2008 (6) TMI 29 - AT - Central Excise

Refinery not entitled to old rules benefits post-2001; case referred for final disposal

The Tribunal held that the special provisions for refineries under the old Central Excise Rules, 1944 did not extend to the Central Excise (No. 2) Rules, ... Continuity of Chapter VII warehousing code for refineries - deemed warehouse status of a refinery - transitional provision and applicability of Rule 32 of the Central Excise (No.2) Rules, 2001 - scope and application of Rule 20 (warehousing) under the 2001/2002 Rules - deeming/saving of prior orders on repeal or supersession of rules - effect of Section 38A of the Central Excise Act on supersession of rules - captively consumed intermediate products and Explanation II to Rule 4Continuity of Chapter VII warehousing code for refineries - deemed warehouse status of a refinery - transitional provision and applicability of Rule 32 of the Central Excise (No.2) Rules, 2001 - effect of Section 38A of the Central Excise Act on supersession of rules - Whether the special provisions for refineries in Chapter VII of the Central Excise Rules, 1944 continued in force after supersession by the Central Excise (No.2) Rules, 2001 and the Central Excise Rules, 2002 - HELD THAT: - The Tribunal held that Chapter VII of the Central Excise Rules, 1944 constituted a self-contained code for refineries (Rules 140, 143A, 157) which prevailed over the general warehousing provisions in the old Rules, but that this special scheme ceased when the old Rules were superseded on 1-7-2001 because no saving clause was enacted to continue Rules 140(2)/143A/157. Rule 32 of the 2001 Rules validates only certain circulars, instructions and administrative orders and does not validate Central Government orders issued under the old Rule 140(2). Even if the government's 3-6-1969 order were treated as an 'order' within Rule 32, it is not 'relevant and consistent' with Rule 20, Rule 9, Rule 4 and Rule 8 of the new Rules. The existence of a specific statutory provision in the Central Excise Act (Section 38A) dealing with effect of amendments means that general saving under the General Clauses Act is inapplicable where the new Rules manifest an intention contrary to the old scheme; such contrary intention is evident from the absence of a saving clause in the 2001 Rules. Consequently the deemed warehouse status conferred under the old Rule 140(2) did not survive as a legal basis under the 2001/2002 Rules. [Paras 9, 10, 11, 14, 16]The special warehousing provisions of Chapter VII of the Central Excise Rules, 1944 did not continue in force after 30-6-2001 and the deemed warehouse status under the old Rule 140(2) did not survive the supersession.Scope and application of Rule 20 (warehousing) under the 2001/2002 Rules - captively consumed intermediate products and Explanation II to Rule 4 - Notification 47/2001-C.E. (N.T.) and its limits - Whether, after 30-6-2001, the respondent refinery was entitled to benefit of Rule 143A of the old Rules (i.e., non-levy of duty on Fuel Oil used to generate steam for refining) or otherwise entitled to remove RFO for captive use without payment of duty under the new Rules - HELD THAT: - The Tribunal found that Rule 20 of the 2001/2002 Rules contemplates removal of excisable goods without payment of duty from a factory to a physically separate warehouse and does not authorize fictional merging of factory and warehouse to permit intra-refinery movements duty-free. Notification 47/2001 extended removal to external warehouses but did not permit captive internal consumption without duty; that limited facility was later withdrawn. Explanation II to Rule 4 of the new Rules treats intermediate products captively consumed in a factory as dutiable unless an exemption (such as Notification No. 67/95-C.E.) applies. Given that the special refinery code no longer operated and the new Rules treat a refinery as a factory of production, any claim to non-levy after 30-6-2001 must rest on statutory notifications (e.g., Notification No. 67/95-C.E.), not on old Rule 143A. [Paras 11, 12, 16]After 30-6-2001 the respondents were not entitled to the benefit of Rule 143A; captive consumption of RFO within the refinery is governed by the new Rules and is dutiable unless covered by a specific notification.Final Conclusion: The Tribunal answered the referred questions by holding that the special Chapter VII warehousing scheme for refineries under the Central Excise Rules, 1944 did not continue after 30-6-2001 and that, consequently, the respondent could not claim the benefit of Rule 143A for the period after that date; any claim for non-levy of duty on intermediate petroleum products post 30-6-2001 must be supported by applicable notifications under the new Rules. Issues Involved:(a) Continuation of special provisions for refineries under the Central Excise Rules, 1944 into the Central Excise (No. 2) Rules, 2001 and Central Excise Rules, 2002.(b) Entitlement of the respondents to the benefit of the special scheme for refineries under Rule 143A of the erstwhile Central Excise Rules, 1944 after 30-6-2001.Detailed Analysis:Issue (a): Continuation of Special Provisions for RefineriesThe Tribunal examined whether the special provisions for refineries under Chapter VII of the Central Excise Rules, 1944 continued under the new rules of 2001 and 2002. The Tribunal noted that the self-contained code for refineries under the old rules did not have a saving clause in the new rules. With the supersession of the old rules, the Central Government's order dated 3-6-1969, which conferred 'deemed warehouse' status on the refinery, ceased to have force. Rule 32 of the new rules, which dealt with transitional provisions, did not protect this order. The Tribunal also noted that the new warehousing provisions under Rule 20 did not facilitate removal of any petroleum product within the refinery without payment of duty for captive consumption. Therefore, the special provisions for refineries under the old rules did not continue under the new rules.Issue (b): Entitlement to the Benefit of Rule 143A After 30-6-2001The Tribunal considered whether the respondents were entitled to the benefit of Rule 143A of the old rules after 30-6-2001. The Tribunal observed that the statutory scheme for refineries under Chapter VII of the old rules came to an end with the supersession of those rules on 1-7-2001. From this date, petroleum products produced in refineries were on par with other excisable goods under the new rules. The Tribunal held that the respondents could not claim the benefits of the old rules beyond 30-6-2001 by virtue of Rule 32 of the new rules. The Tribunal endorsed the view that the decision in CPCL's earlier case [2005 (192) E.L.T. 973] did not lay down the correct law.Conclusion:The Tribunal concluded that the special provisions for refineries under the old Central Excise Rules, 1944 did not continue under the Central Excise (No. 2) Rules, 2001 and Central Excise Rules, 2002. Consequently, the respondents were not entitled to the benefits of Rule 143A of the old rules after 30-6-2001. The referred issues were answered accordingly, and the case was directed to the regular Bench for final disposal.