the appellant. The appellant contended that there was no evidence to prove that SKO which was cleared at nil rate of duty E/87430/2015, E/87068/2016 & E/88902/2018 5 was diverted for any other purpose than the purpose for which the same was cleared for public distribution system. They also contended that SKO was lost in transit beyond the place of removal. They also contended that intermix is a usual phenomena in case of transportation of multiple petroleum products using single pipeline and the same cannot be said to be carried with an intention to evade duty. They further contended that mala fide cannot be alleged in case of Public Sector Undertaking. The original authority did not appreciate the contention of the appellant and confirmed the demand of central excise duty of Rs.47,87,05,326/- and appropriated an amount of Rs.22,48,00,735/- and imposed penalty of Rs.47,87,05,326/- and ordered the appellant to pay interest through order-in- original dated 31.05.2018. Aggrieved by the said order, appellant is before this Tribunal in appeal No. E/88902/2018.
3. Heard the learned counsel for the appellant. Learned counsel for the appellant has submitted as follows:-
a) All the three show cause notices are hit by limitation because in all the three show cause notices extended period of limitation is invoked and it is alleged that the appellant had mala fide intention to evade payment of duty and that the appellant is a Public Sector Undertaking of the Government of India and it does not gain anything by evading central excise duty and as such an organization under the control of the Government of India does not involve in any mala fide intention and, therefore, the extended period of limitation cannot be invoked in respect of the appellant being a Government of India Undertaking and in the absence of mala fide intention, demand raised under extended period does not survive.
b) The Board circular dated 22.04.2002 relied upon by the original authority was issued much before the exemption notifications were issued and was not related to exemption from payment of central excise duty for SKO cleared for public distribution system and the said circular was for deciding the value of imported goods and, therefore, the order-in-original E/87430/2015, E/87068/2016 & E/88902/2018 6 passed on the basis of the said circular dated 22.04.2002 is not sustainable in law.
c) The intermixing takes place post clearance of the goods which is very clear from the sentence "The said intermixed products are completely different from the one they had cleared from their refinery" in para 10 of show cause notice dated 30.01.2015 and similarly worded sentences in the remaining two show cause notices also. The goods were cleared at the place of clearance i.e. factory which is also called refinery and intermixing takes place subsequent to the clearance of the goods.
d) Transfer of petroleum products through pipelines is mandated as per the policy and during such transfer of goods, intermixing is inevitable and is beyond the control of manufacturer and the percentage of intermixing is negligible.
e) The relevant entry in the exemption notification reads as "Kerosene for ultimate sale through public distribution system." There is no condition attached in the exemption notification such as end use certification. The words "for use" in a legislative intent have been interpreted by Hon'ble Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. reported at 2004 (178) ELT 13 (SC) wherein Hon'ble Supreme Court has ruled that expression "for use" must be interpreted as "intended for use". Here, kerosene cleared at nil rate of duty was intended for use in public distribution system and Revenue has not submitted any evidence of its clandestine removal.
f) Revenue has no control over the goods once they are cleared from the place of removal after paying appropriate central excise duty. In the present case, since exemption was availed, no duty was paid. However, nil payment of duty was appropriate payment of duty.
g) He has also relied on the following case laws:-
Hindustan Petroleum Corporation Ltd. vs. Commissioner of Central Excise, Ludhiana and HPCL Mittal Energy Ltd. vs. E/87430/2015, E/87068/2016 & E/88902/2018 7 Commissioner of Central Excise, Ludhiana reported at 2024 (9) TMI 1167 - CESTAT Chandigarh.
Mangalore Refinery and Petrochemicals Ltd. vs. Commissioner of Central Excise and Service Tax reported at 2019-TIOL-2851-CESTAT-BANG.
Mangalore Refinery and Petrochemicals Ltd. vs. Commissioner of Central Excise and Service Tax reported at 2019-TIOL-2866-CESTAT-BANG.
