1986 (5) TMI 120 - AT - Central Excise

Appeal dismissed in favor of respondents for exemption benefits under Notification No. 352/77-C.E.

The appeal was dismissed, affirming the entitlement of the respondents to the exemption benefits under Notification No. 352/77-C.E. The court held that ... manufacture of finished petroleum products Issues:- Interpretation of exemption notification No. 352/77-C.E., dated 16-12-1977- Utilization of Low Sulphur Heavy Stock (LSHS) for trial run of a boiler plant- Applicability of the exemption for the production of finished petroleum productsAnalysis:The appeal was filed by the Collector of Central Excise against the order of the Collector of Central Excise (Appeals) setting aside the Deputy Collector's order and holding that the respondents were entitled to the benefit of Notification No. 352/77-C.E. The Departmental Representative argued that exemption notifications must be strictly construed without deviating from the specified conditions. The key conditions under the notification were the production of petroleum products in the same refinery and the utilization of specific petroleum products as fuel. It was contended that the respondents only used LSHS for the trial run of a boiler, not for manufacturing petroleum products.The Taxation Manager of the Respondent-Company referenced a Special Bench ruling in a similar case to support their argument. The main question for determination was whether the respondents qualified for the exemption under Notification No. 352/77-CE. The notification exempted petroleum products used as fuel within the same premises for the production of other finished petroleum products. The respondents admitted fulfilling all conditions except using LSHS for producing finished petroleum products, as the steam generated during the trial run was not utilized for production.The judgment analyzed the wording of the exemption notification and the purpose of using LSHS for the trial run of the boiler plant. It referenced the Special Bench ruling in a similar case involving furnace oil used for test and trial runs in a fertilizer plant. The Special Bench had concluded that such test or trial runs were essential stages preparatory to production. Applying this reasoning, the judgment upheld the order in favor of the respondents, stating that utilizing LSHS for the boiler plant's test run could be construed as part of the eventual production of petroleum products. Consequently, the appeal was dismissed, affirming the entitlement of the respondents to the exemption benefits under the notification.