2006 (3) TMI 598 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for exemption under Notification No. 75/84.
2. Interpretation of "refinery" in the context of exemption.
3. Applicability of subsequent notifications (Notification No. 217/86 and Notification No. 67/95).

Detailed Analysis:

Issue 1: Eligibility for Exemption under Notification No. 75/84
The appellant, Indian Oil Corporation Ltd., contested the demand for excise duty, arguing that they were entitled to exemption under Notification No. 75/84, dated 1-3-84. The show cause notices were issued because the department believed that the appellant had cleared Reduced Crude Oil (RCO) and Low Sulphur Heavy Stock (LSHS) at a 'nil' rate of duty, claiming it was used within the factory for generating electricity for captive consumption. The Commissioner of Central Excise and Customs, Vadodara, held that the appellant was not eligible for this exemption as they were not an electricity undertaking and did not meet the conditions specified under Serial No. 54 of the notification.

Issue 2: Interpretation of "Refinery" in the Context of Exemption
The appellant argued that they were a petroleum refinery with a thermal power station within their premises, generating electricity for their refinery purposes. They claimed exemption under Serial No. 34 of Notification No. 75/84, which was intended for use as fuel in a refinery. The Commissioner, however, contended that the thermal power station did not qualify as a refinery under the definition provided in the notification. The Tribunal found that since the thermal power station was situated within the refinery premises and generated electricity for manufacturing petroleum products, the fuel used for this purpose qualified for exemption under Serial No. 34.

Issue 3: Applicability of Subsequent Notifications (Notification No. 217/86 and Notification No. 67/95)
For the period after 1-3-1994, the appellant relied on Notification No. 217/86, as amended by Notification No. 61/94, which included Chapter 27 in the description of inputs and final products. The Tribunal held that the appellant was entitled to exemption under this notification for fuel used in generating electricity within the refinery premises. After Notification No. 217/86 was rescinded, similar benefits were available under Notification No. 67/95 from 16-3-1995. The Tribunal confirmed that the appellant was entitled to exemption for LSHS used as input for generating electricity used in the refinery for manufacturing final products under these subsequent notifications.

Conclusion
The Tribunal concluded that the appellant was entitled to the benefit of exemption under:
- Serial No. 34 of Notification No. 75/84 for the period up to 1-3-1994.
- Notification No. 217/86, as amended by Notification No. 61/94, for the period from 1-3-1994 to 16-3-1995.
- Notification No. 67/95 for the period after 16-3-1995.

The appellant was not entitled to exemption for electricity used for purposes other than manufacturing refinery products. The appeals were partly allowed, and the Commissioner was directed to calculate and quantify the demand accordingly.