ORDER
S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Appeal dated 10-1-1989, passed by the Collector (Appeals), New Delhi. By this order, he has observed that the Assistant Collector had rightly held that the assessee had been declared a refinery in relation to raw naphtha only and that they had not specified the goods in which “Methane” was to be utilised, as also about such goods having been specified in the Schedule to Notification No. 276/67-C.E. Thus, the benefit of this Notification has been denied in respect of the goods, Methane, captively consumed in the manufacture of the goods covered in the Schedule appended to the Notification. The appellants submitted that they have two plants for production of ‘Anhydrous Ammonia’ a chemical fertilizer. They have three plants A-I, A-II, A-III set up and established by the Heavy Water Plant of the Department of Atomic Energy within their battery limits for the production of synthesis Gas.
2. The facts of the case are that the appellants are served with a show cause notice in January, 1987 alleging that they were engaged in the manufacture of various excisable goods falling under Chapters 27, 28, 29, 31 and 39 of the Central Excise Tariff Act, 1985. They had filed the classification list Nos. C.L. No. 3/86 and 8/86 for Methane falling under Chapter 27, sub-heading No. 27.11 and sub-heading 2711.29 and had claimed exemption under Notification No. 276/67-C.E. (as amended) for captive consumption or for removal under Chapter X procedure of the Central Excise Rules, 1944 on the ground that under the provisions of Rule 140(2) of Central Excise Rules, 1944 their premises have been declared as refinery and in support had filed a copy of order F. No. 261/14HH/10/73- CX B, dated 23-7-1973 from the Government of India, Ministry of Finance (Department of Revenue & Insurance) New Delhi. It is alleged that the said order of the Ministry furnished by them in respect of their claim for exemption under the said Notification claiming the benefit as refinery applies only in respect of raw naphtha and hence, the claim for the benefit in respect of the goods Methane is not eligible for exemption under the said Notification. In consequence of this charge, they were issued with several show cause notices raising the demands for duty as stated therein in respect of period 1-3-1986 to 28-2-1989. The Assistant Collector in Order-in-Original has held that the premission granted by the Government of India in the said letter confines to the declaration of the appellant as a refinery in relation to raw naphtha falling under item 6 of the First Schedule of the erstwhile tariff. The Assistant Collector has also held that the Notification No. 275/67 was rescinded by Notification No. 190/75-CE. and thereafter, the company had not availed any concession in relation thereto, and therefore, the order issued by the Government of India declaring the premises of the company as refinery stood terminated with the supersession of the Notification No. 275/67-C.E. The Learned Assistant Collector has held that as on the date of filing the classification list, the order of the Government declaring the company as a refinery had lapsed long back on account of non-use, and therefore, the concession of the said Notification is not admissible. Further, he has held that the order also related to the declaration of the company as a refinery in relation to raw Naphtha only which was covered by item 6 of the First Schedule then in force and not to the item Methane. He has also rejected the contention of the company that on declaration of the premises as a refinery under Rule 140(2) of Central Excise Rules, 1944, such refinery shall be deemed to be a warehouse appointed or licenced under Sub-rule (1) of Rule 140 and the provisions of Chapter VII shall apply in relation to goods processed or manufactured in such refinery as they apply in relation to goods stored in the warehouse appointed or licenced under Sub-rule (1) of Rule 140 is not correct.
3. We have heard the Learned Advocate, Shri Willingdon Christian for the appellants and the Learned DR, Shri Sanjeev Sachdeva for the Revenue.
