TaxTMI 
TaxTMI 
TaxTMI 
2008 (6) TMI 29
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.... Corporation Ltd. [M/s. CPCL, for short) — erstwhile 'Madras Refineries Ltd.'], the respondents herein, are engaged in the manufacture of petroleum products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985. One of these products is Fuel Oil (SH 2713.30 of the said Schedule) which is captively used for generating steam which, in turn, is captively used in certain stage of fractional distillation of crude petroleum. Thus Fuel Oil is captively consumed in the manufacture of other petroleum products. One of such other petroleum products is Raw Naphtha which, when supplied to fertilizer manufacturers, attracts NIL rate of duty. During the period April, 2000-March, 2002, a portion of the Raw Naphtha manufactured in the respondents' refinery was removed, without payment of duty, to fertilizer manufacturers. The department issued show-cause notices to M/s. CFCL for recovery of a total amount of duty of Rs. 2,93,13,416/- for the above period on a total quantity of 23,311.980 MTs of Fuel Oil manufactured and captively consumed in their refinery, alleging that the benefit of exemption under Notification No. 67/95-C.E. dated 16-5-1995 (as amended) was not....
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....efinery stood settled by the Apex Court vide Commissioner of Central Excise, Chennai v. Chennai Petroleum Corporation Ltd. - 2007 (211) E.L.T. 193 (S.C.). The referring Bench also noted that the Commissioner (Appeals), in the impugned order, relied on Final Order Nos. 63-67/2005 dated 7-1-2005 passed by the Bench in the respondents' own case [2005 (187) E.L.T. 34]. The relevant portion of Final Order Nos. 63-67/2005 ibid relied on by the lower appellate authority and reproduced by the referring Bench reads asunder: "Following the decision in IOCL s case, we hold that no duty was leviable on any quantity of Fuel Oil/LSHS used for generating steam required for the refining of crude petroleum (yielding petroleum products) in the appellants' refinery during the period of dispute, as we have found that such use of Fuel Oil/LSHS was covered by the expression "conduct such further manufacturing processes" under Rule 143A. Naphtha is, admittedly, one of the petroleum products resulting from the refining of crude petroleum. No duty could be levied on the Fuel Oil used for generating steam required for the manufacture of this product." The referring Bench further noted that the Department....
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....ry [declared as 'refinery' by the Central Government under Rule 140(2) and deemed to be a 'warehouse' for purposes of Rules 143A and 157] and used in the manufacture of end-products as held by this Tribunal in the case of IOC Limited v. Commissioner - 2002 (144) E.L.T. 209 (Tri.-Kol). The ratio of the decision in IOCLs case was followed in Final Order Nos. 63-67/2005 ibid [Madras Refineries Limited v. Commissioner - 2005 (187) E.L.T. 34 (Tri.-Chennai)] and the latter was affirmed by the Supreme court vide 2007 (211) E.L.T. 193 (S.C.). It would follow that, with the self-contained code no longer in existence after 30-6-2001, refineries are not deemed warehouses and their operations must be governed by the general provisions of the new Rules. Hence the view taken by the Tribunal in the respondents' case reported in 2005 (192) E.L.T. 973 (Tri. - Del.) for the period from 1-7-2001 is not legally correct. The only provision for warehousing of goods under the new Rules is Rule 20. Under this provision, excisable goods could be removed without payment of duty from the factory of production to a warehouse or from one warehouse to another warehouse, if permitted by the Central Govt. by Noti....
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....ssioner v. Indorama Textiles Ltd. - 2006 (200) E.L.T. 3 (Bom.),-wherein it was observed that the Central Excise Rules, 1944 and the Central Excise (No. 2) Rules, 2001 lost their legal force on 1-3-2002 when the Central Excise Rules, 2002 came into force. In the context of submitting that the Tribunal's decision in CPCL'S case [2005 (192) ELI. 973] to the effect that their refinery is entitled to continue its activities in terms of Rule 143A of the old Central Excise Rules after 30-6-2001 by virtue of the transitional provisions of Rule 32 of the Central Excise (No. 2) Rules, 2001 is not good law, the learned SDR has referred to the Supreme Court's observations on interpretation of judgments of courts in Collector v. Alnoori Tobacco Products - 2004 (170) E.L.T. 135 (S.C.). 6.3 The SDR has also relied on the minutes of the meeting of the 'Committee on Disputes', dated 4-12-2007, wherein the contention of CBEC's representative that, as any provision analogous to the old Rule 143A did not exist from 1-7-2001, CPCL's challenge against demand of duty on RFO manufactured and captively consumed in the manufacture of other petroleum products within their refinery from 1-7-2001 was not sust....
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.... deemed to be registration for the purposes of the new rules. Therefore, the respondents' refinery shall be deemed to be a warehouse registered under the new Rule 9(1) and, by virtue of this legal position, the refinery could continue beyond 30-6-2001 to undertake its activities which were being under taken by it under the old Rule 143A. Rule 4 of the Central Excise (No. 2) Rules, 2001 mandates that no excisable goods on which duty is payable shall be removed without payment of duty from any place where they are produced or manufactured or from a warehouse unless otherwise provided. The refinery being a deemed warehouse, removal of petroleum products (emerging as intermediates) without payment of duty for captive consumption within the warehouse is otherwise provided under Rule 20. Explanation II to Rule 4 cannot be invoked to deny this benefit to the refinery as deemed warehouse, as the relevant word used in that Explanation is 'factory' and not warehouse. A refinery, in the nature of its operations, must have 'deemed warehouse' status to enjoy the benefit of not having to pay duty on unmarketable intermediates which emerge during the course of manufacture of finished petroleum pr....
