Collector of C. Ex. Vs. U.P. State Electricity Board

1. The Department has filed the captioned appeal on the ground that benefit of Notification No. 51/78, dated 1-3-78 has wrongly been extended to the Respondents herein. The facts of the case in brief are that U.P. State Electricity Board was using power from the main grid for starting their auxiliary unit and once the auxiliary units start functioning the power from the main grid was switched off and the power generated by the auxiliary units was used for running the auxiliary units and for other purposes. The department alleged that the auxiliary units were only for the purposes of transmission and distribution of electricity and were not generating stations as required in the provisions to the aforesaid Notification. They, therefore, issued a show cause notice to the respondents herein asking them to explain as to why duty should not be demanded in respect of electricity consumed in the auxiliary stations. In reply to the show cause notice, Chief Engineer of U.P. State Electricity Board explained the working and stated that electricity generated by the stations was being supplied through the main grid and from the grid for switching on the auxiliary stations only electricity was being used and once the auxiliary stations were switched on, the supply from the main grid was switched off. After careful consideration of the submissions made, the learned Commissioner (Appeals) accepted the contention of the respondents herein and set aside the impugned order passed by the Assistant Commissioner and allowed the appeal of the respondents. Being aggrieved by this Revenue has filed the captioned appeal.

2. Arguing the appeal, Shri R.S. Sangia, learned Departmental Representative reads, from the grounds set out in the memo of appeal and submits that the auxiliary plants were definitely not engaged in generation of electricity but were meant for distribution, transmission and other collateral activity and, therefore, they were not eligible to the benefit of Notification No. 51/78. He submits that in this view of the matter the learned Collector (Appeals)'s order is erroneous inasmuch as the benefit of Notification No. 51/78, dated 1-3-78 was available only to generating stations and not to stations for distribution, transmission and other collateral activity.

3. Shri Y.P. Singh, learned Advocate appears for the respondents submits that there is no finding anywhere in the impugned order that electricity generated by one station under the U.P, State Electricity Board was being used by stations meant for transmission and other collateral activity. He refers to the clarification given by the Chief Engineer of the U.P. State Electricity Board which, according to the counsel, clarifies the position. He submits that this plea of the Department that electricity was being used in auxiliary plants engaged for purposes of transmission or other collateral activities and not for generation purposes is not based on any fact or any expert opinion given by the appellant or placed on record. He, therefore, requests that the impugned order be upheld and appeal may be rejected.

4. We have heard rival submissions. We have also perused the Notification in question. We find that proviso to Notification No.51/78 inter alia provides exemption provided that it is proved to the satisfaction of the Assistant Collector of Central Excise that such electricity is produced by generating stations and supplied to the auxiliary plants of such stations for generation purposes. We have also perused the expert opinion given by the Chief Engineer of U.P. State Electricity Board where we find that electricity produced by the generating stations was being used only to start the auxiliary stations and once the auxiliary stations get started, the main supply from the generating stations is switched off and only electricity produced by the auxiliary stations is used for different purposes. This clarification has not been rebutted by any expert opinion or by any technical literature furnished by the appellant. In this view of the matter, we find no merit in the appeal. We, therefore, uphold the impugned order and reject the appeal.