The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed the excise duty demand against the Indian Oil Corporation Ltd. on the manufactured Low Sulphur Heavy Stock ( LSHS ) captively consumed for electricity generation.
In this case, the appellants, M/s. Indian Oil Corporation Ltd, operates a refinery that processes crude oil and produces petroleum products like motor spirit ( MS ), ULSD, ATF, SKO, LDO, RPC, and LPG under Chapter 27 of the Central Excise Tariff Act. During manufacturing, they also produce Low Sulphur Heavy Stock (LSHS), which is used to generate electricity for their plant, as well as their township and hospital.
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For the usage of LSHS captively, the appellants were given a declaration in terms of notification no. 67/95-CE as amended by 11/97-CE. According to the above notification, no excise duty is required to be paid when the manufactured goods are used captively.
The department was of the view that usage of such LSHS, excise duty, was required to be paid since the electricity is not being used for any manufacturing purpose.
After issuing the Show Cause Notice ( SCN ), the demands were confirmed by the adjudication authority. The Commissioner (Appeals) upheld the Order-in-Original.
Being arrived at by the above orders, the appellant approached CESTAT for relief.
It was submitted by the appellant on behalf of the appellant that the product manufactured by them does not qualify to be termed LSHS. It was contended that the appellant’s LSHS cannot be marketed in the market since the BIS requirement has not been fulfilled. It proves that this product is not marketable as a result and thus no excise duty demand can be made.
The CESTAT bench observed that “the department did not take any timely action on raising the demand in respect of the LSHS used for the electricity that was consumed at their township refinery, hospital, etc. Therefore, we hold that the entire demand for the period January 2007 to March 2007 is time-barred. Hence we set aside the confirmed demand even on account of limitation to this extent.”
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The bench, comprising R. Muralidhar, Member (Judicial), and Rajeev Tandon, Member (Technical), allowed the appeal fully on merits and partly allowed on limitation.
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