Numaligarh Refinery Ltd. vs. Commissioner of Central Excise, Shillong reported at 2019 (6) TMI 496 - CESTAT Kolkata.
4. Heard the learned Special Counsel. Learned Special Counsel has agreed that this Tribunal decision in the case of Hindustan Petroleum Corporation Ltd. vs. Commissioner of Central Excise, Ludhiana reported at 2024 (9) TMI - CESTAT Chandigarh is squarely applicable in the present case. He has further submitted that intermixed SKO has never reached the public distribution system and, therefore, the said quantity of SKO was not eligible for full exemption of central excise duty. He has further submitted that the word "ultimate" used in the expression for exemption is that it should be ultimately consumed by public distribution system to be eligible to avail exemption from payment of central excise duty.
5. We have carefully gone through the record of the case and submissions made. We note that in all the three show cause notices it has been alleged that there was willful suppression, misdeclaration of facts and circumstances with an ulterior motive to defraud the government exchequer by evading payment of duty on the quantity of SKO which was cleared from refinery for intended purpose of distribution under public distribution system and for recovery of central excise duty, provisions under sub- section (4) of Section 11A of Central Excise Act, 1944 were invoked. In show cause notice dated 30.01.2015 it is also stated that Section 11A(4) of Central Excise Act, 1944 is the same as proviso to sub-section (1) of Section 11A before amendment. On this issue we have ruling by Hon'ble Supreme Court in the case of Nizam Sugar Factory vs. Collector of Central Excise, A.P. E/87430/2015, E/87068/2016 & E/88902/2018 8 reported at 2008 (9) STR 314 (SC). We reproduce para 2 to 10 of the said ruling as follows:-
"2. This order shall dispose of Civil Appeal Nos. 2747 of 2001, Civil Appeal No. 6261 of 2003 filed by the assessees and the Civil Appeals @ Special Leave Petition (C) Nos. 9271-9278 of 2003, filed by the revenue. The point of law canvassed is common in these appeals.
3. Civil Appeal No. 2747 of 2001 and Civil Appeal No. 6261 of 2003 have been filed under Section 35L(b) of the Central Excise Act, 1944 (for short 'the Act') against the Final Order No. 326/2000 dated 19-7-2000 and Final Order No. 462/2002-A dated 24-9-2002 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (for short 'the Tribunal') in Appeal No. E/801/89C and Appeal No. E/1250/2002-A whereby the Tribunal dismissed the Appeals filed by the assessee whereas the Civil Appeals @ Special Leave Petition (C) Nos. 9271-78 of 2003 have been filed by the Revenue against the Final Order No. CI/2019-26/WZB/2002 dated 23-7-2002 passed by the Tribunal in Appeal No. E/149 to 153 and 447 to 449/2001-Mum. whereby the Tribunal allowed the appeals filed by the respondents.
4. The facts are stated from Civil Appeal No. 2747 of 2001 (M/s. Nizam Sugar Factory).
5. The Department had issued a Show Cause Notice (for short 'the SCN') to the appellant on 28-2-1984 demanding duty for the period February, 1978 to September, 1982 on the production of impure Carbon dioxide emanating as a by-product during the process of fermentation of molasses in the appellants' factory. It was alleged that the assessee had cleared the said carbon dioxide without payment of duty to another unit in contravention of Rule 9(1) of the Central Excise Rules, 1944 (for short 'the Rules') and without obtaining licence for manufacture of carbon dioxide in their factory; without filing Classification/Price List and without maintaining accounts. Appellant in its reply dated 19-3- 1994 relying on some earlier decisions contended that impure carbon dioxide was not exigible to duty. The case was heard on 16-4-1984 and thereafter no further action was taken in the matter.
