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'REPORTABLE' IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3623-3624 OF 2005

COMMISSIONER OF CENTRAL EXCISE, VADODARA     ... Appellant VERSUS

INDIAN PETROCHEMICALS CORPN.LTD.& ANR.       ... Respondents

WITH

CIVIL APPEAL NO. 1034 OF 2007

CIVIL APPEAL NOS. 262-263 OF 2010

CIVIL APPEAL NO. 4264 OF 2011

J U D G M E N T A. K. SIKRI, J.

These batch of appeals pertain to Indian Petrochemical Corporation  Limited  (in  short  'IPCL')  and  in  the  fourth appeal, the assessee is Indian Oil Corporation.    

IPCL is engaged in the manufacture of various types of petrochemicals, falling under Chapter 27 and 29 of Central Excise Tariff Act, 1985.  It holds valid Central Excise registration  under  Rule  174  of  the  Central  Excise  Rules 1944.  One of the products which is manufactured by IPCL is C4 Raffinate.  On this, the IPCL has been paying 8 per cent

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duty, as it has been claiming the benefit of Notification No. 6/2000 dated 01.03.2000.  We may mention that the normal rate  of  duty  of  the  aforesaid  product  is  16  per  cent. However, by virtue of the aforesaid notification, in respect of certain products duty is halved.  The question arose as to  whether  the  IPCL  is  entitled  to  the  benefit  of  the aforesaid notification and in that context, the issue of classification of this product fell for consideration.  The IPCL has classified the product under chapter sub-heading 2711.19.  Chapter Heading Entry 27.11 reads as under: -

27.11 Petroleum gases and other gaseous hydrocarbons - Liquefied :

2711.11 - Natural gas 2711.12 - Ethylene, propylene, butylene and  

 butadiene 2711.19 - Other

--In gaseous state: 2711.21 - Natural gas 2711.29 - Other

As per the Department, the aforesaid product should have  been  classified  under  Chapter  Heading  2711.12  as butylene.   On  that  basis,  show  cause  notice  was  issued demanding excise duty at the rate of 16 per cent ad valorem and asking the IPCL to pay the differential duty as duty paid by IPCL was at the rate of 8 per cent.  The IPCL replied to the show cause notice sticking to its position that the as per the aforesaid exemption Notification, 50 per cent of the duty of excise specified in the First Schedule, was payable.

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In the Order-in-Original passed by the Commissioner, the demand of duty as claimed in the show cause notice was confirmed rejecting the contention of the IPCL.  However, in an appeal filed before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'CESTAT'), IPCL has emerged successful inasmuch as its contention is accepted.   

On going through the order of the Commissioner as well as the CESTAT, we find that both the authorities below have entered into the various facets of the dispute and gone into the entire gamut of controversy.  Many of the findings of the Commissioner in his order have not found favour with the CESTAT in the impugned decision rendered by it.  We have heard learned counsel for the parties on all the aspects and have gone through the orders minutely through which we were taken by the learned counsel appearing for the parties.  We are, however, of the opinion that it is not necessary to even advert to all those aspects of the matter inasmuch as the fulcrum of the dispute pertains to the interpretation which is to be accorded to the language used in Notification No.  6/2000  which  confers,  as  mentioned  above,  partial exemption.  It reads as under: -

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Chapter or heading No.  or sub-headi ng No.  

Description  of goods  

Rate  under the  First Schedule

Rate under the Second Schedule

Condition No.  

27.11 Liquefied Petroleum  Gases and  other gaseous hydrocarbons other  than natural  gas, ethylene, propylene, butylene  and butadiene

Fifty  per cent  of  the duty  of excise specified  in the  First Schedule  

- -

The basic contention of Mr. Yashank Adhyaru, learned senior counsel appearing for the appellant, was that the aforesaid  notification  exempts  liquified  petroleum  gases (LPG) as well as other gaseous hydro carbons and excludes specifically  natural  gases,  ethylene,  propylene,  butylene and butadiene.  On the other hand, learned counsel appearing for the respondents have argued that the words “other than” qualify only natural gases and according to him, if read in this  manner,  the  products  which  would  fall  within  the exempted category for payment of concessional rate of excise duty would be LPG, other gaseous hydro carbons excluding natural gas, ethylene, propylene, butylene and butadiene.   

We find that the construction as sought to be given by IPCL appears to be correct.  This aspect has been dealt with by the CESTAT in para 5.5 of the judgment and since we are

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agreeing with the said interpretation given by the Tribunal, we reproduce hereunder the said para in its entirety: -

“5.5 As regards the eligibility to the Notification Sr. No. 24 thereof, it is found - (i) Sl. No. 24 of Notification NO. 6/2000-C.E., dated  1-3-2000  confers  partial  exemption  to “Liquefied  Petroleum  gases  and  other  gaseous hydrocarbons  other  than  natural  gas,  ethylene, propylene,  butylene  and  butadiene”.  (emphasis supplied)

In the aforesaid Sl. No. 24 of Notification No. 5/2000, there is no comma after the words 'gaseous hydrocarbons'.   Therefore,  the  expression  “other than”  appearing  after  the  words  “gaseous  hydro carbons” and before the words “natural gas” would qualify  only  the  words  “natural  gas”.   In  other words,  the  following  goods  are  covered  by  the aforesaid Sl. Nos.

(i)  Liquefied  petroleum  gas  and  other  gaseous   hydrocarbons with exclusion of natural gas, (ii) Ethylene, (iii)Propylene, (iv) Butylene and (v) Butadiene. The above submissions is reinforced by a comparison

with Sl. No. 30 of Notification No. 75/84-C.E., dated 3-3-1984  as  introduced  by  Notification  No. 120/86-C.E.,  dated  1-3-1986  which  stood  in  the manner, dining the entire period from 1-3-1986 to 28-2-1994.

F.5 The said Sl. No. 30 of Notification No. 75/84 reads thus:

“Liquefied petroleum gases and other gaseous hydrocarbons, other  than  natural  gas,  ethylene,  propylene,  butylene  and butadiene”.

as in the above Notification No. 75/84, there was a comma  after  gaseous  hydrocarbons,  unlike  present Notification No. 6/2000, Sl. No. 24 thereof.   

Therefore,  even  if  C-4  Raffinate  is  treated  as Butylene Sl. No. 24 of Notification No. 6/2000-C.E., would be applicable, specification of butylenes in the said Sl. No. 24 is not for the purpose of its exclusion,  but  for  the  purpose  of  its  specific enumeration and inclusion. (ii) Even if the description of goods against Sl.

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No.  24  of  Notification  No.  6/2000-C.E.,  is interpreted  to  mean  that  ethylene,  propylene, butylenes and butadiene are also excluded, then C-4 Raffinate is not excluded since it is not exclusively a or any 'butylene' but is a mix of 'butylenes'.  In view  of  the  findings  arrived  in  paras  supra. However, since C-4 Raffinate is liquefied petroleum gas  it  is  covered  by  the  description  of  the “Liquefied  Petroleum  gases  and  other  gaseous hydrocarbons”  under  Sl.  No.  24  of  the  above notification, Raffinate, even if it is assumed as butylene is not excluded from coverage of Sl. No. 24 of  the  Notification  No.  6/2000,  but  would  stand included in the first part of the Notification as liquefied petroleum gases. (iii) The order of the Commissioner on the question of  availability  of  exemption  Notification  No. 6/2000-C.E.,  dated  1-3-2000  and  No.  3/2001-C.E., dated 1-3-2001 is purely based on the intention of the  legislature  on  the  basis  of  the  Finance Minister's speech.  However, it is well settled legal position that the notification has to be interpreted on the basis of plain meaning of words and intention behind  the  notification  cannot  be  a  basis  to interpret  the  notification.   Commissioner  has  not refuted  any  of  the  submissions  made  by  the appellants,  on  the  interpretation  of  the notification.   If  the  interpretation  of  the department  on  Sr.  No.  24  of  Notification  No. 6/2000-C.E.,  dated  1-3-2000  and  Sr.  No.  34  of Notification  No.  3/2001-C.E.,  dated  1-3-2001  is accepted  then  the  simple  way  of  giving  the description of the goods under the said Sr. Nos. of the  Notifications,  would  have  been  “goods  falling under sub-heading 2711.19”, if the Government wanted to extend the concessional rate of duty in respect of liquefied petroleum gas and other hydrocarbons except natural gas.  Hence the interpretation as adopted by the  Commissioner  based  on  the  intention  of  the legislature on the basis of Finance Minister's speech is wholly incorrect.”   

Insofar as Indian Oil Corporation is concerned, the only difference is that it is manufacturing a product known as propylene.  Since it is also one of the products which qualifies  for  partial  exemption  from  payment  of  duty  by Notification No. 6/2000 dated 01.03.2000, result in both the

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cases would be the same.    

Consequently,  all  these  appeals  preferred  by  the Department are hereby dismissed.

........................., J. [ A.K. SIKRI ]

........................., J. [ ROHINTON FALI NARIMAN ]

New Delhi; May 12, 2015.

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