2002 (4) TMI 132 - AT - Central Excise

Summary

Issues Involved:
1. Whether intermediate goods produced in a refinery during the process of blending, mixing, reprocessing, and manufacturing are liable to pay duty when used captively or only when cleared for home consumption.

Issue-wise Detailed Analysis:

1. Captive Use vs. Home Consumption Duty Liability:
The primary issue for determination was whether intermediate goods produced in a refinery, such as Slack Wax, JBO(C), JBO(P), TOFS, RCO, and SKO, used in the manufacture of furnace oil, are liable to pay duty in terms of their captive use or only when they are finally cleared for home consumption.

Facts of the Case:
M/s. Indian Oil Corporation Ltd. manufactured various intermediate products used to produce furnace oil, which was cleared without payment of duty under specific notifications for use in fertilizer units. The Department alleged that these intermediate products were liable to duty under Notification No. 65/95, resulting in a significant demand and penalty.

Contentions of the Assessee:
The assessee argued that according to Ministry of Finance letters and Central Excise Rules, intermediate products used within the refinery should not attract duty. Specifically, Rule 140(2) and Rule 143A of the Central Excise Rules, 1944, allowed refineries to be deemed as warehouses, and intermediate products utilized within these premises for further manufacturing processes should not be dutiable. They contended that a specific code for warehouses in refineries prevailed over general provisions, and duty was payable only when goods were cleared for home consumption.

Contentions of the Revenue:
The Revenue argued that Section 3 of the Central Excise Act, 1944, mandated duty on all manufactured products, including identifiable and marketable intermediate goods. They contended that using these intermediate products in further manufacturing processes within the refinery constituted removal for the purposes of Rules 9 and 49, necessitating duty payment.

Tribunal's Analysis and Findings:
The Tribunal acknowledged the special provisions for warehoused goods in refineries, emphasizing that Rule 157 of the Central Excise Rules specified duty payment only upon clearance for home consumption. They noted that the use of intermediate products in manufacturing the final product did not equate to removal for home consumption. The Tribunal referenced previous decisions, including Hindustan Petroleum Corporation Ltd. v. Collector of Central Excise and Cochin Refineries Ltd. v. Collector of Central Excise, which supported the view that intermediate products used within the refinery were not liable for duty unless removed for home consumption.

Conclusion:
The Tribunal concluded that no duty was payable on intermediate products used in processing, blending, mixing, or manufacturing the end product within a refinery deemed as a warehouse. Consequently, the appeals were allowed, and any consequential benefits were to be granted in accordance with the law.