Excise liability on furnace fuel oil depends on whether storage for internal use breaks the manufacturing stream and amounts to removal.

Oil that ceased to move in a continuous manufacturing stream and was stored for furnace use was treated as a finished excisable product, not a mere intermediate product. Its transfer into storage tanks for internal fuel consumption satisfied the excise concept of removal, because the integrated process of manufacture had ended once the goods were taken out for use as fuel. On the refund and jurisdiction issue, the later departmental order was described as not being a review of a concluded earlier decision, and the refund claim was not defeated on limitation grounds in the circumstances noted in the text.

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Issues: (i) Whether the oil stored in Tanks 170 and 171 was an intermediate product forming part of a continuous integrated process of manufacture, or a finished excisable product liable to duty on removal for consumption; (ii) whether the oil's movement into Tanks 170 and 171 constituted removal within the meaning of the excise rules; (iii) whether the order dated 3 September 1965 was without jurisdiction as an impermissible review of the earlier order, and whether refund was barred by delay under the refund rule.

Issue (i): Whether the oil stored in Tanks 170 and 171 was an intermediate product forming part of a continuous integrated process of manufacture, or a finished excisable product liable to duty on removal for consumption.

Analysis: The distinction turned on whether the oil continued in the production stream or ceased to be used for further manufacture and was instead consumed as fuel. Oil moving through the refinery for further processing and conversion into another petroleum product remained part of an uninterrupted manufacturing process. But the oil that reached Tanks 170 and 171 from the crude unit, the P.D. unit, or the bonded tank was not thereafter used for conversion into another product; it was stored for fuel use in furnaces. In that setting it was not an intermediate product but an end product attracting duty.

Conclusion: The oil in Tanks 170 and 171 was held to be a finished excisable product, not merely an intermediate product, and duty was leviable against the assessee.

Issue (ii): Whether the oil's movement into Tanks 170 and 171 constituted removal within the meaning of the excise rules.

Analysis: Removal was treated as the point at which excise liability became collectible, and consumption of excisable goods by way of fuel in the refinery was held to be removal for the purposes of the rules. The Court distinguished cases where a product remained within an integrated line of manufacture for conversion into another commodity. Once the oil went out of the production line into storage for furnace use, the integrated process snapped and the statutory requirement of removal was satisfied.

Conclusion: The entry of the oil into Tanks 170 and 171 for furnace consumption amounted to removal within the excise rules, and the levy was valid.

Issue (iii): Whether the order dated 3 September 1965 was without jurisdiction as an impermissible review of the earlier order, and whether refund was barred by delay under the refund rule.

Analysis: The earlier order of 14 June 1965 had not finally allowed the claim in question; it had only sent one part of it for pre-audit and had expressly rejected the other parts. The later order therefore did not amount to a review of a concluded decision. On limitation, the Court declined to non-suit the petitioner on technical grounds because the refund claims had been invited by the departmental communication and the authorities themselves had not rejected the claims by relying on the refund limitation rule.

Conclusion: The later order was not without jurisdiction, and the petition was not defeated on the basis of the refund limitation objection.

Final Conclusion: The excise levy on the oil consumed as furnace fuel was upheld, and the writ petition seeking quashing of the departmental orders and refund of duty failed.

Ratio Decidendi: Where goods cease to form part of a continuous manufacturing stream and are taken out for internal consumption as fuel, they become a finished excisable product and their movement into storage for such use constitutes removal for excise purposes.

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