MIS STEEL AUTHORITY OF INDIA LTD. ETC. versus COLLECTOR OF CENTRAL EXCISE

Citation: [1996] SUPP. 4 S.C.R. 163 · Decided: 30-07-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

MIS STEEL AUTHORITY OF INDIA LTD. ETC. 
A 
v. 
COLLECTOR OF CENTRAL EXCISE 
JULY 30, 1996 
B 
[S.P. BHARUCHA AND K.T. THOMAS, JJ.] 
Central Excise Rules, 1944 : Rules 192 and 196( l~Exemptio11 
Notification No. 187 of 1961 dt. 23rd December 1961-:-Concessional rate of 
duty on raw naphtha utilised for the manufacture of fe1tiliser-At Interim stage C 
refomzed gas vented out-Raw naphtha not reaching amonia plant-Imposi-
tion of excise duty on raw naphtha-Held, raw naphtha used for the purpose 
and with the intention to manufacture fe1tilise1~Refonned gas vented out due 
to operational reasons-Entitled to benefit under the exemption notification. 
Appellant-assessee was engaged in the manufacture of fertiliser by D 
using raw naphtha. By exemption notification no. 187 of 1961 dt. 23rd 
December, 1961, raw naphtha was excisable at a concessional rate of duty 
for the manufacture of fertiliser. According to the Revenue, a substantial 
quantity of raw naphtha was not used by the appellant in the manufacture 
of fertiliser. Thus, a show cause notice was issued to the appellant for E 
payment of Excise Duty on quantities of raw naphtha not utilised for the 
manufacture of fertiliser. On appeal, the Customs, Excise and Gold (Con· 
trol) Appellate Tribunal relying upon Rule 196(1) of the Central Excise 
Rules, 1944 upheld the order of the Collector of Central Excise (Appeals). 
The Tribunal noted that the raw naphtha bad been burnt in the naphtha 
reforming plant, did not reach the amonia plant as the reformed gas 
vented out into the atmosphere; and that the quantity of raw naphtha not 
used for the manufacture of fertiliser would not be given the concessional 
rate of Excise Duty. However, the Tribunal while allowing an appeal 
against a subsequent order of the Collector, expressed a contrary view that 
F 
the appellant in fact intended to use raw naphtha for manufacturing G 
fertiliser but for operational reasons it became necessary to vent out the 
reformed gas. Aggrieved by the order of the Tribunal the present applals 
were preferred by the assessee. 
Allowing the appeals, this Court 
163 
H 
A 
B 
164 
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R. 
HELD : 1.1. The benefit of Exemption Notification No. 187 of 1961 
dt. 23rd December 1961 is available to the appellant in regard to the raw 
naphtha that it utilised in its plant for the manufacture of fertiliser but 
which, for reasons over which it had no control, did 'lot in fact result in 
the manufacture of fertiliser but had, at the interim stage of reformed gas, 
to be vented out. [168-F] 
1.2. The Exemption Notification required proof that the raw naphtha 
was "intended for use" in the manufacture of fertiliser and not that the raw 
naphtha was used in the manufacture of fertiliser. Duty at the full rate on 
the raw naphtha would be leviable only if it could not be shown to have 
C 
been used for the purpose and with the intention of manufacturing fer· 
tiliser. Thus, the Tribunal erred in holding in its first order that it was 
requisite that it should be proved that raw naphtha had been actually used 
in the manufacture of fertiliser. [168-A-D] 
1.3. There can be no doubt that the raw naphtha that was fed by the 
D appellant into its plant was for the purpose and with the intention of 
manufacturing fertiliser and that it was only because of supervening 
circumstances, namely, the low, uncertain and fluctuating availability of 
power, that the reformed gas produced during the interim stage of 
manufacture had to be vented out. Thus, the Tribunal was justified in 
E 
expressing its disagreement in the second order with the view taken in the 
first order. [168-E-F] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3406-11 
of 1990 Etc. 
F 
From the Judgment and Order dated 11.5.90 of the Customs, Excise 
G 
and Gold (Control), Appellate Tribunal, New Delhi in A. Nos. E./283 to 
288/90-C Order No. 468-473 of 1990-C. 
V. Sreedharan, Sunil Kumar Jain, J atinder K. Bhatia, Sanjeev Bansal 
and K.J. John for the Appellants. 
Joseph Vellappally, R.P. Srivastava, P. Parmeswaran and V.K. 
Verma for the Respondent. 
The Judgmer.t of the Court was delivered by 
H 
BHARUCHA, J. These are appeals against orders of the Customs, 
STEELAlJfHOIU1Y OF INDIA LID. v. COLLECTOROFC.E (BHARUGIA,J.] 165 
Excise & Gold (Control) Appellate Tribunal dismissing appeal filed by the A 
present appellants, Steel Authority of India Ltd. (SAIL), before it. 
SAIL has a plant at Rourkela which manufactu

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