Cce Vs. Welspun Terry Towelks and Shri - Court Judgment

Excerpt:
1. these appeals by the department are against the order of commissioner in f. no. v adj (scn) (aem) 15-39/2001, dt. 14.2.2002 i) the appellant company is a 100% eou and are engaged in the manufacture and export of terry towels, fabrics, made ups, cotton and blended yarns. ii) they procured capital goods, raw material, consumables etc from indigenous sources without payment of duty availing the benefit of exemption under notification no. 1/95-ce dated 4.1.95 as amended. iii) they also imported capital goods, raw materials, consumables etc duty free availing exemption under notification no. 53/97 cus dated 3.6.97 as amended from time to time. iv) notification no. 1/95 ce dt.4.1.95 was amended by notification no. 31/98 ce dt.15.9.98 by which "furnace oil required for boilers used in textile unit was specifically made eligible for exemption. similarly, amendment dt.20.6.98 to the notification no. 53/97 enabled similar concession in respect of imported furnace oil. v) prior to the above amendments, appellant company was procuring/importing furnace oil required for boilers without payment of duty claiming them as "consumables" which was one of the entries covered by notification no. 1/95 ce dt.4.1.95, and notification no. 53/97 cus dt.3.6.97. vi) the excise authorities felt that as the furnace oil have been made specifically eligible for exemption by the above mentioned amendments, they were not eligible for duty free procurement/import of fuel oils and accordingly the proposed demand of duty and also imposition of penalty on the appellant company as well as manager (excise) of the appellant company. vii) commissioner dropped the proceedings vide his order dt. 14.2.02, inter alia, holding that the assessee has effectively demonstrated that furnace oil was a consumable; that the show cause notice did not spell out any logic as to how the furnace oil was excluded as a consumable as mentioned in the said notification; that the word consumables figuring in the notification was wide enough to cover the usage of furnace oil whether in the textile or non-textile eou not withstanding the amendment dt.15.9.98. the learned dr submits that the interpretation of the commissioner are not legal and it makes the amendment dated 15.9.98 to notification no. 1/95 ce and the amendment dated 26.6.98 to notification no. 53/97 cus as redundant. he also submits that the fuels are used in the boilers to produce steam and they are not consumables used in the machinery. he also submits that any exemption notification being in nature of an exception, same is to be construed strictly and in case of any ambiguity, the issue has to be resolved in favour of revenue. learned advocate for the respondent submits that the issue of eligibility of exemption for furnace oil procured by 100% eou has been decided by the tribunal in case of jayant agro organics ltd. v. cce vadodara and also in case of tata 4. we have carefully considered the rival submissions. the 100% eou has been permitted to procure capital goods, raw material and consumables both from domestic sources as well as by way of import. prior to the amendments in 1998 referred above, they were getting the furnace oil under ct 3 procedure without payment of duty claiming them as consumables. during the relevant period, the development commissioner has granted permission for procurement of the furnace oil as consumables in terms of the policy governing 100% eou. whether the furnace oil can be considered as consumable for the purpose of notification no. 1/95 has been decided in the case of jayant agro organics ltd and also in case of tata tea ltd cited supra. the relevant portion of the finding in case of tata tea ltd cited supra is reproduced below: 5.3 the question, now, is whether the furnace oil used as fuel for the appellant's 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 instant 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 manufacturer 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-c.e., dated 4.1.95.similar view has been expressed in the case of jayant agro organics ltd. cited supra.5. the ratio of the above decisions are applicable to the present case.therefore, we hold that no valid grounds have been adduced to interfere with the findings and reasonings of the commissioner.6. therefore, the appeals by the department are rejected. the cross-objection is also disposed off accordingly.

Judgment:
1. These appeals by the Department are against the order of Commissioner in F. No. V Adj (SCN) (AEM) 15-39/2001, dt. 14.2.2002 i) The appellant company is a 100% EOU and are engaged in the manufacture and export of Terry Towels, Fabrics, made ups, Cotton and blended yarns.

ii) They procured capital goods, raw material, consumables etc from indigenous sources without payment of duty availing the benefit of exemption under Notification No. 1/95-CE dated 4.1.95 as amended.

iii) They also imported capital goods, raw materials, consumables etc duty free availing exemption under Notification No. 53/97 Cus dated 3.6.97 as amended from time to time.

iv) Notification No. 1/95 CE dt.4.1.95 was amended by Notification No. 31/98 CE dt.15.9.98 by which "furnace oil required for boilers used in textile unit was specifically made eligible for exemption.

Similarly, amendment dt.20.6.98 to the Notification No. 53/97 enabled similar concession in respect of imported furnace oil.

v) Prior to the above amendments, appellant company was procuring/importing furnace oil required for boilers without payment of duty claiming them as "consumables" which was one of the entries covered by Notification No. 1/95 CE dt.4.1.95, and Notification No. 53/97 Cus dt.3.6.97.

vi) The excise authorities felt that as the furnace oil have been made specifically eligible for exemption by the above mentioned amendments, they were not eligible for duty free procurement/import of fuel oils and accordingly the proposed demand of duty and also imposition of penalty on the appellant company as well as Manager (Excise) of the appellant company.

vii) Commissioner dropped the proceedings vide his order dt.

14.2.02, inter alia, holding that the assessee has effectively demonstrated that furnace oil was a consumable; that the show cause notice did not spell out any logic as to how the furnace oil was excluded as a consumable as mentioned in the said notification; that the word consumables figuring in the notification was wide enough to cover the usage of furnace oil whether in the textile or non-textile EOU not withstanding the amendment dt.15.9.98.

The learned DR submits that the interpretation of the Commissioner are not legal and it makes the amendment dated 15.9.98 to Notification No. 1/95 CE and the amendment dated 26.6.98 to notification No. 53/97 Cus as redundant. He also submits that the fuels are used in the boilers to produce steam and they are not consumables used in the machinery. He also submits that any exemption notification being in nature of an exception, same is to be construed strictly and in case of any ambiguity, the issue has to be resolved in favour of Revenue.

Learned advocate for the respondent submits that the issue of eligibility of exemption for furnace oil procured by 100% EOU has been decided by the Tribunal in case of Jayant Agro Organics Ltd. v. CCE Vadodara and also in case of Tata 4. We have carefully considered the rival submissions. The 100% EOU has been permitted to procure capital goods, raw material and consumables both from domestic sources as well as by way of import. Prior to the amendments in 1998 referred above, they were getting the furnace oil under CT 3 procedure without payment of duty claiming them as consumables. During the relevant period, the Development Commissioner has granted permission for procurement of the furnace oil as consumables in terms of the policy governing 100% EOU. Whether the furnace oil can be considered as consumable for the purpose of notification No. 1/95 has been decided in the case of Jayant Agro Organics Ltd and also in case of Tata Tea Ltd cited supra. The relevant portion of the finding in case of Tata Tea Ltd cited supra is reproduced below: 5.3 The question, now, is whether the furnace oil used as fuel for the appellant's 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 instant 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 manufacturer 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-C.E., dated 4.1.95.

Similar view has been expressed in the case of Jayant Agro Organics Ltd. cited supra.

5. The ratio of the above decisions are applicable to the present case.

Therefore, we hold that no valid grounds have been adduced to interfere with the findings and reasonings of the Commissioner.

6. Therefore, the appeals by the Department are rejected. The cross-objection is also disposed off accordingly.