COMMISSIONER OF CENTRAL EXCISE, MUMBAI versus MIS. NATIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED

Citation: [2008] 15 S.C.R. 499 · Decided: 06-11-2008 · Supreme Court of India · Bench: DALVEER BHANDARI · Disposal: Dismissed

Judgment (excerpt)

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[2008] 15 S.C.R. 499 
COMMISSIONER OF CENTRAL EXCISE, MUMBAI 
v. 
MIS. NATIONAL ORGANIC CHEMICAL INDUSTRIES 
LIMITED 
(Civil Appeal No. 1130 of 2003) 
NOVEMBER 6, 2008 
[DALVEER BHANO!\RI AND HARJIT SINGH BEDI, JJ.] 
A 
B 
Central Excise Tariff Act, 1985 - Chapter 27 & 29 -
Notification no.217186 CE dt 02.04.1986 - Ethylene and 0 
propylene - Exemption under Notification - Benefit of -
Ethylene and propylene manufactured by cracking of naphtha 
- Emergence of ethane and methane - Inputs (Ethylene and 
· propylene) captively consumed and used as refrigerant in the 
factory in further manufacture of same goods - Denial of b 
exemption by Excise Department on the ground of production 
of ethane and methane as by-product in process of 
manufacturing ...,. Benefit of exemption allowed by tribunal -
Interference with - Held: Not called for - Ethylene and 
propylene could not be manufactured without manufacturing 
E 
its by-products ethane and methane - Emergence of ethane ' 
and methane was inevitable and automatic. 
Respondent-assessee 
is 
engaged 
in 
the 
manufacturing of ethylene and propylene by cracking · 
raw naphtha in a naphtha cracker. During the process of F 
cracking raw naptha, gases such as methane and ethane. 
automatically emerge as by-products. Ethylene and 
propylene fall under chapter 29 and methane and ethane 
fall under chapter 27 of the Central Excise Tariff Act, 1985. 
A part of the ethylene and propylene manufactured by the 
G 
said process is captively consumed by using the same 
as a refrigerant in the process of separation. Th~ 
remaining quantity of ethylene and propylene is sold as 
the final product. The respondent never informed the 
499 
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H 
500 
SUPREME COURT REPORTS 
(2008] 15 S.C.R. 
~ ,. 
A Authoritie$ about the manufacture of the products falling 
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under chapter 27. Appellant issued notices to the 
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respondent demanding excise duty for the inputs 
ethylene and propylene used in the manufacture of 
. finished products falling under chapter 27. It was 
B appellant's case that as per Exemption Notification 
No.217/86 CE dated 2.4.1986, the inputs ethylene and 
propylene (falling under chapter 29) captively consumed 
in the manufacture of finished goods falling under 
chapter 29 are exempted from excise duty. Such 
-t. 
c exemption was not available to ethylene and propylene 
used in the manufacture of goods falling under chapter 
27, namely methane and ethane. The Commissioner of 
Central Excise upheld the demand of duty and imposed 
penalty along with interest for delayed payment of duty. 
D Aggrieved, respondent filed appeal which was allowed. 
Hence the present appeal. 
Dismissing the appeal, the Court 
'f 
HELD: 1.1. The Tribunal's finding that the ethylene 
E and propylene used as refrigerant has been used in or 
·in relation to the manufacture of the same goods. The 
inevitable arid automatic emergence of ethane and 
methane, therefore, by itself is no ground for denying the 
exemption contained in the notification. The Tribunal 
F came to the categoric finding that the respondent could 
not have manufactured ethylene and propylene without 
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manufacturing its by-products ethane and methane. The 
Tribunal held that in any technology the emergence of 
ethane and m~thane was inevitable and hence while it is 
G no doubt correct to say that the ethylene and propylene 
have been used in or in relation to the manufacture of 
ethane and methane, the identical quantity. of the same 
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... 
' goods has simultane~usly been used in the manufacture 
of ethylene and propylene. The emergence of ethane and 
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methane, therefore, cannot be a ground to deny the 
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COMMNR. OF CENTRAL EXCISE, MUMBAI v. NATIONAL 501 
ORGANIC CHEMICAL INDUS. 
benefit of exemption to the respondent. Thus, no 
A 
interference is called for in the well-reasoned judgment/ 
order of the Tribunal. [Paras 30 and 31] (511-F-H; 512-A, 
B] 
Commissioner of Central Excise, Chandigarh-I v. 
8 
Mahaan Diaries, (2004) 11 SCC 798; Commissioner of 
Central Excise, Trichy v. Rukmani Pakkwell Traders, (2004) 
11 SCC 801; Union of India and Ors. v. Tata Iron and Steel 
Company Limited, (1977) 1 EL T 61; Indian Farmers Fertiliser 
Cooperative Limited v. Commissioner of Central Excise, 
C 
Ahmedabad, ·(1996) 86 EL T 177; Indian Petrochemicals 
Corporation Ltd. v. Collector of Central Excise, Vadodara, 
(1997) 92 ELT 294; National Organic Chemical Industries Ltd. 
v. Collector of 

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