Judgment:
1. All these three appeals are directed against the order in original No. 10/MP/2003 dated 24.10.2003 by which, the demand was confirmed and penalties were imposed on the appellants.
2. The relevant facts, that arise for consideration, are that the appellant company M/s Haryana Sheet Glass was a 100% EOU, engaged in the manufactured of sheet glass. The appellant company had been granted Industrial licence by the Department of Industrial Development under EOU scheme. The appellant was availing the benefit of exemption Notification No. 1/95-CE dated 4.1.1995 as EOU. The appellant procured furnace oil, HSD and LDO under Notification No. 1/95 after following the proper procedure as laid down in the said Notification. Show cause notice was issued to the appellant in June, 2001 directing them to show cause as to why the benefit of Notification No. 1/95 be not denied to them on the ground that the items like furnace oil, LDO, HSD do not fall in the category of consumable for which they had sought CT-3 certificates. The appellant contested the above show cause notice on the ground that these goods were consumed in the factory premises and proper accounts have been maintained for consumption of these goods and used for manufacture by them and finished goods were exported. They had fulfilled the export obligation as required by an EOU. Despite this, the adjudicating authority came to the conclusion that the appellant company had violated the provisions of the Notification No. 1/95 by procuring the furnace oil, HSD, LDO during the period September 1996 to July, 1997 without payment of duty and consumed them in violation of the procedure. After coming to the conclusion, he confirmed the demand and imposed penalties on the appellant company and their employees. The appeals are against the said order.
3. Learned Advocate appearing on behalf of the appellant submits that there is no dispute about the use of the furnace oil, HSD and LDO. The condition of the export obligation was also fulfilled by the appellant.
It is the submission that interpretation as sought to be done by the adjudicating authority as against the consumables is not correct. He relies on the decision of the Jayant Agro Organics Ltd. v. C.C.E., Vadodara C.C.E., Kochi as reported for the proposition that the word 'consumable' in Notification No. 1/95 covers the fuel even for the period prior to the amendment to the Notification.
4. Learned SDR appearing for the revenue submits that at no stretch of imagination fuel can be considered as consumable. It is his submission that subsequent to the amendment to the Notification No. 1/95, would indicate that fuel was a separate item and hence the benefit of the inclusion of fuel in notification will be applicable from the date of amendment.
5. Considered the submissions made by both sides at length and perused record. It is undisputed that furnace oil/LDO/HSD was being procured under Notification No. 1/95. It is also undisputed that the appellant had consumed the same in the manufacture of final products, which were subsequently exported. The appellant had fulfilled export obligation as imposed whey they got registered as EOU. The specific finding of the adjudicating authority while confirming the demand of duty is as under: I find that consumables had not been defined in Central Excise Notification under reference. Therefore, we have to examine the Notification in totality & arrive at harmonious interpretation. It is quite clear that the Ministry of Furnace, Department of Revenue did not consider Furnace Oil for boilers as covered under the term consumables and that is why the need arise to specify Furnace Oil as a fresh entry. Had the view of exemption issuing authority same as claimed by the noticees, there was no need for specifying Furnace Oil in the relevant Notifications. If view of the noticees is accepted, fresh entries for furnace oil (introduced in two stages, first for textile units and thereafter for all units) would be absurd and superfluous. It is significant that even after insertion of fresh entries for furnace oil, the entry consumables had not been qualified with expression 'excluding furnace oil' which would have been imperative if Government's view was to cover furnace oil for boiler in the category of consumables. Moreover, raw material, consumables and fuel are indicated as three distinct genres, contrary to these all being broad banded as raw materials or only as consumable. Each genre covers a separate category of goods. Fuel is distinct from consumables, though fuel does get consumed just as raw material is also consumed but is placed in a separate category.
Therefore, the correct view will be that furnace oil, HSD & LDO were not covered under the term consumables used in the Central Excise Notification mentioned in he show cause notice and therefore, the exemption was wrongly availed by the assessee. Therefore, I hold that M/s Haryana Sheeet Glass Ltd., became entitled for duty free procurement of furnace oil, HSD & LDO only from 22.5.2000.
