TMI Blog2008 (6) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... f the erstwhile Central Excise Rules, 1944 can be considered to have continued to be in force under the Central Excise (No. 2) Rules, 2001 and the Central Excise Rules, 2002? (b) Whether, after 30-6-2001, the respondents are entitled to the benefit of the special scheme for refineries provided under Rule 143A of the erstwhile Central Excise Rules, 1944? 2. The facts of the case as stated in the referral order are as follows: M/s. Chennai Petroleum Corporation Ltd. [M/s. CPCL, for short) — erstwhile 'Madras Refineries Ltd.'], the respondents herein, are engaged in the manufacture of petroleum products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985. One of these products is Fuel Oil (SH 2713.30 of the said Schedule) which is captively used for generating steam which, in turn, is captively used in certain stage of fractional distillation of crude petroleum. Thus Fuel Oil is captively consumed in the manufacture of other petroleum products. One of such other petroleum products is Raw Naphtha which, when supplied to fertilizer manufacturers, attracts NIL rate of duty. During the period April, 2000-March, 2002, a portion of the Raw Naphtha m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Rules, 1944 governed the manner in which petroleum products manufactured in a refinery (so declared under sub-rule (2) of Rule 140 and deemed to be a registered warehouse for purposes of Chapter VII of the Central Excise Rules, 1944) could be captively used], the question whether duty of excise was leviable on any quantity. of Fuel Oil used for generating steam required for the refining of crude petroleum (yielding petroleum products) in the respondents' refinery stood settled by the Apex Court vide Commissioner of Central Excise, Chennai v. Chennai Petroleum Corporation Ltd. - 2007 (211) E.L.T. 193 (S.C.). The referring Bench also noted that the Commissioner (Appeals), in the impugned order, relied on Final Order Nos. 63-67/2005 dated 7-1-2005 passed by the Bench in the respondents' own case [2005 (187) E.L.T. 34]. The relevant portion of Final Order Nos. 63-67/2005 ibid relied on by the lower appellate authority and reproduced by the referring Bench reads asunder: "Following the decision in IOCL s case, we hold 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred under the old provisions. Prior to 1-7-2001, the provisions of Rule 140(2), Rule 143A and Rule 157 of the old Rules (CER, 1944) constituted a self-contained code for refineries with overriding effect on the general provisions relating to removal of goods for captive and home consumptions. On account of such overriding effect, the deeming provisions of Rule 9(1) of the old Rules being general provisions were not applicable to removal of intermediate products warehoused in a refinery [declared as 'refinery' by the Central Government under Rule 140(2) and deemed to be a 'warehouse' for purposes of Rules 143A and 157] and used in the manufacture of end-products as held by this Tribunal in the case of IOC Limited v. Commissioner - 2002 (144) E.L.T. 209 (Tri.-Kol). The ratio of the decision in IOCLs case was followed in Final Order Nos. 63-67/2005 ibid [ Madras Refineries Limited v. Commissioner - 2005 (187) E.L.T. 34 (Tri.-Chennai)] and the latter was affirmed by the Supreme court vide 2007 (211) E.L.T. 193 (S.C.). It would follow that, with the self-contained code no longer in existence after 30-6-2001, refineries are not deemed warehouses and their operations must be gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeming it to be a warehouse registered under sub-rule (1) did not survive the parent rule and therefore the refinery lost its 'deemed warehouse' status on 1-7-2001. 6.2 In the context of submitting that nothing contained in the Central Excise Rules, 1944 could be invoked to maintain 'deemed warehouse' status for a refinery beyond the date on which those rules were superseded by the Central Excise (No. 2) Rules, 2001, the learned SDR has relied on the judgment of the Bombay High Court in Commissioner v. Indorama Textiles Ltd. - 2006 (200) E.L.T. 3 (Bom.),-wherein it was observed that the Central Excise Rules, 1944 and the Central Excise (No. 2) Rules, 2001 lost their legal force on 1-3-2002 when the Central Excise Rules, 2002 came into force. In the context of submitting that the Tribunal's decision in CPCL'S case [2005 (192) ELI. 973] to the effect that their refinery is entitled to continue its activities in terms of Rule 143A of the old Central Excise Rules after 30-6-2001 by virtue of the transitional provisions of Rule 32 of the Central Excise (No. 2) Rules, 2001 is not good law, the learned SDR has referred to the Supreme Court's observations on interpretation of judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, if not by virtue of the transitional provisions of Rule 32 of the Central Excise (No. 2) Rules, 2001 and Rule 33 of the Central Excise Rules, 2002. The refinery is still holding the licence granted to it by the Department under Rule 174 of the old Central Excise Rules, which licence was also referred to in the Government's order dated 3-6-1969. By virtue of the proviso to sub-rule (1) of Rule 9 of the Central Excise (No. 2) Rules, 2001, the registration already obtained under Rule 174 of the old rules shall be, deemed to be registration for the purposes of the new rules. Therefore, the respondents' refinery shall be deemed to be a warehouse registered under the new Rule 9(1) and, by virtue of this legal position, the refinery could continue beyond 30-6-2001 to undertake its activities which were being under taken by it under the old Rule 143A. Rule 4 of the Central Excise (No. 2) Rules, 2001 mandates that no excisable goods on which duty is payable shall be removed without payment of duty from any place where they are produced or manufactured or from a warehouse unless otherwise provided. The refinery being a deemed warehouse, removal of petroleum products (emerging as intermedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 140, Rule 143A and Rule 157 beyond 30-6-2001 and hence