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....rnment's order dated 3-6-1969 containing mention of the licence issued under Rule 174 and conferring the status of 'deemed warehouse' on the refinery shall be deemed to have continued to be in force beyond 30-6-2001. In this view of the matter, the counsel has argued that the facility of removal of RFO without payment of duty within the refinery (deemed warehouse) was available to the respondents under Rule 20(1) of the new rules read with Notification 47/2001-C.E. (N.T.). After examining the relevant provisions of the old and new rules and other statutory provisions and case law cited by both sides, we are not able to accept the learned counsel's argument. 9. As noted by this Tribunal in IOCL's case [2002 (144) E.L.T. 209], there was a self-contained code embodied in Chapter VII of the Central Excise Rules, 1944 governing warehousing of petroleum products manufactured in a refinery. It was held, in that case, that a "refinery" so declared by the Central Govt. under Rule 140(2) was a "deemed warehouse" and therefore the warehousing provisions were applicable to it. It was also held that such provisions prevailed over the general provisions contained elsewhere in the Central Excise....
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.... June, 2001, shall, to the extent they are relevant and consistent with these rules, be deemed to be valid and issued under the corresponding provisions of these rules." The above rule deals only with circulars/instructions/orders/trade notices issued by the Board and Chief Commissioners and Commissioners of Central Excise under the Central Excise Rules, 1944 and does not contain any reference to orders issued by the Central Government under the said Rules. Therefore the Central Government's order dated 3-6-1969 issued under the old Rule 140(2) cannot be said to have been validated under -the above Rule 32 for any period beyond 30-6-2001, the date on Which the old rule was superseded. Only those orders, circulars etc., specified in Rule 32 could be said to have been validated beyond 30-6-2001 and, that too, only to the extent they are relevant and consistent with the new rules. . 11.1 Even if it be assumed that the Government's order declaring the respondents' unit as "refinery" under the old Rule 140(2) is also within the scope of "orders" mentioned in Rule 32 ibid, we are unable to accept the counsel's argument that it is "relevant and consistent" with Rule 20 (warehousin....
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....nder Rule 174 of the said rules". Obviously what had been obtained by them was a licence under Rule 174 as this rule stood in those days when the rule required manufacturers, traders and certain other specified categories of persons to take out licence from the department for conducting their business. The specified persons included "holders of private warehouses other than those in the licensed premises of a manufacturer". In the year 1992, the Licensing scheme was replaced by the new regime of registration and, under the new Rule 174, manufacturers, holders of private warehouses etc. were required to get registered with the department. This was a mandatory requirement to be complied with by the respondents also. The new Rule 174 (registration) nowhere provided that a holder of 'L4' licence issued under the old Rule should be deemed to be registered for purposes of the new provisions. The respondents have not produced any registration certificate issued under Rule 174 (as this rule stood on 30-6-2001) in respect of their refinery as factory of production or as private warehouse. Hence there is no question of the refinery being deemed [under the proviso to Rule 9(1) of the 2001 Rul....
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....under sub-rule (1). Any deeming provision must be in express terms. Rule 20 nowhere says that a "refinery" so declared by the Central Govt. under the old Rule 140(2) shall continue to be "deemed warehouse". Hence the said order cannot, in terms of Rule 32 (transitional provision) of the 2001 Rules, be deemed to have been issued under Rule 20 of these Rules, nor can it be held that the said order is "relevant and consistent" with these rules. For this reason also, it has to be held that Rule 32 is not applicable to the order dated 3-6-1969 issued by the Central Govt. 14. The learned counsel has made a feeble attempt to claim support from Section 6 of the General Clauses Act, 1897 to his submission that the supersession of Rule 140(2) of the Central Excise Rules, 1944 did not affect the 'deemed warehouse' status already acquired thereunder. We have found in the Central Excise Act a provision similar to Section 6 of the General Clauses Act and the same is Section 38A. Where specific provision exists in the Central Excise Act declaring the effect of amendments of rules, notifications and orders, Section 6 of the General Clauses Act has no application. We shall now refer to Section 38A....
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.... old Rules even by incorporating a saving clause in the preamble to the Central Excise (No. 2) Rules, 2001 while repealing the old Rules (Central Excise Rules, 1944). In other words, the Government had no intention to see that its order dated 3-6-1969 [issued under Rule 140(2) of the old rules] continued to be in force. As held by the Hon'ble High Court in Indorama case (vide supra), the Central Excise Rules, 1944 ceased to have legal force when the Central Excise (No. 2) Rules, 2001 came into force. Where Rule 140(2) ceased to have effect, the Government's order issued thereunder could not survive. 15. The old Budget proposals, circulars etc. of the 1960s placed before us by the counsel only reflect the legislative intent behind Rules 140, 143A, 157 etc. of the Central Excise Rules, 1944. A contrary intent is evident from the absence of saving provisions in the Central Excise (No. 2) Rules, 2001. We have also seen both sides relying on proceedings of the "Committee on Disputes". Suffice it to say that the decisions of that Committee have no precedent value for this Tribunal. 16. It appears that the statutory scheme specially made for refineries under Chapter VII of the Cen....