6. It can be seen from the above reproduced portion of the order in original that adjudicating authority has denied the benefit of notification 1/95 to fuel, holding that the "consumable" does not include "fuel". An identical question was before the Division Bench of the Tribunal in the case of Tata Tea Ltd. (supra) wherein the Division Bench has held as under: 5.3 The question, now, is whether the furnace oil used as fuel for the appellants' boilers could be considered as a 'consumable'. This term has not been defined in the Notification nor under the Central Excise Act/Rules. According to the Concise Oxford dictionary of Current English it means a 'commodity that is eventually used up'.
There is no dispute, in the instants case, of furnace oil having been used as a fuel for the boilers. The boilers generated steam and the latter was used in the drying stage of the process of manufacture of instant tea powder. The furnace oil was, thus, consumed in the process. It fell in the category of consumables indisputably, and undisputedly too. Therefore, we hold that the furnace oil brought into the EOU and used in the boilers during 1.1.2000 to 21.5.2000 was exempt from payment of Central Excise duty in terms of Entry No. 7 of Annexure I to Notification No. 1/95-CE, dated 4.1.95.
We find that the issue is covered by the decision of the Tribunal in the case of Jayant Agro Organics Ltd. (supra) also wherein the Tribunal has held as under: 4. After hearing both sides and considering the material on record and the submissions made. The appellants are challenging an interpretation, that by the amendment dated 15-9-98 to Notification 1/95 the benefit of duty free utilisation would be available under Serial No. 3(c) of the table to the notification only to furnace oil used for boilers in an 100% EOU of textiles would only be eligible and not to an EOU using furnace oil to generate steam used in and essentially required in the distillation of the oils in the appellants unit i.e. used as a consumable or and raw material permitted under Serial Nos. 5 & 7 of the same table. It is termed: (a) The amendment dated 15-9-98 to the Notification vide Notification 31/98 added the following entries in the table to Notification 1/95.
3. Captive power plants, including captive generating sets of a capacity exceeding 1000 KVA and the spares for such plants and sets as recommended by the said board.
3A. Captive power plants, including captive generating sets, up to a capacity of KVA and the spares for such plants and sets as recommended by the Development Commissioner.
3B. Fuel, lubricants and consumable for goods specified at items 3 and 3A as approved by the Commissioner of Customs on the recommendation of the Development Commissioner, 3C. Furnace oil required for the boilers used in the textile units as approved by the Commissioner of Customs on the recommendation of the Development Commissioner.
(b) There is no doubt, that vide amendment at 3C above, furnace oil required for boilers used in the textile mills as approved by the Commissioner of Customs on the recommendations of the Development Commissioner, were goods eligible for the benefit of the exemption notification. However, this amendment did not impugne Entry Nos. 5 or/and 7, in the said list captioned "raw material", "consumable" against which the benefit was being availed, by the said appellants herein before the amendment came into effect vide. Notification 31/98.
(c) There is no material on record which demonstrated that furnace oil was indeed not a consumable and/or not a raw material, permitted under Entry Nos. 7 and/or 5 of the Notification 1/95 which remains the same before and after the amendment. The use of this furnace oil is to generate steam in the appellants' factory, which is thereafter used in relation to the process of distillation of the final product. Without the use of this steam, process of distillation cannot be carried out, and end products can not be manufactured.
Therefore, we cannot approve the Commissioner's findings that the use of furnace oil in the boilers in this case to generate the steam. Prima facie would no constitute and be covered under the word "consumables" or "raw material". The notification permits the goods mentioned, which are brought "in connection with the manufacture of an article" and there is no doubt there can be no dispute that the "furnace oil" in this case has been brought and used for the manufacture of final products, which have been exported by the EOU. Therefore, there is no doubt that the said goods would be covered by the word "raw material" and/or "consumable" in this case.
7. Respectfully following the said decisions, we hold that furnace oil/LDO/HSD procured by appellants are covered under heading "consumable" in Notification No. 1/95 and the impugned order is liable to be set aside. We also hold that appellant had correctly followed the provisions of Notification No. 1/95, as amended. Accordingly, the impugned order is set aside and the appeals are allowed, with consequential relief, if any.