NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. versus COLLECTOR OF CENTRAL EXCISE, BOMBAY

Citation: [1997] 1 S.C.R. 1 · Decided: 06-01-1997 · Supreme Court of India · Bench: S.P. BHARUCHA, K. VENKATASWAMI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. 
A 
v. 
COLLECTOR OF CENTRAL EXCISE, BOMBAY 
JANUARY 6, 1997 
[S.P. BHARUCHA AND K. VANKATASWAMI, JJ.] 
B 
Excise Law: Central Excises and Salt Act, 1944: Items 11-AA(2) and 
68. 
Ethylene, butylene and propylene-Delived not directly from cmde C 
petroleum but from raw naphtha-Held: such products were covered by Item 
11-AA (2) and not residumy Item 68--0rdinmy mean.i.ug has to be given to 
words "derbled from" occurring therein-Trade Notice dated 24. n. 1!)84--Ex-
emption Notification dated 21.12.1967. 
Words and Phrases: 
"Delived from''-Meaning of-Jn the context of Item 11-AA(2) in 
Schedule I to Central Excises anJ! Salt Act, 1944. 
D 
The appellants were a refinery, recognised to be such by the Union of 
India and manufactured ethylene, butylene and propylene. The Customs, E 
Excise and Gold (Control) Appellate Tribunal held that the said products 
were not excisable under Item 11-AA(2) but under the residuary Item 68. 
Hence this appeal. 
On behalf of the appellants it was contended thAf the said products 
fell within Item ll-AA(2) of the Excise Tariff and that the appellants were p 
entitled to the benefit of an Exemption Notification issued in respect of that 
Item on 21-12-1967. 
On behalf of the respondent-Revenue it was contended, basing on a 
Trade Notice dated 24.11.1984, that the said products were manufactured 
from raw naphtha and, therefore, were not classifiable under Item ll-AA(2) G 
but under the residuary item 68. 
Allowing the appeal, this Court 
HELD : 1.1. The dictionaries state that the word "derive" is usually 
followed by the word "from", and it means get or trace from a source: arise H 
1 
2 
SUPREME COURT REPORTS 
[1997) 1 S.C.R. 
A from; originate in; show the origin or formation of. [5-E] 
1.2. The use of the words 'derived from' in Item 11-AA(2) in Schedule 
I to Central Excises and Salt Act, 1944 suggests that the original source of 
the produce has to be found. Thus, as ;;. matter of plain English, when it is 
said that one word is derived from another, often in another language, what 
B is meant is that the source of that word is another word, often in another 
language. That is the ordinary meaning of the words 'derived from' and 
there is no reason to depart from that ordinary meaning here. [5-F] 
1.3. Crude petroleum is refined to produce raw naphtha. Raw naph-
tha is further refinea, or cracked, to produce ethylene, butylene and 
C propylene. It makes no difference that the appellants buy the raw naphtha 
from others. The question is to 1'.Je judged regardless of that. The refining 
of crude petroleum produces various products at different stages. Raw 
naphtha is one such stage. The further refining, or cracking, of raw naphtha 
results in the said products. The source of the said products is crude 
D petroleum. The said products must, therefore, be held to have been derived 
from crude petroleum. The Customs, Excise and Gold (Control) Appellate 
Tribunal erred in holding that the said products were not excisable under 
Item ll-AA(2) but under the residuary Item 68. [5-G-H, 6-A, 4-B] 
The Tata Oil Mills Co. Ltd. v. Collector of Central Excise, (1989) 43 
E ELT 183 (SC) and Nav Bharat Industries (P) Ltd. v. Collector of Customs, 
Madras, (1983) ELT 1134, referred to. 
F 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3828 of 
1990. 
. From the Judgment and Order dated 15.5.90 of the Customs, Excise 
and Gold (Control), Appellate Tribunal, New Delhi in A. No. E/3521 of 
of 1987-C and E/Cross/339/87-C (F.O. No. 496/90-C). 
Soli J. Sorabjee, Ravindra Narian, D. Shroff, Ms. Amrita Mitra and 
G Amit Bansal for the Appellants. 
J. Vellapally and R.P. Srivastava for the Respondent. 
The Judgment of the Court was delivered by 
H 
BHARUCHA, J. The proper construction of the words "derived from" 
N.O.C. INDUSTRIES LTD. v. C.O.C.E. [BHARUCHA, J.] 
3 
will determine this appeal against a judgment and order of the Customs, A 
Excise & Gold (Control) Appellate Tribunal. 
The appellants are a refinery, recognised to be such by the Union of 
India. They manufacture ethylene, butylene and propylene ("the said 
products"). It is their contention that the said products fall within Item B 
llAA of the Excise Tariff and that they are entitled to the benefit of an 
Exemption Notification issued in respect of that Item on 21st December, 
1967, as amended from time to time, under Rule 8 of the Central Excise 
Rules. The Revenue contends, basing itself on a Trad
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