TMI Blog1997 (3) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sujata V. Manohar, J. [Judgment per : Sujata V. Manohar, J.]. - The appellant is a Government of India Undertaking. The appellant is engaged, inter alia, in the manufacture of Ethylene, Propylene, Benzene, Toluene and other products falling under Chapters 27 and 29 of the Central Excise Tariff Act, 1985. 2. At the material time the appellant obtained raw naphtha from the Refinery in terms of Notification No. 27/89-C.E., dated 1-3-1989. Under this notification, raw naphtha falling under sub-heading No. 2710.14 of the Schedule to the Central Excise Tariff Act, 1985 intended for use in the manufacture of products specified in the table annexed to the said notification, is exempt from payment of so much of the duty of excise leviable thereon as is in excess of the amount calculated at the rate of Rs. 60 per kilolitre at 15ÉC on the quantity of naphtha consumed in the manufacture of the said products. The table of products which is annexed to the notification, inter alia, covers Ethylene, Propylene, Butadiene, Benzene, Toluene and Para-Xylene which are the products manufactured by the appellant from raw naphtha obtained by the appellant under the concessional rate of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the appellant to obtain Benzene and Toluene which are products enumerated in the Table. The residue left after this manufacture is further processed to produce Petroleum Resins. Petroleum Resins are not listed in the Table. What is left over is returned to the refinery. 5. The Collector, Central Excise held that the entire quantity of Pyrolysis Gasolene which was presumed by him to be raw naphtha, was not entitled to concessional rate of duty as it was used for the manufacture of Petroleum Resins. He levied a duty of Rs. 24,41,99,988.77, ordered confiscation of land, building, plant, machinery with option to the appellant to redeem them on payment of Rs. 1 lakh and imposed a penalty of Rs. 5 crores. 6. In appeal the Tribunal held that Pyrolysis Gasolene used for manufacture of Benzene and Toluene was entitled to concessional rate of duty. But the residual Pyrolysis Gasolene used for the manufacture of Petroleum Resins was not so entitled. It reduced the duty to Rs. 4.36 crores and reduced the penalty to Rs. 10 lacs. The present appeal is from this order. 7. Broadly speaking, the process of manufacture adopted by the appellant is as follows : Raw Naphtha which is obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The notification exempts raw naphtha intended for use in the manufacture of products specified in the table attached to it from so much of the duty of excise as is in excess of the amount calculated at the rate of Rs. 60 per kilolitre at 15oC on the quantity of naphtha consumed in the manufacture of the said products. It is an accepted position that the appellant has used raw naphtha which was obtained by the appellant under the notification for the manufacture of products which are listed in the table. 11. The only contention of the department is that the appellant has not used the entire quantity of raw naphtha for this purpose. This contention does not appear to be correct. The entire quantity of raw naphtha which was obtained by the appellant under the exemption notification is subjected to thermal cracking for the purpose of obtaining ethylene, butadiene, propylene and other items which are incorporated in the said table. After the entire quantity of raw naphtha is subjected to thermal cracking, three items emerge; olefenic rich gas, pyrolysis fuel oil and pyrolysis gasolene. There is no way in which the appellant could have avoided this outcome. Out of these resultants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule. In fact, the respondent has issued a clarification with the concurrence of the Ministry of Law bearing G.I. (D.R. D.) F.No. 03/15/72-CX. 3, dated 26-3-1976 setting out as follows : ".......... it is clarified that when raw naphtha is intended for use in the manufacture of any one or more of the products specified in the Schedule appended to the notification the production of other goods which are incidental/inevitable/involuntary in such production would not disturb the scheme of exemption and that the whole of the raw naphtha would be deemed to have been used in the manufacture of the product for the manufacture of which raw naphtha was obtained." 14. In this connection, our attention is drawn to a decision of this Court in the case of State of Haryana v. Dalmia Dadri Cement Ltd. [1987 (Supp) SCC 679]. In that case, cement required for use in the generation or distribution of electrical energy was exempted from sales tax. The Punjab State Electricity Board had obtained the cement and given certificates that it was for use in the generation or distribution of electrical energy. The Court said that the mere fact that some of the cement supply was, in fact, used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for manufacture of other items. 18. In this connection, the appellant has drawn our attention to another exemption notification being Notification No. 28/89-C.E., also dated 1-3-1989 which is as follows : "Exemption of goods other than blended or compounded lubricating oils and greases. - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods (other than blended or compounded lubricating oils and greases) falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced in a factory and - (a) utilised in the factory in which the said excisable goods are produced, for the manufacture of other goods or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both; or (b) allowed to escape in the atmosphere by flare system or otherwise; from the whole of the duty of excise leviable thereon which is specified in the said Schedule." 19. Under this notification pyrolysis gasolene which falls under Chapter 27 is produced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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