Chennai Petroleum Corporation Vs. Cce - Court Judgment

Excerpt:
.....jt. cdr has not contested this submission of the counsel. he, however, submits that a part of the electricity generated by the process involving dm water was used outside the factory of production.in other words, learned jt. cdr reiterates the logic adopted by the lower authorities.3. we find that it is not in dispute that dm water is classifiable under single '-' entry "distilled or conductivity water and water of similar purity". the question now is whether it should be classified under sh 2851.11 [-- used within the factory of production] or under sh 2851.19 [-- other]. if dm water was used within the factory of its production, it should be classified only under sh 2851.11. admittedly, it was used within the factory of its production and accordingly it has to be.....

Judgment:
1. These appeals of the assessee are against demands of duty on what is called 'demineralized water' [DM water, for short], for the periods August 2000 to March 2001 and April 2001 to September 2001. During the periods of dispute, DM water was prepared by a process of purification in the assessee's factory, used in boilers for generation of steam, this steam was used to run a turbine for generation of electricity, a major part of this electricity was captively consumed in the manufacture of final products in the factory and the remaining portion of the electricity was supplied to the TNEB (Tamilnadu Electricity Board) grid. On these facts, the lower authorities classified DM water under SH 2851.19 of the First Schedule to the Central Excise Tariff Act after rejecting the assessee's claim for classification of the item under SH 2851.11. The impugned demand of duty is consequential to this classification. The relevant part of the text of the Tariff entry is extracted hereunder: 2. Learned Counsel for the appellants has submitted that it is not in dispute that DM water was used within the factory of production.

Learned Jt. CDR has not contested this submission of the counsel. He, however, submits that a part of the electricity generated by the process involving DM water was used outside the factory of production.

In other words, learned Jt. CDR reiterates the logic adopted by the lower authorities.

3. We find that it is not in dispute that DM water is classifiable under single '-' entry "Distilled or Conductivity Water and Water of Similar Purity". The question now is whether it should be classified under SH 2851.11 [-- Used within the factory of production] or under SH 2851.19 [-- Other]. If DM water was used within the factory of its production, it should be classified only under SH 2851.11. Admittedly, it was used within the factory of its production and accordingly it has to be classified appropriately under SH 2851.11 attracting 'nil' rate of duty.

4. In the result, the demand of duty is set aside and these appeals are allowed.