Integrated manufacturing use of refinery fuel qualified for exemption during boiler trial run under the notification.

Low Sulphur Heavy Stock used as fuel for a boiler's trial run in a refinery was treated as use within the refinery premises for the manufacture of finished petroleum products. The notification covered petroleum products produced in refineries and utilised as fuel in the same premises for production of other finished petroleum products. Although the steam generated was not itself used in production, the trial run was regarded as an essential preparatory stage in the integrated manufacturing process. On that basis, the exemption was held applicable and the respondents were entitled to it.

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Issues: Whether Low Sulphur Heavy Stock used as fuel for the trial run of a boiler plant in the refinery premises was entitled to exemption under Notification No. 352/77-C.E. dated 16-12-1977.

Analysis: The notification exempted petroleum products produced in refineries and utilised as fuel within the same premises for the production or manufacture of other finished petroleum products. Although the boiler was only on a trial run and the steam generated was not itself used in production, the trial run was treated as an essential preparatory stage in the integrated process of manufacturing finished petroleum products. The use of fuel for putting the boiler into operation before integration with the plant was therefore regarded as use in the eventual manufacture of petroleum products, rather than as an isolated or unrelated activity.

Conclusion: The respondents were entitled to the exemption, and the appeal failed.

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