E/87430/2015, E/87068/2016 & E/88902/2018 9
6. Appellant was served with a second SCN by the Collector on 16-7-1987 alleging that the appellant was supplying carbon dioxide to another unit as per agreement dated 19-3-1983; that they had not taken necessary licence; had not followed the procedure prescribed under the rules; and had not discharged duty liability. The said SCN covered the period of assessment years 1982-83 to 1986-87. Appellant responded to the second SCN and took the plea that the SCN under consideration was practically a repetition of the allegations contained in the SCN dated 28-2-1984 and for the period April, 1982 to September, 1982 the department had raised demands under two different SCNs. It was pointed out that carbon dioxide in the impure form was not marketable as it also contained carbon monoxide in lethal proportions. It was contended that they were under bona fide belief that since such impure carbon dioxide was not exigible to payment of duty, they were not required to file either Classification List or the Price List or take out licence. It was submitted that resorting to extended period of limitation under Section 11A(1) was not justified in the circumstances of the case. Appellant was served with the third SCN on 12-9-1988 for the period 16-3-1988 to 27-6-1988 on the same allegations. Assessee filed its reply in terms of the earlier replies i.e. reply to SCN dated 16-7-1987. The adjudicating authority did not accept the appellant's contention and the demands raised in the SCN were confirmed.
7. Aggrieved against the aforesaid orders of the adjudicating authority, the appellant filed appeals before the Tribunal relating to the second and third SCNs which were clubbed together and disposed of by a common order. The Tribunal did not record any finding regarding the marketability but held that the impure carbon dioxide emanating as a by-product during the process of fermentation of molasses would be covered under Chapter Heading No. 28.11 of Central Excise Tariff Act, 1986 (for short 'the Tariff Act'). Counsel for the appellant had contended before the Tribunal that in a case where the Department issued a show cause notice on the basis of certain set of facts to an assessee, then, it cannot allege in another show cause notice issued subsequently for a later period, suppression on the part of the assessee as it was fully aware of the facts even at the time of E/87430/2015, E/87068/2016 & E/88902/2018 10 the issuance of the first show cause notice. Extended period of limitation could not therefore be evoked. In support of this contention reliance was placed upon the following six judgments of the Tribunal viz. Hindustan Development Corporation Ltd. v. CCE [1990 (50) E.L.T. 165 (T)]; Khatao Makanji Spg. & Wvg. Co. v. CCE, Bombay [1999 (108) E.L.T. 378 (T)]; Sonarome Chemicals Pvt. Ltd. v. CCE, Bangalore [1998 (101) E.L.T. 328 (T)]; Mettur Chemical & Indus. Corpn. Ltd. v. CCE, Coimbatore [1996 (87) E.L.T. 114 (T)]; Wipro Information Technology v. CCE, Bangalore [1999 (107) E.L.T. 467 (T)]; and Nicholas Piramal India Ltd. v. CCE, Mumbai [1998 (101) E.L.T. 314 (T)].
8. Without going into the question regarding Classification and marketability and leaving the same open, we intend to dispose of the appeals on the point of limitation only. This Court in the case of P & B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in (2003) 3 SCC 599 = 2003 (153) E.L.T. 14 (S.C.) has taken the view that in a case in which a show cause notice has been issued for the earlier period on certain set of facts, then, on the same set of facts another SCN based on the same/similar set of facts invoking the extended period of limitation on the plea of suppression of facts by the assessee cannot be issued as the facts were already in the knowledge of the department. It was observed in para 14 as follows :
"14. We have indicated above the facts which make it clear that the question whether M/s.
Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the first show cause notice was issued in 1985 and also at the stage when the second and the third show cause notices were issued in 1988. At all these stages, the necessary material was before the authorities. They had then taken the view that M/s. Pharmachem Distributors was not a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a suppression of fact on the part of the E/87430/2015, E/87068/2016 & E/88902/2018 11 assessee so as to saddle with the liability of duty for the larger period by invoking proviso to Section 11A of the Act. So far as the assessee is concerned, it has all along been contending that they were not related persons, so, it cannot be said to be guilty of not filling up the declaration in the prescribed proforma indicating related persons. The necessary facts had been brought to the notice of the authorities at different intervals from 1985 to 1988 and further, they had dropped the proceedings accepting that M/s. Pharmachem Distributors was not a related person. It is, therefore, futile to contend that there has been suppression of fact in regard M/s. Pharmachem Distributors being a related person. On that score, we are unable to uphold the invoking of the proviso to Section 11A of the Act for making the demand for the extended period."
