ORDER
I.J. Rao, Member (T)
1. The Appellants before us M/s. Tata Iron & Steel Co. Ltd., a limited Co., are primarily engaged in the manufacture of iron and steel at its Works at Jamshedpur. They also hold a Licence U/S 28 of the Indian Electricity Act, 1910 for supply of electrical energy to the public within the sanctioned area. They set up three capital power houses inside their Works area primarily and es-sentially to meet the requirements of the Works. The generation of electricity from their own Power Houses not being sufficient to meet the capital and public demand, a con siderable quantity of electricity is purchased by the appellants from Damodar Valley Corporation (DVC in short).
2. In 1978 electricity became liable to Central Excise Duty, being classified as Tariff Item 11 (E). In the same year, the Central Government exempted from duty electricity on the condition that the same is generated in an industrial unit and is con sumed there. (Notification No. 52/78-CE).
3. The Central Excise Deptt. took into consideration the factual position that the electricity generated by the appellants gets mixed up with the electricity supplied by DVC. Therefore, there is no separate identity for the electricity manufactured by the ap pellants. Deptt. felt that the appellants did not pay the correct duty on the electricity which was partly used by them in their industrial units and partly consumed for other than industrial purposes. Alter due process, including the issuance of show-cause notice and a personal hearing, the Collector passed an order, to the effect that the appellants should pay duty on the electricity supplied by them for other than industrial uses in proportion to the electricity generated by themselves and that obtained from the DVC in a particular month. As a result, the threatened demand was reduced from over 3.78 crores to a little over 1.13 crores.
4. Aggrieved by this order, the Appellants filed a Writ Petition (CWJ) Case No 782/83 under Articles 226 & 227 of the Constitution of India in Patna High Court. Then: were three issues before the High Court. These were that the levy of duty on electricity was ultra vires and that electricity was not “goods”, that the demand was lime barred and finally that the formula suggested by the Collector of Central Excise was neither proper nor sound. The question of “vires” was not pressed, and the Court for reasons recorded in paragraph 11 of their Judgment did not express any opinion on the question of whether electricity was “goods”.
5. Considering the other contention pertaining to the formula laid down by the Collector of Central Excise, the High Court in paragraph 1.6 ordered as follows :
“Having examined the question very closely and having considered the mat-ter in all its ramifications, I direct that the Respondents should deduct the quant-tity of energy supplied to the various associated companies from the total supply of energy received from the DVC before it gets mixed up with the electricity generated in the petitioner’s power houses and thereafter, it would be ap-propriate if the petitioner paid the duty on the electricity supplied by them for other than industrial uses in proportion to the electricity generated by themsel-ves and that obtained from DVC in a particular month. In my opinion, it would be proper that this formula can be adopted on the quantitative analysis and where there is balance available from Tisco’s generation supplied outside the Works, duty should be chargeable on that balance;”
The other Judge on the Bench, Justice Hari Lal Aggarwal added the following to the Judgment passed by Justice Surendra Narain Jha. (Para 21) of the High Court
“The only point that was ultimately pressed by Mr. K.D. Chatterji was that while working out the ratio of the consumption of the electric energy for the industrial purposes by the petitioner company out of the supply received from the DVC and that from its own power house, no account has been taken of the supp-ly from the DVC being diverted to other sources before it was mixed up with the energy produced in the petitioner’s power house and thus, the ratio was augmented. It was accordingly argued that if the energy which was consumed by other sources is accounted for and only the balance of the supply from the DVC which only was being mixed with petitioner’s generation was considered, it will give some relief to the petitioner inasmuch as there was no other possibility of maintaining separate accounts of the consumption from the two sources of supply and their intermixture was inevitable. This argument which appears to be very reasonable and just was also not seriously opposed on behalf of the Revenue. And inasmuch as this requires a verification and a fresh calculation at the end of the Excise Authorities, the matter has to go back to them and it is accordingly remanded for a fresh calculation in accordance with above directions. There will be no order as to costs.”
6. In the light of the remand order, the Collector took up the matter for fresh adjudication. By that time, the appellants appeared to have come across two orders (in appeal) passed by the Central Board of Excise & Customs in the cases of M/s. F.C.I, and Indian Iron & Steel Co. Ltd. At least in one of these orders the Board decided that the electricity generated by the appellants’ thermal unit shall be liable to duty if and only when their internal consumption on any date, in the industrial unit, is reduced to less than the quantum generated by their Unit.
