2010 (10) TMI 7 - SC - Central Excise

Concessional rate of duty - superior kerosene - notification no. 5/98 - Held that - The expression ordinarily may mean normally , but, the said expression must be understood in the context in which it has been used. - it becomes abundantly clear that the word ordinarily implies that the kerosene must be ordinarily used for illumination purposes, and it would be immaterial if the kerosene is also used for other domestic purposes - it is plain that the benefit of concessional rate of duty extends only to that variety of kerosene that (i) has a smoke point of 18mm or more, and (ii) is ordinarily used as an illuminant in oil burning lamps. It is manifest that these two conditions are conjunctive, and therefore, the twin conditions need to be satisfied in order to avail of the concessional rate of duty

Summary

Issues:
Interpretation of Notifications No. 5/98-CE and 5/99-CE for concessional rate of Excise duty on kerosene products. Whether kerosene cleared to industrial users qualifies for the benefit of the notifications.

Analysis:
The case involved civil appeals challenging an order by the Customs, Excise & Gold (Control) Appellate Tribunal denying the appellant the benefit of concessional rate of Excise duty under Notifications No. 5/98-CE and 5/99-CE. The appellant, a public sector undertaking, manufactured petroleum products, including "superior kerosene" classified under Chapter sub-heading 2710.90 of the Central Excise Tariff Act, 1985. The notifications provided for concessional rates of duty on specific categories of kerosene products.

The Tribunal dismissed the appeal, emphasizing that the notifications aimed to benefit economically backward masses by providing concessional rates for kerosene used as illuminant in oil burning lamps. The Tribunal found that kerosene cleared to industrial users during the dispute period did not satisfy the criteria of being ordinarily used as illuminant in oil burning lamps, hence not eligible for the concessional rate of duty.

The appellant argued that the conditions in the notifications related to the quality of kerosene capable of illumination, not the end-user, citing relevant legal precedents. On the contrary, the additional Solicitor General contended that both conditions in the notifications must be met to qualify for the concessional rate, and supplying kerosene to industrial consumers did not fulfill these conditions.

The Supreme Court held that the primary objective of the notifications was to provide relief to economically backward sections using kerosene for illumination, limiting the benefit of concessional rate of duty to kerosene cleared to the Public Distribution System (PDS). The Court interpreted the term "ordinarily" in the context of the notifications, emphasizing that kerosene must be predominantly used for illumination to qualify for the concessional rate, irrespective of other domestic uses.

The Court concluded that the appellant's clearance of kerosene to industrial consumers did not meet the conditions specified in the notifications, thus affirming the Tribunal's decision. The appeals were dismissed with costs imposed on the appellant.