Customs, Excise and Gold Tribunal - Delhi
Haryana State Electricity Board vs Collector Of Central Excise on 10 April, 1990
Equivalent citations: 1990(31)ECR285(TRI.-DELHI)
ORDER D.M. Vasavada, Member (J)
1. The appellant herein were during the material time engaged in the generation and distribution of electricity falling under the erstwhile tariff item No. 11E. Electricity used for agricultural consumption was exempted from the whole of duty. The appellant was a partner in the Bhakra, Dehar and Pong Power Houses under the control of Bhakra Bens Management Board (hereinafter referred to as BBMB) where electric energy was generated. The appellant board received its share of electricity generated in the above Power Houses as a partner. The appellant board had also its own Power Houses situated in the State of Haryana where electric Power was generated. Originally Central Excise duty on electricity which was levied with effect from 1.3 1978 (withdrawn from 1.10.1984) generated at the above power houses under the management and control of BBMB was being paid by BBMB but w.e.f. 1.4.1981 it stopped paying the duty contending that it should be paid by the partner State Electricity Boards on the basis of their share. The Central Beard of Excises and Customs vide its letter dated 15.2.1983 accepted the above suggestion and allowed the payment of duty within two months of clearance of electricity from BBMB. Pursuant thereof the appellant board filed revised RT-12 returns for the years 1981-82 and 1982-83 and thereafter regularly filed monthly RT-12 returns and the total duty for the above period as per those returns came to Rs. 13.60 Crores approximately. The appellant board could not however pay up the duty within the period of two months originally stipulated and payment fell in arrears. However with the approval of jurisdictional Additional Collector at Ambala the appellant board executed bonds on 23.12.1983 and again on 8.6,1984 and undertook to pay arrears of duty by instalments. The board started paying arrears of duty by instalments. Later on as a result of discussions between the appellant's jurisdictional Assistant Collector and the Collector of Central Excise Chandigarh the entire arrears outstanding against the appellant were transferred to Chandigarh Collectorate for recovery from BBMB. Thereafter the appellant board was served with Show Cause Notice on 29.7.1985 alleging that while assessing RT-12 returns filed by the appellant board for the months of March 1984 to September 1984 it was noticed that duty as per these returns amounting to Rs. 3,13,02,337.24 had not been paid and that the appellant board had intentionally avoided payment of duty. The appellant in its reply stated that there was no controversy or dispute regarding the amount of duty and that payment had gone into arrears due to extremely stringent condition of the board. On adjudication the learned Collector confirmed the demand and also imposed a penalty of Rs. 1 lakh under rule 173(Q) for the reasons stated therein. Aggrieved by the above order the appellant has come in this appeal.
2. We have heard Mrs. Archana Wedhawa, learned Advocate for the the appellant and Shri S.R. Narayanan, learned J. CDR for the respondent.
3. Mrs. Wadhawa submitted that the appellant board had agreed to pay the duty on the electricity which came to its share from the electricty generated by BBMB and that was an agreement arrived at between BBMB and the appellant board keeping in view the financial stringency of BBMB But otherwise it was legal duty of BBMB to pay the duty as per provisions of rule 9(1) of the Central Excise Rule, 1944. So (be department could not proceed against the appellant board for arrears of duty leviable on electricity generated by RBMB. She pointed out that at the time of personal hearing also the appellant had raised this contention and that contention has been noted in the impugned order also. The learned Collector nut with this argument in following terms. 'in the reply to the show cause notice, while admitting the non-payment, the party has tried to shirk their responsibility by arguing that the 'Prime' responsibility to pay the duty rested with the Bhakra Beas Management Board. I am surprised that the party is taking such a line as if they are paying the duty out of courtesy. It must be noted that the RT-12 returns cover a considerable quantity of electricity generated by H.S. EB itself in its thermal plants. The argument attempting to evade the responsibility as above in any case does not apply to the electricity generated by the H.S.E.B itself. Even otherwise, the party themselves admit that accord ing to an agreement they had been entrusted with the responsibility to pay the Central Excise duty on "their share of electricity" produced by other stations. Firstly, the reference to "their share" of electricity produced shows at least prima facie, in the absence of specific arguments, that the H.S.E.B is also a sharer of the production. Even otherwise, this is a case to which Rule 3 of the Central Excise Rule squarely applies. Mere, M/s. H.S.E.B have been expressly authorised by the various producing stations to be their agent in respect of the electricity produced for the purpose of confirming to the Central Excise Requirements and such authorisation is certainly approved by the Collector and even by the Central Board of Excise and Customs, In these circumstances M/s. H.S.E.B shall be deemed to be the owner of the electricity produced for nil the purposes of the Central Excises and Salt Act, 1944 which includes the liability to pay duty and also penal consequences arising from a failure to perform obligations under the Act. 1, therefore, reject the contention that the H.S.E.B had no 'Prime' responsibility to pay the duty". As submitted by Mrs. Wadhawa that is not the correct position of law. She also submitted that Show Cause Notice dated 29.7.1985 has been issued alleging that the appellant had not paid the duty on electricity generated by the Board during the period March 1984 to September 1984 but in fact this amount was already paid by the appellant as can be seen from the letter dated 16.10.1985 which is on record as annexure 'B' with the appeal memo. On perusal we find that this is the letter addressed by the Assistant Collector, Central Excise of Ambala City to the Collector Central Excise Chandigarh wherein after stating about the amount of duty recoverable and amount of duty which was recovered from the appellant board on its own generation and on the electricity generated by the BBMB it has been stated as under:
As the arrears on the share of M/s. BBMB itself amount to Rs. 13,28,95,057.01, the entire amount pending realisation is transferred to Chandigarh Collectorate and May please be recovered at your end. The arrears on their own generation stand fully recovered. In fact Rs. 98,28.032.95 have been recovered in excess of the arrears on their own generation. You may please take up the case with the Principal Collector, Central Excise & Customs, New Delhi for book adjustment of Rs. 98,28,032.95 in the favour of Chandigarh Collectorate.
