2005 (4) TMI 370 - AT - Central Excise

Summary

Issues:
1. Applicability of exemption from Excise duty for reduced crude oil (RCO) captively consumed.
2. Interpretation of Circular issued by the Board regarding exemption for intermediate product electricity in the manufacture of petroleum products.
3. Previous Tribunal decision on exemption for RCO/LSHS used in the manufacture of electricity.

Analysis:
1. The main issue in this case was the contention raised by the applicants regarding the exemption from Excise duty for reduced crude oil (RCO) captively consumed. The applicants argued that as per Notifications issued, there was an exemption for RCO captively consumed by them, IOC Ltd. The Tribunal noted that there was no dispute about the applicability of the Notification issued under the provisions of Section 5(A) of the Central Excise Act.

2. The Tribunal referred to a Circular issued by the Board on 16-12-1977 to interpret the exemption for intermediate product electricity in the manufacture of petroleum products. The Circular stated that the exemption would be available to the quantity of intermediate product, i.e., electricity, generated as an incidental part of the manufacture of petroleum products falling under specific categories. It was clarified that the exemption would not apply to the quantity of petroleum product used in generating electricity if the electricity was not used in the process of manufacturing petroleum products. The Tribunal noted that there was no dispute that the electricity generated using RCO was indeed used in the process of manufacturing petroleum products.

3. The Tribunal also considered a previous decision by a Bench of the Tribunal in the applicants' own case regarding the exemption for RCO/LSHS used in the manufacture of electricity. The Bench had allowed the appeals in that case, clarifying that the exemption would not apply if the RCO/LSHS used in generating electricity was disposed of without being used in the refinery. Based on this previous decision and the prima facie case made by the applicants, the Tribunal decided to waive the requirement of pre-deposit and stay the impugned order in favor of the applicants.

In conclusion, the Tribunal found in favor of the applicants, considering the exemptions applicable to RCO captively consumed and the use of electricity generated in the manufacturing process. The decision was based on the interpretation of relevant Notifications and Circulars, as well as a previous Tribunal decision on a similar issue.