2003 (12) TMI 109 - AT - Central Excise

Tribunal Rules Furnace Oil as Consumable, Grants Duty Exemption; Time-Barred Demand Set Aside; Appeal Allowed.

TATA TEA LIMITED Versus COMMISSIONER OF CENTRAL EXCISE, KOCHI

The Tribunal overturned the adjudicating authority's decision, confirming that furnace oil used by the appellants, a 100% EOU, qualified as a 'consumable' ... Eligibility of furnace oil as a 'consumable' for duty exemption under Notification No. 1/95-C.E - 100% Export Oriented Unit - Interpretation of statutes - period of limitation under the proviso to Section 11A(1) - HELD THAT:- There is no dispute, in the instant case, of furnace oil having been used as a fuel for the boilers. The boilers generated steam and the latter was used in the drying stage of the process of manufacture of Instant Tea Powder. The furnace oil was, thus, consumed in the process. It fell in the category of consumables indisputably, and undisputedly too. Therefore, we hold that the furnace oil brought into the EOU and used in the boilers during 1-1-2000 to 21-5-2000 was exempt from payment of Central Excise duty in terms of Entry No. 7 of Annexure-I to Notification No. 1/95-C.E., dated 4-1-95. In the case of Waterbase [2000 (8) TMI 538 - CEGAT, CHENNAI], the question was whether the benefit of exemption under Notification No. 1/95-C.E. was available to HSD oil and furnace oil used by the assessee (100% EOU) in their aquaculture farms after the issuance of Notification No. 10/95-C.E., dated 23-2-95 which exempted from duty various excisable goods brought into aquaculture farms of 100% EOUs. This Tribunal held that the assessee had the right to choose that Notification which extended the benefit to him. Again, this decision does not appear to be relevant to the facts of the present case in which the party has claimed only under one notification viz. 1/95-C.E. for the relevant period. We have not heard anybody say that 'consumable' could be so construed as to exclude fuels like furnace oil used in boilers. In the cases of Mangalore Chemicals [1991 (8) TMI 83 - SUPREME COURT] and Fertilizers [1991 (8) TMI 83 - SUPREME COURT] and Novopan India [1994 (9) TMI 67 - SUPREME COURT], it was held by the Court that, once an assessee was found to fall within the ambit of an Exemption Notification, full effect should be given to the exemption by a liberal interpretation of the terms of the notification. This ruling appears to have a say in the instant case. The appellants had, admittedly, satisfied all the substantive conditions of Notification No. 1/95-C.E. to come within its purview. The only dispute was whether the 'furnace oil' which was procured without payment of duty fell within the coverage of 'consumables' under Entry No. 7. When construed in terms of the Apex Court's ruling, the entry would squarely cover the appellants,' furnace oil. We need not consider the learned Counsel's plea for giving retrospective effect to Notification No. 40/2000-C.E. In the result, we set aside the impugned order to the extent it relates to the demand of duty for the period, 1-1-2000 to 21-5-2000. The appeal stands allowed. Issues Involved:1. Eligibility of furnace oil as a 'consumable' for duty exemption under Notification No. 1/95-C.E.2. Applicability of the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act.3. Interpretation of amendments to Notification No. 1/95-C.E. and their retrospective effect.Summary:1. Eligibility of Furnace Oil as a 'Consumable':The appellants, a 100% EOU, procured furnace oil duty-free under Notification No. 1/95-C.E. for use as fuel in boilers generating steam for manufacturing Instant Tea Powder. The department issued show cause notices demanding duty, alleging that the exemption was not available for furnace oil used as fuel. The appellants argued that furnace oil was a 'consumable' under the notification. The adjudicating authority denied the exemption, stating that a separate entry for fuel in captive power plants indicated a distinction between fuel and consumables. The Tribunal held that furnace oil used in boilers was a 'consumable' as it was eventually used up in the manufacturing process, thus eligible for exemption under Entry No. 7 of Annexure-I to Notification No. 1/95-C.E.2. Applicability of the Larger Period of Limitation:The show cause notices invoked the larger period of limitation u/s 11A(1) of the Central Excise Act, alleging intent to evade duty. The appellants contested this, arguing that their use of furnace oil as a consumable was declared and accepted by the department. The Tribunal did not find sufficient grounds to support the allegation of intent to evade duty, thus the demand for the period up to 31-12-1999 was held to be time-barred.3. Interpretation of Amendments to Notification No. 1/95-C.E.:The adjudicating authority relied on amendments made by Notification No. 31/98 and Notification No. 40/2000-C.E. to deny the exemption. The Tribunal noted that each entry in the notification should be construed independently. The amendment on 22-5-2000, which included furnace oil for all EOUs, did not retrospectively affect the status of furnace oil as a consumable. The Tribunal concluded that the legislative intent was to include furnace oil as a consumable for the relevant period, thus allowing the exemption.Conclusion:The Tribunal set aside the impugned order concerning the demand of duty for the period 1-1-2000 to 21-5-2000, allowing the appeal and confirming that furnace oil used by the appellants was eligible for duty exemption as a consumable under Notification No. 1/95-C.E.