4. The learned JCDR took time to clarify the position but he could not get any information from the Collectorate. In the absence of any clarification from the Collectorate there is no reason to disbelieve the statement made by the Assistant Collector in this letter. So the allegation in the Show Cause Notice that the appellant board had not paid duty leviable on the electricity generated in their Power Houses during the period March 1984 to September 1984 stands contradicted by this letter. No demand is raised for duty payable on electricity generated by BBMB and supplied to the appellant Board. So in light of this letter the Show Cause Notice stands contradicted and the adjudication order is rendered invalid. In this position of the matter it is not necessary for us to discuss the aspect of law as to whether the appellant board could be held liable for arrears of duty leviable on electricity generated in power houses owned by BBMB.
5. We have noted the statement made by Mrs. Wadhawa at the bar that amount demanded in notice has been in fact paid by the appellant during the pendency of this appeal. Whatever it might be but in the circumstances of the case there could not be any justification for imposing penalty also. So we pass the following final order.
(1) The appeal is allowed and the impugned order is set aside with consequential relief to the appellant, if any, Sd/- (D.M. Vasavada) Member (J) S.K. Bhatnagar:
I agree with the learned Member (Judicial)'s views in the matter. However I would like to add a few observations before parting.
During the course of the hearing the Bench had raised two important questions, one relating to jurisdiction and another relating to liability.
The Bench had observed that the show cause notice refers to the electricity produced in the power Stations under the control of Bhakra-Bias Management Board as also the electricity generated in the power stations of Haryana State Electricity Board, Chandigarh and this order had been passed by the Collector of Central Excise, Delhi. As such a question had arisen whether the Collector of Central Excise, Delhi had jurisdiction to deal with the matter.
Even in respect of, the electricity generated by Haryana State Electricity Board in its own power stations, the Bench wanted the learned SDR to show as to what was the liability of the Haryana State Electricity Board which survived on the date of issue of show cause notice. However the department could neither clarify the position regarding the jurisdiction nor that of the liability.
Prima-facie the power stations of Bhakra-Bias Management Board falls within the jurisdiction of Collector of Central Excise, Chandigarh. Whereas these under the Haryana State Electricity Board falls within the jurisdiction of Collector of Central Excise, Delhi. The Bench had given an opportunity to the department, to produce the copies of Central Excise licences issued to the assessees, but the department did not avail of the same.
In so far as the question of liability is concerned, in respect of the electricity generated in the power stations located under the control of Bhakra-Bias Management Board which are in the jurisdiction of Chandigarh Collectorate, the liability would, in the normal course, be that of the licence holder i.e. the legal unit which has licenced to produce the electricity. This liability could not he passed on to another licence holder (except in cases where liability could he legally transferred' under the rules and not otherwise), Rule 3 referred by the Collector in this regard does not help the case of the department as it is neither intended to cover such situations nor has even been invoked in the show cause notice. As such the liability, if any, in respect of the electricity generated in the power stations located in the jurisdiction of Chandigarh Collectorate and under the control of Bhakra-Bias Management Board could only be determined by the concerned officers of Chandigarh Collectorate and at the lace of it, the Collector of Central Excise, Delhi had no jurisdiction.
In this connection the letter of the Assistant Collector Central Excise, Ambala dated 16.10.1980 is very instructive.
It indicates that he had proposed to the Collector that the amount due from Bhakra-Bias Management Board on account of electricity generated in power stations under their control was required to be realised by the Chandigarh Collectorate; And this shows very correctly indeed, that the jurisdiction in this respect vested with the Collector of Chandigarh. This fact in turn supports the view already expressed above regarding jurisdiction for determining liability and relating the arrear if any.
In respect of the electricity produced in the power stations (under the control of Haryana State Electricity Board) in the jurisdiction of Delhi Collectorate, the Collector of Central Excise, Delhi was the competent authority.
However, it is interesting to note the facts which the letter (dated 16.10.1989) brings to light. It refers to the amounts which have been recovered from the appellant in respect of their own generation and states in so many words that "the arrears on their own generation have been fully recovered".
Hence as observed by my learned brother, Member (Judicial) the department to unable to show that any amount was outstanding in respect of the period covered by the show cause notice.
Further no case has been made out to show that Haryana State Electricity Board had violated the law deliberately with the intention to avoid responsibility or evade payment of Central Excise duty or that it has shown contumacious conduct in deliberate contempt of law or lawfully constituted authority.
The learned Collector has in this connection referred to the arrangements agreed to by the Central Board of Excise and Customs and approved by the Collector under which the Haryana State Electricity Board is said to have assumed the responsibility to pay duty in respect of its share of electricity from Bhakra-Bias Management Board apart from its own generation and the appellants have not denied it. However, this undertaking Bhakra-Bias Management Board and the Haryana State Electricity Board on one hand that the Ministries of Finance (CBEC) and Energy or the Collectorate(s) on the other hand had no basis in law. It merely amounts to an administrative arrangement for mutual convenience; And non-adherence of the same was not punishable under the Central Excise Act or Rules.
Even otherwise the Collector of Central Excise, Delhi could hardly have any grievance if his own Assistant Collector had proposed that the arrears in respect of the share of electricity from Bhakra-Bias Management Board may be realised by the Chandigarh Collectorate and had ensured that the arrears in respect of the latter were duly paid out in instalments. The Assistant Collector was obviously right.
In the above circumstances imposition of penalty by the Collector was not justified at all.
In view of the above position, agreeing with my learned brother Member (Judicial), I also accept the appeal.