This judgment was followed by this Court in the case of ECE Industries Limited v. Commissioner of Central Excise, New Delhi reported in (2004) 13 SCC 719 = 2004 (164) E.L.T. 236 (S.C.). In para 4, it was observed :
"4. In the case of M/s. P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in [2003 (2) SCALE 390], the question was whether the extended period of limitation could be invoked where the Department has earlier issued show cause notices in respect of the same subject-matter. It has been held that in such circumstances, it could not be said that there was any wilful suppression or mis-statement and that therefore, the extended period under Section 11A could not be invoked."
Similarly, this judgment was again followed in the case of Hyderabad Polymers (P) Ltd. v. Commissioner of Central Excise, Hyderabad reported in 2004 (166) E.L.T. 151 (S.C.). It was observed in para 6 :
".......... On the ratio laid down in this judgment it must be held that once the earlier Show Cause Notice, on similar issue has been dropped, it can no longer be said that there is any suppression. The extended period E/87430/2015, E/87068/2016 & E/88902/2018 12 of limitation would thus not be available. We are unable to accept the submission that earlier Show Cause Notice was for a subsequent period and/or it cannot be taken into consideration as it is not known when that Show Cause Notice was dropped. If the Department wanted to take up such contentions it is for them to show that that Show Cause Notice was not relevant and was not applicable. The Department has not brought any of those facts on record. Therefore, the Department cannot now urge that findings of the Collector that that Show Cause Notice was on a similar issue and for an identical amount is not correct."
9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.
10. For the reasons stated above, Civil Appeal Nos. 2747 of 2001 and Civil Appeal No. 6261 of 2003 filed by the assessees are accepted and the impugned orders are set aside on the question of limitation only. The demands raised against them as well as the penalty, if any, are dropped. Civil Appeals @ Special Leave Petition (C) Nos. 9271-9278 of 2003 filed by the department are dismissed. Questions of classification and marketability are left open. Parties shall bear their own costs."
In para 9 of the said ruling, Hon'ble Supreme Court has held that when the first show cause notice was issued, all the relevant facts were in the knowledge of authorities and that while issuing the second and third show cause notices, the same and similar facts would not be taken as suppression of fact on the part of the assessee as these facts were already in the knowledge of the authorities. Therefore, Hon'ble Supreme Court has held that in E/87430/2015, E/87068/2016 & E/88902/2018 13 respect of second and third show cause notices, there was no suppression of fact on the part of the appellant. We note that in the above stated show cause notices dated 27.01.2016 and 22.12.2017 the same facts as that in show cause notice dated 30.01.2015 were stated and was stated that there were suppressions of fact. By following the ruling by Hon'ble Supreme Court in the case of Nizam Sugar Factory (Supra), we hold that the other two show cause notices except show cause notice dated 30.01.2015 are not sustainable in law. We, therefore, hold that order-in-original dated 27.05.2016 which is arising out of show cause notice dated 27.01.2016 is not sustainable and the same is set aside. As a result, appeal No. E/87068/2016 is allowed. Similarly, order-in-original dated 31.05.2018 arising out of the said show cause notice dated 22.12.2017 is not sustainable and the same is set aside and appeal No. E/88902/2018 is allowed.