4. The Learned Advocate submitted that Methane is manufactured out of raw Naphtha, which is procured on concessional rate for manufacture of Ammonia or Fertilizer. It is his submission that Methane is an intermediate product for the purpose of manufacture of Ammonia or Fertilizer for which the Notification has been intended. It is his submission that the Notification does not stipulate the company to be declared as a refinery for the purpose of manufacture of Methane only other than the one mentioned in the Notification. He also pointed to Rule 140(2) and submitted that it does not stipulate for filing of a declaration in respect of refinery which manufactured other type of goods. It is his submission that the Government of India’s orders had not been withdrawn and it continued to be operative and the order also does not state that the benefit of exemption is not to apply for Methane. Methane is manufactured from raw Naphtha, hence it is his submission that wordings in the Notification namely, “in relation to raw Naphtha”, for which the refinery having been declared, applies to all goods manufactured by the appellants and hence the benefit cannot be denied to raw Methane. He submitted that the Government of India’s orders and Rule 140 have to be read together in a harmoneous manner and interpreted. He submitted that all products which are classifiable under Chapter 27 are exempted from levy of duty under the Notification, on the company being declared as a refinery. As the appellants are refinery and that position has not been challenged in respect of manufacture of various other goods by the department, therefore, the finding that the appellant’s company is not a refinery for the purpose of manufacture of Methane is an erroneous order and unsustainable in law. He also relied on the trade notice issued by Vadodara Collectorate. He also relied on the rulings rendered by the Hon’ble Supreme Court in the case of Union of India v. Wood Papers Ltd. as reported in 1990 (47) E.L.T. 500, for construing the words in a notification.
5. The Learned DR submitted that the order issued by the Collector declaring the company as a refinery is only for the purpose of raw Naphtha and not for the purpose of manufacture of Methane. In that view of the matter, the findings given by the lower authorities are all sustainable.
6. We have carefully considered the submissions made by both the sides and have perused the impugned orders. The appellants had claimed the benefit of the Notification No. 276/67-C.E., dated 21-12-1967, which has been amended from time to time. The Notification reads as follows :
In exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944 read with Sub-section (3) of Section 3 of the Mineral Oil (Additional Duties of Excise and Customs) Act, 1958 (27 of 1958), the Central Government hereby exempts the excisable goods falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), produced in any premises (other than the premises wherein refining of crude petroleum or shale or blending of non-duty paid petroleum products is carried on) declared under Sub-rule (2) of rule 140 of the Central Excise Rules, 1944, to be a refinery, and –
(a) utilised in the refinery in which the said excisable goods areproduced, for the manufacture of other goods or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both;
(b) allowed to escape in the atmosphere by flare system or otherwise;or
(c) cleared to another factory outside the refinery in accordance withthe procedure set out in Chapter X of the Central Excise Rules, 1944, for use in the manufacture of any of the commodities specified in the Schedule hereto annexed otherwise than as fuel from the whole of the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944):
Provided that any of the excisable goods having its flash point below twenty-five degrees of Centigrade thermometer and not less than 7% by volume of which distils above 215°C, and cleared under this clause for use as industrial fuel (but not as fuel for internal combustion engine), shall be exempted from so much of the duty leviable thereon as is in excess of –
(a) Rs. 103.43 per KL at 15°C in the case of motor spirit, kerosene,refined diesel oil and diesel oil not otherwise specified; and
(b) Rs. 103.45 per KL at 15°C in the case of furnace oil and other petroleum products.
SCHEDULE 1. Antibiotics 7. Pharmaceuticals 2. Carbon blacks 8. Plastics. 3. Chemicals 9. Plasticizers. 4. Omitted. 10. Polyisobutylenes. 5. Dye-stuffs and dyestuff intermediates. 11. Synthetic fibres. 6. Pesticides. 12. Synthetic rubbers.
As per the terms of the above Notification, the Central Government exempts the excisable goods falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 produced in any premises which has been declared as a refinery. The lower authorities have denied the benefit of this Notification on a very short point, i.e. the order issued by the Government of India declaring the appellant’s company as a refinery under Sub-rule (2) of Rule 140 of Central Excise Rules, 1944 stood terminated on the supersession of the Notification and also that the Notification does not apply to Methane, but merely it applies to the raw Naphtha. As has been argued by the Learned Advocate that the findings of the lower authorities are totally erroneous and unsustainable in law. It is not the case of the department that the appellant’s company is not a refinery and that the order issued by the Government of India has been rescinded or cancelled or not being in force, as has been asserted by the appellants. The order declaring the appellant as a refinery in relation to raw Naphtha falling iunder item 6 of the First Schedule to Central Excises and Salt Act, 1944 does not imply that the appellant is not a refinery for the purpose of Methane.
