I.O.C. LIMITED Vs. CCE

JUDGEMENT

(1.) These appeals of Indian Oil Corporation raise a common issue i.e whether Reduced Crude Oil (R.C.O) Low Sulphur Heavy Stock (LSHS) captively consumed by the appellant were eligible for exemption from Central Excise duty. Acordingly, all the appeals are disposed of by this common order.

(2.) The appellants are engaged in the refining of Crude petroleum which leads to the manufacture of various petroleum products. They produced RCO/LSHS, which are residual fuel oils, and used by them captively in the generation of electricity, which electricity in turn was used in the refinery for refining crude petroleum. The appellants claimed exemption for RCO/LSHS which had been captively consumed based on exemption notifications issued from time to time (Notification Nos. 352/77 dated 16.12.77 No. 75/84, No. 67/95 and 8/96 etc.). However, impugned orders held that the exemption was not available on the ground that the exemption is available only to RCO/LSHS directly used in the oil refinery and not to RCO/LSHS used in the manufacture of electricity which is not liable to Central Excise duty, the fact that electricity produced from RCO/LSHS is also used in petroleum refining notwithstanding.

(3.) The appellant's contention is that these are cases of indirect use of the specified exempted material and the fact that use is indirect is no ground for denial of the exemption. During the hearing of the appeals, learned Counsel for the appellants pointed out that the issue is well settled that the emergence of an intermediate product and the indirect nature of the use are no ground for denial of exemption to specified inputs. He cited the decision of the Southern Bench of the CEGAT in the case of Hindustan Petroleum Corporation Ltd. v. CCE, Hyderabad 2000 (124) ELT 323 and points that in regard to use of Naptha in identical manner, the Tribunal had held that indirect use, namely, production of electricity/steam which is used in manufacturing process, would also satisfy the requirement for use of a material in or in relation to the manufacture of final products. Learned Counsel also submitted that the objection regarding indirect use cannot have any acceptance in view of Supreme Court's decision in case of Jaypee Rewa Cement v. Commissioner of Central Excise