2011 (5) TMI 748 - AT - Central Excise

Tribunal upholds decision on furnace oil as consumable in manufacturing process

The Tribunal upheld the Commissioner's decision in favor of the respondent, allowing furnace oil used in air burners for drying onions in a 100% EOU as a ... Demand - 100% EOU - department is of the view that the furnace oil used in the air burner for generating hot air cannot be considered as consumable and would not eligible for exemption under Notification No.1/95 CE – Held that:- in the case of M/s. Jayant Agro Organics Ltd (2003 - TMI - 52038 - CESTAT, WEST ZONAL BENCH, MUMBAI - Central Excise) wherein the Tribunal held that furnace oil procured and used by a 100% EOU as fuel to generate steam from the boiler for manufacture of final product was entitled for benefit of exemption under Notification No.1/95-CE as a raw material/ consumable under entries Nos. 5 and 6 of its table, appeal is dismissed Issues:Interpretation of Notification No.1/95 CE regarding exemption of furnace oil used in air burners for generating hot air for drying onions in a 100% EOU engaged in export.Analysis:The case involved a 100% EOU engaged in manufacturing dehydrated onions for export, receiving raw materials duty-free under Notification No.1/95 CE, including furnace oil for the captive power plant and air burners. The dispute arose when the department contended that the furnace oil used in air burners for drying onions did not qualify as consumable under the notification, leading to a demand of Rs. 9,68,016 against the respondent. The Commissioner(Appeals) set aside the demand, relying on a Tribunal judgment upheld by the Supreme Court, which allowed furnace oil as a raw material/consumable for generating steam. The Tribunal upheld the Commissioner's decision, citing the Supreme Court's judgment in favor of the respondent, dismissing the appeal.The key issue revolved around the interpretation of Notification No.1/95 CE concerning the eligibility of furnace oil used in air burners for drying onions as a consumable for a 100% EOU. The department argued that such usage did not qualify for exemption, leading to the demand against the respondent. However, the Tribunal, following the precedent set by a previous judgment upheld by the Supreme Court, ruled in favor of the respondent, allowing furnace oil as a raw material/consumable for the manufacturing process. This decision was based on the specific entries in the notification and the legal interpretation provided by the higher courts, which supported the respondent's position.The Tribunal's analysis considered the grounds of appeal presented by the Revenue, emphasizing the nature of furnace oil usage in air burners for drying onions and its classification as consumable under Notification No.1/95 CE. The Tribunal referenced a previous case involving a 100% EOU and the Supreme Court's validation of the Tribunal's decision in that case, which supported the allowance of furnace oil as a raw material/consumable for specific processes. By aligning with the Supreme Court's interpretation and the precedent set by the earlier case, the Tribunal upheld the Commissioner's decision, dismissing the appeal and affirming the eligibility of furnace oil under the notification for the respondent's manufacturing activities.