7. Rule 140 of Central Excise Rules, 1944 reads as follows :-
“Rule 140. Appointment and licensing of warehouse –
(1) The Collector shall, by order in writing, from time to time, approve and appoint public warehouses and may in like manner licence private warehouses for the storage of excisable goods on which duty has not been paid, and may direct in what parts or divisions of such warehouses, and in what manner and on what terms, such goods may be stored and how and in what manner such waresouses, or parts, or divisions thereof, shall be secured by locks, fastenings or otherwise. The Collector may revoke his approval of a warehouse, and upon such revocation all goods warehoused therein must be removed as the Collector directs, and no abatement of duty or allowance shall be made in respect of any such goods for deficiency of quantity, strength or quality after notice of the revocation has been given to the proprietor or occupier of the warehouse:
(2) If the Central Government is satisfied that it is necessary or expedient so to do in the public interest, it may, by a general or special order, declare any premises or group of premises to be a refinery, either permanently or for a specified period, and on isuch declaration, such refinery shall be deemed to be a warehouse appointed or licenced under Sub-rule (1) and the provisions of this Chapter shall apply in relation to the goods processed or manufactured in such refinery as they apply in relation to the goods stored in a warehouse appointed or licenced under Sub-rule (1).”
As can be seen from the above Rule, the Central Government has already declared the appellant’s company as a refinery for the purpose of raw Naphtha, which is a basic material or input utilised by the appellants for the purpose of manufacture of various goods. This raw Naphtha which is brought in pipelines and stored by the appellants for the purpose of manufacture of various goods falls under Tariff Item 6 and it is the only basic raw material. Therefore, the order of the Government of India is two-folded, one it declares the premises of the appellants as a refinery and secondly, on such declaration the refinery shall be deemed to be a warehouse appointed or licenced under Sub-rule (1) and the provision of the Chapter VII dealing with the warehouse and it shall apply in relation to the goods processed or manufactured in such refinery as they apply in relation to the goods stored in a warehouse appointed or licenced under Sub-rule (1). Therefore, the lower authorities had not properly analysed the Rule 140. The order given by the Government of India is not only to declare the appellants as a refinery but also to declare such a refinery as a warehouse in relation to the goods processed or manufactured and stored in such refinery, which has been treated as an appointed or licenced warehouse. It follows that all the goods manufactured from raw Naphtha are deemed to have been manufactured in a refinery and those goods are deemed to have been stored in a warehouse for the purpose of manufacture under Chapter VII of the Central Excise Rules, 1944. The Notification in question grants exemption to the goods falling under Chapter 27 of the Schedule to the CET, 1985 produced in any premises which has been declared as a refinery. As has been held by us, the order of the Government of India declaring the appellant’s company as a refinery has not been revoked and the appellant’s company being a refinery and Methane having been classified under Chapter 27 and it is utilised in a refinery in which the said excisable goods are produced, for the purpose of manufacture of other goods as mentioned in the Schedule of the Notification, are therefore, exempted from levy of excise duty. There is no reason for denying the benefit of the Notification, as it is not the department’s case that Methane has not satisfied the other terms of the Notification except to hold that the certificate issued by the Government of India is only in respect of raw Naphtha and not for Methane. The lower authorities have not properly appreciated and understood the certificate issued by the Government of India. As observed by us, the order of the Government of India has been issued in terms of the Rule 140, which has been analysed by us as above, is for the purpose of declaring the appellant’s company as a refinery and also as a warehouse for the purpose of goods manufactured therein. Therefore the order of the Government of India is not a restricted order declaring the appellant’s company as a refinery only for the purpose of raw Naphtha. The order of the Government of India having been issued in terms of the Rule 140 satisfies the stipulation of the said rule as well as for manufacture of all goods from raw Naphtha in the refinery; and it is a refinery for all purposes. Therefore, the reasons given by the lower authorities not being sustainable in law, the impugned order is required to be set aside and hence, we order accordingly.