Mrs. SUJATA V. MANOHAR, J. - (1.) THE appellant is a Government of India undertaking. THE appellant is engaged, inter alia, in the manufacture of Ethylene, Propylene, Benzene, Toluene and other products falling under Chapters 27 and 29 of the Central Excise Tariff Act, 1985.
(2.) AT the material time the appellant obtained raw naphtha from the Refinery in terms of Notification No. 27/89-C. E. dated 1-3-1989. Under this notification, raw naphtha falling under sub-heading No. 2710. 14 of the Schedule to the Central Excise Tariff Act, 1985 intended for use in the manufacture of products specified in the table annexe to the said notification, is exempt from payment of so much of the duty of excise leviable thereon as is in excess of the amount calculated at the rate of Rs. 60 per kilolitre at 150C on the quantity of naphtha consumed in the manufacture of the said products. The table of products which is annexed to the notification, inter alia, covers Ethylene, Propylene, Butadiene Benzene, Toluene and Para-Xylene which are the products manufactured by the appellant from raw naphtha obtained by the appellant under the concessional rate of excise duty under the above notification. According to the appellant it has not violated any term of this notification. The text of the notification is as follows : "Concessional rate on naphtha used in the manufacture of specified chemicals. - In exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts raw naphtha, falling under sub-heading No. 2710.14 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), intended for use in the manufacture of the products specified in the Table hereto annexed from so much of the duty of excise leviable thereon as is in excess of the amount calculated at the rate of Rs. 60 per kilolitre at 150 C on the quantity of naphtha consumed in the manufacture of the said products : Provided that where the use is elsewhere than in the factory of manufacture the procedure set out in Chapter X of the Central Excise Rules, 1944 is followed. Explanation :- 1.The amount of naphtha consumed in the manufacture of the products shall be calculated by subtracting from the quantity of naphtha received by the factory manufacturing the products the quantity of naphtha returned by the factory to a refinery, declared as such under sub-rule (2) of Rule 140 of the Central Excise Rules, 1944. 2.In cases where certain goods which are incidental, inevitable, or involuntary to the process of manufacture the products specified in the said Table are produced in the course of the manufacture, the exemption under this notification shall not be denied for the reason that the said goods are not products specified in the said Schedule. TABLE JUDGEMENT_515_3_1997Html1.htm According to the appellant the entire quantity of raw naphtha obtained by it is subjected to thermal cracking and is further subjected to fraction and other processes to extract or manufacture these products. At an intermediate stage of manufacture, one of the by-products obtained is pyrolysis Gasolene. Pyrolysis Gasolene is further processed by the appellant to obtain Benzene and Toluene which are products enumerated in the Table. The residue left after this manufacture is further processed to produce petroleum Resins. Petroleum Resins are not listed in the Table. What is left over is returned to the refinery.
(3.) THE Collector, Central Excise held that the entire quantity of Pyrolysis Gasolene which was presumed by him to be raw naphtha, was not entitled to concessional rate of duty as it was used for the manufacture of Petroleum Resins. He levied a duty of Rs. 24, 41, 99, 988. 77, ordered confiscation of land, building, plant, machinery with option to the appellant to redeem them on payment of Rs. 1 lac and imposed a penalty of Rs. 5 crores. In appeal the Tribunal held that Pyrolysis Gasolene used for manufacture of Benzene and Toluene was entitled to concessional rate of duty. But the residual Pyrolysis Gasolene used for the manufacture of Petroleum Resins was not so entitled. It reduced the duty to Rs. 4. 36 crores and reduced the penalty to Rs. 10 lacs. The present appeal is from this order.;