Exemption for raw naphtha used in manufacturing-linked utilities protected workshop and plant power use, but not residential supply.

Approved exemption for raw naphtha used in ammonia production extended to allied off-site plants connected with manufacturing, so electricity generated for the workshop, effluent treatment plant and bore-well water extraction remained within the protected ambit and the corresponding duty demand was unsustainable. Electricity supplied to the residential complex was treated differently and fell outside the exemption accepted in the appellants' own case, so the demand attributable to that use was confirmed.

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Issues: Whether raw naphtha cleared at concessional rate under Notification No. 75/84 remained eligible for the benefit when used for generation of electricity consumed in the workshop, effluent treatment plant and for drawing water from bore-wells, and whether duty could be demanded only in respect of power supplied to the residential complex.

Analysis: The approved exemption covered raw naphtha used for producing ammonia and for allied off-site plants connected with the manufacturing activity. The use of naphtha for generating electricity for the workshop, effluent treatment plant and water drawn from bore-wells fell within that protected ambit and the corresponding demand could not be sustained. The use of electricity in the residential complex stood on a different footing and was outside the scope of the exemption accepted in the appellants' own case.

Conclusion: The duty demand relating to use of raw naphtha for the workshop, effluent treatment plant and bore-well water extraction was not sustainable, while the demand of Rs. 1,03,881.09 attributable to electricity supplied to the residential complex was confirmed.

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