S.H. Shetha, J.
1. The Associated Cement Companies Limited, the petitioner before us, has been manufacturing cement at Sevaliaya in Kheda District. It has been running its power house in which it has been generating electric power for captive use only. It is used by them alone exclusively for the purpose of manufacturing cement. The Electric Power House is run with the help of steam to produce which boiler has been installed in the power house itself. It is the case of the petitioner that it is not supplying electricity to any outside person or agency but has been making exclusively captive use thereof. On 30th April 1975, the Central Government issued notification No. 118/75-Central Excise, under which it granted exemption from payment of excise duty to goods falling under Item 68 of the first schedule to the Central Excises and Salt Act, 1944, if they were produced by the manufacturer in his own factory only for the purpose of captive use. That notification came into force on 30th April, 1975.
2. On 6th August, 1976, respondent No. 3 issued to the petitioner notice calling upon to show cause why it should not be ordered to pay central excise and penalty on the production of steam which it had been doing since 1st March, 1975 without obtaining a licence in that behalf as contemplated by Section 6 of the Central Excises and Salt Act, 1944 and Rule 174 of the Central Excise Rules, 1944.
3. On 26th August, 1976, the petitioner replied to the show cause notice and denied its liability to pay excise duly. On 8th September, 1976, respondent No. 3 made an order in which he took the view that steam which was generated by the petitioner for the purpose of producing electric power and light was taxable under Item 68, the residuary item-in the first schedule to the Central Excises and Salt Act, 1944, and that the petitioner was, therefore, liable to pay excise duty to the extent of Rs. 6, 145.32 P. for the period commencing from 1st March, 1975 to 30th April, 1975 and also ordered the petitioner to pay a penalty of Rs. 100. The petitioner did not appeal against that order but filed this petition in which the order made by Superintendent Customs and Central Excise, Balasinor, is challenged.
4. It is not in dispute before us that since 1st May, 1975, the petitioner company has been enjoying the exemption from payment of duty on steam as well as electric power produced by it in its power house exclusively for captive use. So far as the period between 1st March, 1975 and 30th April, 1975 is concerned Mr. Nanavaty who appears on behalf of the petitioner has shown us another notification which was in force then. Under that notification, the Central Government had exempted goods specified in the schedule annexed thereto and falling under Item 68 of the first schedule to the Central Excises and Salt Act, 1944, from the whole of the duty of excise leviable thereon. One of the goods specified in the schedule read as under : 'Electric, Light and power'. It is clear, therefore, that during the relevant period, electric light and power was exempted from taxation under the residuary item 68 in the first schedule. However, can it therefore be said that steam was also exempted from taxation under residuary Item 68 by virtue of the said notification ?
5. There is no doubt or dispute about the fact that electric light and power is produced by the petitioner company exclusively for captive use only. So far as steam is concerned, if it was an independent product of the petitioner, probably it would have attracted the application of residuary Item 68. The facts of the case, however, show that steam was not produced as an independent commodity indeed exclusively for captive use In the instant case, the petitioner had been producing steam in order to produce electric light and power. Loosely, therefore, it can be described as an intermediate or component part of electric light and power. However, we are of the opinion that since steam was produced by the petitioner company only for the purpose of producing electric light and power, production of steam merely represented the process of producing electric light and power. It was nothing more than it. What has been rendered taxable under the Central Excises and Salt Act, 1944, is the final product and not the process of production or manufacture. Therefore, since steam was produced only in the process of producing electric power and light into which it has transferred as soon as it was produced, it did not attract taxability under residuary Item 68.
6. In the view of the matter, the petition succeeds, The impugned order is quashed and rule is made absolute with costs.