TMI Blog2001 (1) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been used for generating steam and this will be with effect from 1st March, 1988. In respect of the earlier period, it is only that part of LSHS which will be entitled to 100 per cent exemption from excise duty by virtue of Notification No. 147/1974 and Notification No. 75/1984 which has been used as feed stock and not for the purpose of generating steam. For the aforesaid reasons, while I.A. No. 3/1995 in C.A. No. 9122/1994 is allowed and it is held that the appellants therein are entitled to the benefit of Notification No. 127/1988 with effect from 1st March, 1988, the appeals are dismissed with no order as to costs. - 2448 of 1992, 9122 of 1994 & 3119 of 2000 - - - Dated:- 18-1-2001 - B.N. Kirpal, Ruma Pal and Brijesh Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellants, LSHS was used in twin fold manner - (a) directly in manufacture of fertilizers, and (b) for manufacture of steam which in turn was used in manufacture of fertilizers. 5.There are three notifications of exemption with which we are concerned in the present cases. They are Notification Nos. 147/1974, 75/1984 and 127/1988. It is not in dispute that the first two notifications, for the purpose of these cases, are similar and therefore we need refer to only one of them namely, Notification No. 147/1974 which reads as follows : "Exemption to Furnace Oil and heavy petroleum stock if used as feed stock in the manufacture of fertilizers :- In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that with the help of LSHS steam was produced which is an integral part in the process of manufacture of gases which ultimately result in the formation of liquid ammonia. It is from liquid ammonia that urea is ultimately being manufactured. Just as LSHS and furnace oil, when first reacted with oxygen steam results in the form of ammonia, similarly, steam also goes into the process of manufacture of liquid ammonia and in production of steam LSHS is used and therefore the entire quantity of LSHS was entitled to full exemption. 8.The revenue did not accept this contention. After show cause notice had been issued and reply received, the appellants were asked to pay duty on the basis that they were not entitled to the benefit of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of fertilizers". At item Nos. 56 and 57 of the Notification No. 127/1988 which had been quoted hereinabove, the language is similar in respect of LSHS to that of furnace oil. Under Entry 56 there is a complete exemption in respect of LSHS which is intended for use as feed stock in the manufacture of fertilizers but if LSHS was intended for use otherwise than as feed stock but in the manufacture of fertilizers duty at the rate of Rs. 70/- per tonne had to be paid. 11.The aforesaid notifications clearly show that in the manufacture of fertilizers there may be more than one way in which LSHS may be used. It is only if LSHS is used as 'feed stock' that there is a complete exemption from duty. 12.The question, therefore, arises as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was burnt for boiling water which resulted in the production of steam which was also an essential part of the process of manufacture of fertilizers but that by itself would not entitle them to the benefit of complete exemption from excise duty unless it can be shown that LSHS has been used as feed stock in the manufacture. The notification clearly indicate that it is only in respect of the limited use of LSHS as feed stock that complete exemption has been granted. LSHS used in the manufacture of fertilizers, but not as feed stock, was however subject to excise duty though at a lower rate. 15.The very process of manufacture indicated hereinabove shows that LSHS, as a result of chemical reaction, becomes gas which is subsequently purified r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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