cannot claim any right or benefit under the Central Government's order dated 3-6-1969, which ceased to operate on 1-7-2001 with the supersession of the parent provision [Sub-rule (2) of Rule 140]. On the other hand, the argument of the learned counsel for the respondents is that, as the registration of the refinery under the old Rule 174 shall be deemed to have continued as registration under the new Rule 9(1) by virtue of the proviso to Rule 9(1), the Government's order dated 3-6-1969 containing mention of the licence issued under Rule 174 and conferring the status of 'deemed warehouse' on the refinery shall be deemed to have continued to be in force beyond 30-6-2001. In this view of the matter, the counsel has argued that the facility of removal of RFO without payment of duty within the refinery (deemed warehouse) was available to the respondents under Rule 20(1) of the new rules read with Notification 47/2001-C.E. (N.T.). After examining the relevant provisions of the old and new rules and other statutory provisions and case law cited by both sides, we are not able to accept the learned counsel's argument. 9. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use" status on the respondents' refinery also ceased to have force with the supersession of the parent rule (Rule 140) on 1-7-2001 without saving clause. Rule 32 (transitional provision) of the new rules did not protect the Government's order. This rule reads as under :- "RULE 32. Transitional provisions. — Any circulars, instructions, standing orders, trade notices or other orders issued under the Central Excise Rules, 1944 by the Board, the Chief Commissioner or the Commissioner of Central Excise, and in force as on 30th June, 2001, shall, to the extent they are relevant and consistent with these rules, be deemed to be valid and issued under the corresponding provisions of these rules." The above rule deals only with circulars/instructions/orders/trade notices issued by the Board and Chief Commissioners and Commissioners of Central Excise under the Central Excise Rules, 1944 and does not contain any reference to orders issued by the Central Government under the said Rules. Therefore the Central Government's order dated 3-6-1969 issued under the old Rule 140(2) cannot be said to have been validated under -the above Rule 32 for any period beyond 30-6-2001, the date on Which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . — (1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse, or otherwise uses excisable goods, shall get registered: Provided that a registration obtained under Rule 174 of the Central Excise Rules, 1944 shall be deemed to be as valid as the registration made under this sub-rule for the purpose of these rules." We note that the Government's order dated 3-6-1969 (issued under the old Rule 140) described the respondents' refinery as "covered by the licence in Form L.4 granted to them under Rule 174 of the said rules". Obviously what had been obtained by them was a licence under Rule 174 as this rule stood in those days when the rule required manufacturers, traders and certain other specified categories of persons to take out licence from the department for conducting their business. The specified persons included "holders of private warehouses other than those in the licensed premises of a manufacturer". In the year 1992, the Licensing scheme was replaced by the new regime of registration and, under the new Rule 174, manufacturers, holders of private warehouses etc. were required to get registered with the department. This was a man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use outside the refinery vide Sl. No. 1 of the Table annexed to the Notification. Even this facility was withdrawn when the Notification was superseded by Notification No. 17/2004-C.E. (N.T.), dated 4-9-2004. 13. As rightly observed by the referring Bench, no part of Rule 20 of the 2001 /2002 Rules has a provision corresponding to sub-rule (2) of Rule 140 of the Central Excise Rules, 1944, whereunder the Central Govt. by order dated 3-6-1969 had declared the respondents' unit as a "refinery" thereby deeming it to be a warehouse registered under sub-rule (1). Any deeming provision must be in express terms. Rule 20 nowhere says that a "refinery" so declared by the Central Govt. under the old Rule 140(2) shall continue to be "deemed warehouse". Hence the said order cannot, in terms of Rule 32 (transitional provision) of the 2001 Rules, be deemed to have been issued under Rule 20 of these Rules, nor can it be held that the said order is "relevant and consistent" with these rules. For this reason also, it has to be held that Rule 32 is not applicable to the order dated 3-6-1969 issued by the Central Govt. 14. The learned counsel has made a feeble attempt to claim support from Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise of the powers conferred by Section 37 of the Central Excise Act, 1944 (1 of 1944) and in supersession of the Central Excise Rules, 1944, the Central Government hereby makes the following rules, namely:-" Conspicuously, the words, "except as respects things done or omitted to be done before such supersession", are absent in the preamble to the Central Excise (No. 2) Rules, 2001. Obviously the rule making authority did not intend to save anything already done under Rule 140(2) of the old Rules even by incorporating a saving clause in the preamble to the Central Excise (No. 2) Rules, 2001 while repealing the old Rules (Central Excise Rules, 1944). In other words, the Government had no intention to see that its order dated 3-6-1969 [issued under Rule 140(2) of the old rules] continued to be in force. As held by the Hon'ble High Court in Indorama case (vide supra), the Central Excise Rules, 1944 ceased to have legal force when the Central Excise (No. 2) Rules, 2001 came into force. Where Rule 140(2) ceased to have effect, the Government's order issued thereunder could not survive. 15. The old Budget proposals, circulars etc. of the 1960s placed before us by the counse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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