Consumable classification of furnace oil used as boiler fuel preserved exemption for a 100% Export Oriented Unit.

Furnace oil used by a 100% Export Oriented Unit in boilers was treated as a consumable eligible for exemption under the relevant notifications. The Tribunal noted that the EOU policy permitted procurement of consumables from indigenous sources or by import, that furnace oil had earlier been obtained duty free under the consumable entry, and that the Development Commissioner had approved its procurement as a consumable. Applying earlier decisions, it held that boiler fuel is ultimately used up in the manufacturing process and therefore falls within the ordinary meaning of consumables. Later amendments referring specifically to furnace oil did not displace that position, so the exemption remained available.

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Issues: Whether furnace oil procured by a 100% Export Oriented Unit for use in boilers could be treated as a consumable and therefore qualify for exemption under the relevant notifications.

Analysis: The unit was permitted to procure capital goods, raw materials and consumables from indigenous sources as well as by import. Before the 1998 amendments, furnace oil was being obtained duty free under the consumable entry. The Tribunal noted that the Development Commissioner had also granted permission for procurement of furnace oil as consumables under the 100% EOU policy. Relying on earlier decisions, it held that furnace oil used as boiler fuel is a commodity eventually used up in the process and therefore answers the description of consumables. The later amendments specifically referring to furnace oil did not displace the earlier position that furnace oil already fell within the consumable entry.

Conclusion: Furnace oil used in boilers by the 100% EOU was a consumable and remained eligible for exemption. The departmental challenge failed.

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