TMI Blog2006 (12) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... t this residue is mainly used as a direct fuel for heating crude oil as well as for generating steam in boiler. The steam so generated is in turn used for generating electricity in a co-generation plant. This electricity and excess steam are captively used in the refinery. A part of RCO resulting from refining of crude oil is udgraded by mixing with other petroleum products. The product so upgraded is called Low Sulphur Heavy Stock (LSHS). During the period 1-3-1994 to 31-3-2005, the appellants removed naphtha and LSHS out of the factory under bond to M/s. IBP Ltd. without having paid duty on the corresponding quantity of RCO used as fuel. They were claiming the benefit of Notification No. 217/86-CE (upto 28-2-1995) and Notification No. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the refining process was consumed as fuel for production of steam and electricity, which, in turn, were used captively for manufacture of petroleum products. The demand of duty is on RCO consumed as fuel for production of steam and electricity as also on the RCO content in LSHS removed from the factory during the period of dispute. 3. After hearing both sides and considering their submissions, we find that the short question to be settled in these appeals is whether the removal of naphtha and LSHS under bond from the refinery can be considered to be removal of goods chargeable to nil rate of duty or exempt from payment of duty. Notifications 217/86-C.E. and 67/95-C.E. granted exemption to intermediate products where the final prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sulphur (a by-product chargeable to nil rate of duty) cleared during the same period without payment of duty in terms of the same Notification. The order challenged in Appeal No. E/1235/2001 sustained demands of duty on Fuel Oil held to have been used for the manufacture of both raw naphtha and sulphur cleared like wise during 8/1999-3/2000 . 10. Following the decision in IOCL s case that no duty was leviable on any quantity of fuel oil/LSHS used for generating steam required for the refining of crude petroleum (yielding petroleum products) in the appellants refinery during the period of dispute, as we have found that such use of fuel oil/LSHS was covered by the expressions conduct such further manufacturing processes under Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of RCO. It is submitted that, in the case of Indian Oil Corporation Ltd., the apex court impliedly upheld the view taken by the Tribunal in Madras Refineries Ltd. s case. Learned Counsel has also claimed support from the Tribunal s decision in Commissioner of Central Excise, Chennai v. Madras Refineries Ltd. [2000 (121) E.L.T. 645 (Tri.)], wherein Modvat credit was allowed to the party on inputs used for the manufacture of final products which were cleared under bond. Relying on the cited judicial authorities, learned Counsel submits that the substantive issue is no longer res integra. On the other hand, learned SDR submits that none of the decision cited by learned Counsel would support the appellants challenge against the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty raised by the Commissioner against the appellants in respect of RCO as direct fuel for the production of steam and electricity which, in turn, were captively used in the manufacture of naphtha and LSHS (along with other petroleum products) which were cleared from the refinery under bond cannot be sustained. As pointed out by learned SDR, it appears, there is a small clearance of the petroleum products at nil rate of duty under relevant Notifications. Leaned counsel has claimed that this clearance of goods was also made under bond, but he has not adduced evidence in support of this claim. Hence we observe that learned Commissioner has rightly demanded duty on that quantity RCO which is proportionate to the quantity of naphtha and LS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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