Deemed warehouse refinery goods are not dutiable until actual clearance; internal processing does not count as home consumption.

Where a refinery is declared a deemed warehouse, the special warehousing provisions operate as a self-contained code for intermediate products used within the refinery. Internal use of such products in blending, mixing, processing or manufacture of the final product is not treated as removal for home consumption, so excise duty does not arise at that stage. Duty becomes payable only when the goods are actually cleared from the refinery for home consumption. The deeming provision in Rule 9 was held inapplicable to warehoused refinery goods, and Rule 157 governed clearance from the warehouse.

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Issues: Whether intermediate products arising in a refinery and used within the refinery for blending, mixing, processing or manufacture of the final product are chargeable to excise duty before their clearance, or only upon removal for home consumption.

Analysis: The Rules applicable to goods warehoused in a refinery were treated as a special and self-contained code. A refinery declared as a deemed warehouse is governed by the warehousing provisions, including the special mechanism for processing and further manufacture of goods within the refinery. Rule 157, which governs clearance for home consumption, was held to be the relevant provision for removal from the warehouse. In that setting, internal use of intermediate products in the process of manufacturing the end-product was not regarded as removal for home consumption. The deeming provision in Rule 9 was held inapplicable to such warehoused refinery goods. The reasoning was consistent with the earlier decisions recognising that the object of the refinery provisions is to permit utilisation of intermediate products within the integrated refining system and to levy duty only when the goods are cleared from the refinery.

Conclusion: No excise duty was payable on the intermediate products so long as they remained within the refinery and were used in processing, blending, mixing or manufacture of the final product; duty would arise only on clearance for home consumption.

Ratio Decidendi: Where a refinery is declared a deemed warehouse, the special warehousing provisions prevail, and intermediate products used within the refinery for further manufacture are not treated as removed for home consumption and are not dutiable until actual clearance from the refinery.

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