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Issues: Whether ethylene, butylene and propylene manufactured from raw naphtha obtained in the course of refining crude petroleum were goods "derived from refining of crude petroleum" and therefore classifiable under Item 11AA of the Central Excise Tariff and eligible for the exemption notification, or whether they fell under the residuary Item 68.
Analysis: The phrase "derived from" was construed in its ordinary and plain meaning as denoting the source or origin of the product. Crude petroleum is refined through successive stages and raw naphtha is one such intermediate stage. The fact that raw naphtha was purchased from other refineries did not alter the character of the final products, because the source of those products remained crude petroleum. The intervening stage of raw naphtha did not break the nexus between the final products and the refining of crude petroleum.
Conclusion: The products were held to be derived from refining crude petroleum and thus fell within Item 11AA. The Revenue's classification under Item 68 was rejected, and the exemption notification was applicable.
Final Conclusion: The appeal succeeded and the Tribunal's contrary view on classification was set aside, with the assessee obtaining the benefit of Item 11AA and the linked exemption.
Ratio Decidendi: Where a tariff entry uses the expression "derived from", the decisive inquiry is the real source or origin of the goods, and an intermediate processing stage does not displace classification if the final goods continue to originate from the specified source.
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