Consumables exemption for furnace oil used in boiler steam generation upheld for pre-15-9-98 export manufacture

Furnace oil procured indigenously by a 100% Export Oriented Unit and used in boilers to generate steam for manufacture of export goods was treated as a consumable under Notification No. 1/95-C.E. for the period before 15-9-98. The reasoning was that the oil was consumed in the manufacturing process, not for a merely ancillary purpose, and the wider central excise concept of manufacture applied rather than the narrower sales tax meaning relied on by Revenue. Earlier Tribunal rulings had already covered fuel used in boilers for steam generation, so exemption was admissible for the disputed period.

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Issues: Whether furnace oil procured indigenously by a 100% Export Oriented Unit and used in boilers for generation of steam, during the period prior to 15-9-98, was eligible for exemption as "consumables" under Notification No. 1/95-C.E. dated 4-1-95.

Analysis: The furnace oil was not used for any merely ancillary purpose. It was consumed in the process of manufacture because the steam generated from it was used in the production of the export goods. The meaning of manufacture under central excise law is wider than the limited sense adopted in the sales tax decision relied on by the Revenue. The issue was already covered by earlier Tribunal decisions holding that, for periods prior to 15-9-98, fuel used in boilers for generating steam for export manufacture fell within the entry "consumables" in the notification.

Conclusion: The exemption under Notification No. 1/95-C.E. was admissible to the furnace oil for the disputed period, and the Revenue's appeals failed.

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