2011 (11) TMI 558 - AT - Central Excise

Benefit of Notification No. 1/95-C.E., dated 4-1-1995 - Procurement of furnace oil without payment of excise duty - Held that - The argument on part of the Revenue is that furnace oil is not a consumable going by ordinary meaning of the word or the definition of the word as given in the Import-Export Policy. His argument is that furnace oil is not consumed in the manufacture of terry towels because no part of the furnace oil forms part of the product manufactured. We are not able to agree with this argument. Steam was required for manufacture of terry towels and furnace oil obtained was used for producing steam and steam was consumed in manufacture of terry towels. That being the situation, the meaning given by the Commissioner (Appeals) to the word consumable is only a proper interpretation - Following decision of assessee s own previous case 2007 (10) TMI 303 - SUPREME COURT OF INDIA - Decided against Revenue.

Summary

Issues:
Interpretation of Notification No. 1/95-C.E. for exemption on furnace oil procurement without excise duty payment.
Applicability of the term "consumables" in Annexure-I of the notification.
Validity of the show cause notice for excise duty demand on furnace oil.
Interpretation of the term "consumables" in the context of manufacturing process.
Consideration of the time-bar for raising the excise duty demand.

Analysis:
The judgment involves the interpretation of Notification No. 1/95-C.E. regarding the exemption on furnace oil procurement without excise duty payment. The respondents, a 100% Export Oriented Undertaking manufacturing terry towels, obtained furnace oil under the said notification. The dispute arose when the Revenue contended that furnace oil did not fall under the consumables listed in Annexure-I of the notification, leading to a demand for excise duty. The Commissioner (Appeals) held in favor of the respondents, considering furnace oil as consumables. The Revenue challenged this decision.

The Revenue argued that only materials consumed in the manufacturing process qualify as consumables, emphasizing that furnace oil was not directly part of the final product. They highlighted that the notification was amended to specifically include furnace oil for boilers after the disputed period. The respondents countered, stating that furnace oil was essential for steam production, a necessary component in manufacturing terry towels. They relied on legal precedents and a Customs Circular to support their position.

The Tribunal rejected the Revenue's argument, affirming that furnace oil, used to produce steam consumed in the manufacturing process, qualified as a consumable under the notification. The Tribunal referenced legal precedents to support their interpretation. They dismissed the Revenue's appeal, stating that the issue was settled law and did not require further examination. The Tribunal did not delve into the time-bar issue raised by the Revenue, as they found no merit in the appeal.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision, ruling in favor of the respondents regarding the exemption on furnace oil under Notification No. 1/95-C.E. The judgment clarified the interpretation of "consumables" in the context of the manufacturing process, emphasizing the essential role of furnace oil in steam production for manufacturing activities. The Tribunal's decision highlighted the settled legal position on the matter, dismissing the Revenue's appeal.