2017 (6) TMI 714 - AT - Central Excise

Tribunal Upholds Decision on Excise Duty Exemption for Sulphur as Incidental By-Product

The Tribunal upheld the impugned orders, dismissing the Revenue's appeals and disposing of the respondent's cross objection. The decision was based on the ... Captive consumption - N/N. 67/95-C.E dated 16.03.1995 - It is the case of the department that fuel oil was used in the refinery in the manufacture of Sulphur, an exempted product and therefore, the benefit of captive consumption Exemption N/N. 67/95-C.E dated 16.03.1995 is not available - Held that: - reliance placed in the case of MADRAS REFINERIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI-I [2005 (1) TMI 257 - CESTAT, CHENNAI], where it was held that the RFO is entirely used in the manufacture of dutiable petroleum products and sulphur was emerging as an incidental by product and hence no duty of excise could be demanded on the ground that RFO was used for manufacture of sulphur. Appeal dismissed - decided against Revenue. Issues:1. Captive consumption of Residual Fuel Oil (RFO) in a petroleum refinery for the period October 2000 to December 2003.2. Interpretation of Notification No. 67/95-C.E dated 16.03.1995 regarding the exemption for captive consumption.3. Applicability of legal provisions under Central Excise Rules, 1944 and Central Excise Rules, 2001.4. Dispute over the duty liability on RFO used in the manufacture of exempted Sulphur.5. Challenge by the Revenue against the decision of the Commissioner (Appeals) based on earlier Tribunal orders.6. Consideration of case law and previous Tribunal decisions regarding captive consumption and duty liability.Analysis:1. The case involves a petroleum refinery's captive consumption of Residual Fuel Oil (RFO) between October 2000 and December 2003. RFO is used as fuel in the generation of steam within the refinery for various purposes, including the manufacturing process of petroleum products and electricity generation.2. The dispute centers around the interpretation of Notification No. 67/95-C.E dated 16.03.1995 regarding the exemption for captive consumption. The Revenue argues that RFO used in the manufacture of exempted Sulphur should not benefit from the exemption, leading to a demand for excise duty with interest.3. The issue of the applicability of legal provisions under Central Excise Rules, 1944, and Central Excise Rules, 2001 arises. The Revenue challenges the Commissioner (Appeals) decision, citing differences in legal provisions during the relevant periods and questioning the impact of warehouse provisions on duty liability.4. The core of the dispute lies in the duty liability on RFO used in the manufacture of exempted Sulphur. The Revenue contends that the exemption should not apply to RFO consumed in producing finished products like Sulphur, which are cleared without duty payment.5. The Revenue challenges the Commissioner (Appeals) decision based on earlier Tribunal orders, raising concerns about the Tribunal's jurisdiction and the applicability of decisions rendered under different legal provisions. The ongoing legal battle between the Central Excise Department and the Tribunal adds complexity to the issue.6. The analysis includes a detailed review of case law and previous Tribunal decisions regarding captive consumption and duty liability. The Tribunal's findings support the respondent's position that RFO is entirely used in the manufacture of dutiable petroleum products, with Sulphur emerging as an incidental by-product, justifying the exemption from excise duty.In conclusion, the Tribunal upholds the impugned orders, dismissing the appeals filed by the Revenue and disposing of the respondent's cross objection. The decision is based on the Tribunal's interpretation of the usage of RFO in the manufacturing process and the emergence of Sulphur as a by-product, aligning with previous case law and Tribunal decisions, ultimately leading to the dismissal of the Revenue's appeals.