6. Now the demand raised through show cause notice dated 30.01.2015 is partly covered by normal period of limitation. We, therefore, examine the merit of the issue. We understand that SKO is cleared from the place of removal after manufacture. If it is intended for use in public distribution system and is cleared at nil rate of duty under the said two notifications while the goods are transported through pipeline, some negligible quantity of SKO gets mixed with either HSD or with MS. Revenue is of the view that the said negligible quantity of SKO which is inevitably getting mixed with MS or HSD while continuous transportation through pipeline should be subjected to central excise duty since it has not ultimately reached public distribution system. Learned special counsel for Revenue has emphasized on the word "ultimate" whereas learned counsel for the appellant has emphasized on the words "for use". For the purpose of understanding the legislative meaning of the words "for use"
learned counsel for the appellant has relied on ruling by Hon'ble Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. (supra). For the sake of ready reference we reproduce para 2 to 15 of the said judgment as follows:-
E/87430/2015, E/87068/2016 & E/88902/2018 14 "2. The respondent-assessee supplied cement in the years in 1964-1965 and 1965-1966 to the Punjab State Electricity Board (referred to hereinafter as 'the Board') on the basis of the certificates issued by the Board to the effect that the cement was required for use in the generation or distribution of electrical energy. In the initial assessment proceedings on the basis of these certificates the sales of cement by the assessee to the Board were exempted. The exemption was granted under Section 5(2)(a)(iv) of the Act.
3. Section 5(2)(a)(iv) of the Act reads as under :
"5(2). In this Act the expression 'taxable turnover' means that part of the dealer's gross turnover during any period which remains after deducting therefrom -
(a) x x x x
(1) x x x x
(2) x x x x
(3) x x x x
(iv) Sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910 (IX of 1910) of goods for use by it in the generation or distribution of such energy:
x x x x x x x x x x x x x
4. There is no dispute that the Board was an undertaking supplying the electrical energy to the public and that it held a licence or a sanction under the Indian Electricity Act 1910. The assessing authority on the basis of the certificates took the view that the cement was sold by the assessee to the Board for use by it in the generation or distribution of electrical energy.
5. Thereafter on the basis of an audit report, the assessment was reopened by the Deputy Excise and Taxation Commissioner (Appeal). The Deputy Commissioner started suo motu proceedings under Section 21 of the Act and issued a show cause notice to the assessee; and, after giving a hearing to the assessee, he came to the conclusion that the exemption was not attracted and the deduction which had been granted by the E/87430/2015, E/87068/2016 & E/88902/2018 15 original assessing authority, to the tune of Rs. 1 lac for the year 1964-65 and Rs. 2 lacs for the years 1965-66, had been granted wrongly and issued additional demands aggregating to Rs. 18,000/-.
6. The assessee challenged the additional demands made before the Sales Tax Tribunal, Haryana but the challenge was repelled by the Tribunal and the appeal of the assessee dismissed.
7. Thereafter a reference was made by the Tribunal to the Punjab & Haryana High Court under Section 22 of the Act. The Division Bench of the High Court while disposing of the reference came to the conclusion that on a true construction of the provisions of Section 5(2)(a)(iv) of the Act, the assessee, who made sales to the said Board on the basis of the certificates that the cement was required for use in the generation and distribution of electrical energy, is not required to prove further that the cement was actually so used and, on the basis of this decision which is challenged before us.
8. The submission of R. Bana, learned counsel for the appellant is that in order to get the benefit of the exemption it is required that it should be established before the Tax Authorities that the cement supplied by the assessee was actually used by the Board in an activity directly connected with the generation or distribution of electrical energy. In the present case, the inquiry held by the Deputy Commissioner showed that the assessee was not in a position to establish such actual use by the Board and it appeared that part of the cement supplied was used by the Board in the construction of staff quarters and other constructions which could not be said to be directly connected with the generation or distribution of electrical energy.
9. It was, on the-other hand, submitted by the learned counsel for the respondent that there was nothing to show that the certificates issued were false certificates as such, that is, certificates given with the knowledge that the cement purchased was to be used partly in activities not directly connected with the generation or distribution of electrical energy nor were the certificates obtained by the assessee in collusion with the Board.
