TMI Blog2007 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, 1944. 2.The assessee manufactures petroleum products like naptha from crude oil since 1969. These petroleum products fall under Chapters 27, 28 and 29 of the Central Excise Tariff Act, 1985. Basically, the assessee is a refinery. It uses Refinery Fuel Oil (RFO), being the residuary left after distillation of Bombay High Crude Oil as fuel for generation of high pressure steam which in turn is used for generation of electricity for their co-generation plant in which the high pressure steam moves a turbine which generates electricity. A part of that electricity is supplied to Tamil Nadu Electricity Board and the major portion of it is captively consumed. 3.In the present case, we are concerned with three products produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 1998 whereas the period August 1998 to January 1999 came under show cause notice dated 17th February, 1999. Consequently, in the present case, we are required to consider whether the Department was entitled to invoke the extended period of limitation under Section 11A with show cause notice dated 22nd December, 1998. However, that question did not arise in the case of show cause notice dated 17th February, 1999 since the demand fell within the period of limitation. 4.Having heard learned counsel on both sides, we are in agreement with the view expressed by the Tribunal in its impugned judgment by which it has been held that naptha is a petroleum product and, therefore, the assessee which was a "deemed warehouse" was entitled to exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for producing petroleum products. That status is not meant for producing products which are not petroleum products. In other words, the Deemed Warehouse Status demands nexus to the final product cleared from it. Generation of electricity, if captively consumed, is exempted from duty. This is because electricity which is generated in the refinery is used to operate the various processes within the refinery. In the refinery, there exists large number of processes. Each process generates an item and, therefore, every refinery is given the status of "deemed warehouse". However, a portion of the generated electricity, in the present case, is sold to Tamil Nadu Electricity Board. To that extent alone, the Department was right in demanding dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice dated 17th February, 1999 fails. However, as stated above, a part of the electricity produced from RFO was sold to Tamil Nadu Electricity Board during the period August 1998 to January 1999. To that extent alone, the assessee would be liable to payment of duty. This will require recalculation. Accordingly, to that extent alone, the matter is being remitted to the adjudicating authority for fresh determination of the duty amount payable by the assessee during the period August 1998 to January 1999. 9.We are also of the view that the penalty imposed on the assessee was unjustified since it has produced naptha and sulphur which are petroleum products. Similarly, the assessee has produced electricity from RFO, the major portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E., dt. 16-12-77 as amended by Notification Nos. 131/80-C.E., dt. 23-8-80 and 41/82-C.E., dt. 28-2-82 would be available to the quantity of intermediate product electricity. The exemption contained in this notification will, however, not be available to that quantity of petroleum products which is used in the generation of electricity which, in turn, is not used in the process and manufacture of petroleum products." [emphasis supplied] [underline by us] 13.Low Sulphur Heavy Stock is used by the assessee as fuel in a Thermal Power Plant located within the refinery area for generating electricity which in turn is captively consumed for production of various petroleum products. Entry No. 34 of Notification No. 75/84 read with the clarific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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