7. These orders were cited by the Appellants before the Collector. However, the Collector held that both orders in appeal were not relevant “because these decisions have been taken by a subordinate authority and therefore, the decision of the Hon’ble High Court of Patna is binding.”
8. Thereupon, the appellants came up before us in the present appeal. Mr. Ravindra Narain, the ld. Counsel for the appellants explaining the facts submitted that if the ratio of the Board’s order is not extended to the appellants whose facts are similar to the matter before the Board, there would be discrimination. He submitted that the correct approach would be to eliminate totally the electricity supplied by DVC and not mixed up with the appellants’ own production. After that, taking the total amount of electricity (the Appellants’ own production plus that part of the DVC supply which was actually mixed up) the monthly production of the appellants should be compared to the captive consumption in the Works. If such captive consumption is less than the total amount of electricity arrived at, duty should be demanded only on that part of it. If the total internal consumption is equal to or more than the total quantity of electricity arrived at, there should be no demand. Alternatively, if there is an excess of total generation including the DVC supply the entire mixed up energy should be apportioned between industrial consumption and non-industrial consumption. The ld. Advocate sub-mitted that the Collector quite wrongly ignored the direction to calculate the monthwise liability, mixed up the entire supply from DVC with the appellants’ own production and then apportioned it between captive (Industrial) and non-industrial consumption.
9. We made attempts to ascertain if the Central Board of Excise & Customs would agree to adopt the method of calculation recorded by the Member CBEC in his order in Indian Iron & Steel Co. Ltd. (Order No. 182 dated 18-6-1982 passed by the Central Board of Excise & Customs). However, in spite of repeated adjournments nothing was stated before us. The 1d. Representative of the Deptt. supported the Collector’s order.
10. We have considered the rival submissions. In the given set of facts, three views can be taken. The first view is to take into consideration the entire supply from DVC, add it to the appellants’ own generation and apportion the total between industrial consumption, eligible to exemption and non-industrial consumption. As the supply from DVC was of duty paid electricity such step may be harsh to the appellants. The second approach would be to take into consideration only that part of the DVC supply which actually gets mixed up with the appellants’ own generation and then apportion it at be-tween industrial consumption and non-industrial consumption. This is what the Patna High Court ordered. The third and most liberal step (from the Appellants’ point of view) would be to consider that the entire captive generation of the appellants was used for industrial purposes only and to demand duty only on that part of the captive generation, which is over and above the captive consumption (for industrial purposes). This is what the Appellate Order of the Board – (Supra) ordered, about the appellants’ want.
11. The question therefore, before us, whether we should follow the method we should follow the direction of the High Court. In our view, the choice is simple. The Board’s orders are not binding on us. But in the interest of justice, we can certainly consider their persuasive value but such persuasive value would vanish when on the same set of facts in respect of the same appellants and for the same period, the High Court passes an order. That the appellants were not aware of the Board’s order when they went before the High Court, cannot be a ground to agitate before us seeking that the High Court’s order should be ignored. We cannot, for a moment, over-look the fact that the Union of India were the Respondents before the High Court and the order was passed after hearing both sides and remained un-challenged. Therefore, we are bound by the High Court’s order.
12. The appellants have two grievances against the Deptt. even in the light of the High Court’s order. One is that the total supply from DVC was taken into consideration and the second one is that the Collector did not calculate the liability on the basis of monthwise figures. It was not possible for us to ascertain the accuracy of these facts and even the ld. Representative of the Deptt. was not in a position to deny or confirm these submissions made by the appellants. A perusal of the High Court’s order reproduced earlier would show that the Collector was bound to take into consideration only that part of the electricity deducting the quantity of energy supplied to the various associated companies from the total supply of energy received from DVC. The High Court’s order is also clear that this should be done on a monthly basis.
13. We, therefore, direct that formula laid down by the High Court should be applied to the matter. We have made clear the implications of the High Court’s order. The Collector should now examine the correctness of the demand against the appellants in the light of our directions which are entirely based on the Judgment of the Patna High Court. If these two requirements were not earlier followed due to any reason, the demand now should be revised in the light of our directions. The Appellants should be given adequate opportunity to make representations in this regard. A fresh order should be passed after such representations are considered by the Collector.
13A. The appeal is disposed of in these terms.