E/87430/2015, E/87068/2016 & E/88902/2018 16 The assessee was entitled to rely on the certificates and get the exemption.
10. We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, for example, "goods actually" used or "goods used".
11. Mr. Bana, in support of his submission, drew our attention to the decision of the High Court of Madhya Pradesh in Associated Cement Co. Ltd., Kymore, M.P. v. Assistant Commissioner of Sales Tax, Jabalpur Region, Jabalpur and Another - 1971 (28) S.T.C. 629. In that case the exemption provision was in pari materia with the exemption provision before us. It was held by the Madhya Pradesh High Court that everything sold to the Electricity Board for its use did not fall within the exemption under Section 2(j)(a)(iii) of the Act. It was only when there was direct use of the goods in the generation or distribution of electrical energy that the goods sold to the Board could fall within the exemption.
12. We may point out that this decision in not of any assistance in the case before us as the dispute in that case centered on the question whether, in order to attract the exemption, the goods supplied must be directly used in the generation or distribution of electrical energy or whether indirect use of the goods for the aforesaid purpose was enough. It appear that the Division Bench which decided that case did not consider at all the question whether the expression "for use" in the exemption clause meant "intended for use" or it meant "actually used". The same is the position regarding the decision of the High Court of Punjab & Haryana in Spedding Dinga Singh & Co. v. The Punjab State -
E/87430/2015, E/87068/2016 & E/88902/2018 17 (1968) 22 S.T.C. 319 which dealt with the very sub-clause in question before us.
13. We are, therefore, of the view that the real question which we are called upon to determine is whether, in the present case, the cement supplied was intended for use directly in the generation or distribution of electrical energy. If it was so intended, the exemption was attracted but not otherwise. The certificates which we have referred to earlier issued by the Board clearly show that the intention of the Board was that the cement should be used for a purpose directly connected with the generation or distribution of electrical energy. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion with the Board. The mere fact that some of the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption.
14. In view of the conclusion set out in the previous paragraph, we do not feel called upon to go into the question whether certificates granted by the Board must be regarded as conclusive in a matter of granting exemption. We may, however, point out that the certificate contemplated under Section 5(2)(a)(iv) of the Act cannot compare with the certificate in Form C which is a statutory certificate nor can it be regarded as completely conclusive. We are not called upon in this case to consider in what circumstance the assessing authority can go behind the certificate. It is clear that in the present case no such circumstances existed.
15. In the result, the appeals must fail and are dismissed with costs."
We note that Hon'ble Supreme Court in para 10 of the above stated ruling has observed that it must be noted that the important words used in the relevant provisions are goods "for use" by it in the generation or distribution of such energy and that on a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". In para 13 Hon'ble Supreme Court has also held that there was no other E/87430/2015, E/87068/2016 & E/88902/2018 18 use by the user in mind in that case. We find that the ruling by Hon'ble Supreme Court in the above said case of State of Haryana vs. Dalmia Dadri Cement Ltd. is squarely applicable in the present case. In the present case the goods were intended for use in public distribution system. There is no evidence that there was any clandestine removal of the goods by any of the authorities. There was no end-use condition required for availment of exemption. We note that intermixing was inevitable. Revenue also did not draw samples and obtain a report from Central Revenue Laboratory as to the content of SKO in intermix. We, therefore, by following the judgment in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. (supra) hold that there was no case for recovery of central excise duty on SKO after SKO was cleared for the intention of use in public distribution system by availing exemption allowing full exemption of duty. We, therefore, set aside order-in-original dated 31.07.2015 and allow appeal No. E/87430/2015.
7. To sum up, we allow appeal Nos. E/87430/2015, E/87068/2016 and E/88902/2018.
(Order pronounced in the open court on 11.12.2024) (Anil G. Shakkarwar) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu