M/S INDIAN OIL CORPORATION LTD.versusCOMMISSIONER OF CENTRAL EXCISE, VADODARA

                      [2012) 2 S.C.R. 965


            M/S INDIAN OIL CORPORATION LTD.                          A
                                v.
  COMMISSIONER OF CENTRAL EXCISE, VADODARA
        (Civil Appeal Nos. 4530-4532 of 2005)

                      JANUARY 13, 2012
                                                                     B
          [A.K. PATNAIK AND ANIL R. DAVE, JJ.]

       Central Excise Rules, 1944 - Chapter X, r. 192 -
 Exemption from excise duty - Entitlement to - Reduced
 Crude Oil (RCO) - Held: Proviso in the exemption notification       C
 made it clear that for availing exemption two conditions were
 to be satisfied: First, that it was proved to the satisfaction of
 the excise officer that the goods were used for intended use
 and second, where such use was elsewhere than in the factory
 of production, the procedure set out in Chapter X of the Rules      D
 was followed - Plea of appellant that if the first condition is
 satisfied, exemption has to be granted, not acceptable - RCO
-produced by appellant was not to be used in its factory but at
 the place of generation of electricity by the Ahmedabad
 Electricity Company Ltd. - Hence, the second condition laid         E
 down in the proviso was also to be complied with - Language
 of Rule 192 of Chapter X of the Rules clearly provided that
 for availing concession from excise duty on excisable goods
 used in a specified industrial process, a person must obtain
 a registration certificate from the Collector and that "the         F
 concession shall, unless renewed by the Collector, cease on
 the expiry of the registration certificate"- Registration
 certificate of Ahmedabad Electricity Company Ltd. had
 expired on 31.12.1995, hence, exemption granted under the
 notification ceased on 31. 12. 1995 - Fresh registration            G
 certificate in favour of the Ahmedabad Electricity Company
 Ltd. was issued only on 26. 06. 1996 and such registration was
 not for any period prior to 26. 06.1996 - As procedure laid down
 in Rule 192 of Chapter X of the Ruies was not complied with,
 the appellant was not entitled to avail the exemption of excise
                                 965                                 H
    966      SUPREME COURT REPORTS                    [2012) 2 S.C.R.

A duty under the exemption notification during the period from
    01.01.1996 to 25.06.1996 - Exemption Notification -
    Notification No. 75184-CE dated 01.03.1984.
       •1

            Central Excise (Removal of Goods at Concessional Rate
     of Duty for Manufacture of Excisable Goods) Rules, 2'001 -
8
     r. 3 - Exemption from excise duty - Entitlement to - Naptha
    - 1-feld: The exemption notification made it clear that
     exemption was to be allowed if it was proved to the Central
     Excise Officer having jurisdiction that the goods were cleared
C    fo[ the intended use - In addition, there was a further condition
     in)he exemption notification that where the intended use was
     elsewhere than the factory of production, exemption was to be
     allowed if the procedure set out in the 2001 Rules was followed
    -;Since in the instant case, the Naphtha produced by the
     appellant in its factory was to be used for the manufacture of
D    fe{iilizer elsewhere than in its own factory, i.e. in the factory of
     lndo Gulf Corporation Limited, exemption could be anowed
    onjy if the procedure set out in the 2001 Rules was followed
    - ,Rule 3(1) of the 2001 Rules made it amply clear that the
    m?riufacturer, who intends to use subject goods for spi~cified
E    us.e at concessional rate of duty, shall make an application
    in. ,quadruplicate in the Form at Annexure-1 to the
    jurisdictional Assistant Commissioner or Oeputy
    Commissioner of Central Excise, as the case may be - No
    suq.h application was made by lndo Gulf Corporation Limited
F   in the form at Annexure-1 to the jurisdictional Assistant
    C9mmissioner or Deputy Commissioner of Central Excise -
    A~ the procedure set out in the 2001 Rules was not followed,
    th!3 appellant was not entitled to exemption on the Ns1phtha
    cleared from its factory for supply to lndo Gulf Corporation
G   Limited for manufacture of fertilize.r - Exemption Notification
    - Notification No. 312001-CE dated 01.03.2001.

      ~ ,. Two different set of appeals under Section 35L' (b) of
    the Central Excise Act, 1944 viz. Civil appeal nos. 4530-
    4532 of 2005 and Civil Appeal No.8048 of 2004 came up
H     f I                                                       "·
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 967
           CENTRAL EXCISE, VADODARA

for consideration before this Court.                         A

Civil appeal nos. 4530-4532 of 2005

     The appellant in this matter produces inter a/ia
Reduced Crude Oil ("RCO"). By Notification No. 75/84-CE
dated 01.03.1984, the Central government in exercise of B
its powers under Sub-Rule 1 of Rule 8 of the Central
Excise Rules, 1944 exempted certain goods from duty of
excise subject to the intended use, or the conditions, if
any. The proviso in the notification stated two conditions
subject to which the exemption was granted and one of C
the conditions was that where the intended use is
elsewhere than in the factory of production, the
procedure set out in Chapter X of the Rules is followed.
Rule 192 in Chapter X of the Rules provided inter a/ia that
where the Central Government has by notification under D
Rule 8 sanctioned the remission of duty on excisable
goods other than salt used in a specified industrial
process and it is necessary for this purpose to obtain an
excise registration certificate, he should submit the
requisite application along with the proof of payment of E
the registration fee and shall then be granted a
registration certificate in the proper form. Rule 192 further··
provided that the concession shall, unless renew~d by
the Collector, cease on the expiry of the registration
certificate. The Ahmedabad Electricity Company ltd. had F
obtained a registration certificate in Form CT-2 under Rule
192 of Chapter X of the Rules and on the strength of such
registration certificate, purchased RCO from the appellant
availing the exemption from excise duty under
Notification No. 75/84 dated 01.03.1984. The registration G
certificate obtained by the Ahmedabad Electricity
Company Ltd. expired on 31.12.1995 and a fresh
registration was granted in its favour on 26.06.1996. The
Assistant Commissioner of Central Excise passed orders
demanding excise duty from the appellant for RCO H
   968     SUPREME COURT REPORTS             [2012] 2 S.C.R.

A supplied to the Ahmedabad Electricity Company Ltd.
  during the period 01.01.1996 to 25.06.1996 on the g1round
  that the said company did not have a regist1ration
  certificate in Form CT-2 under Rule 192 of Chapte!r X of
  the Rules during this period and, therefore, thEl RCO
B supplied by the appellant to the Ahmedabad Elec:tricity
  Ce>mpany Ltd. during this period was not exempt from
  excise duty. The appellant paid the excise duty and
  subsequently applied for refund contending that the
  registration certificate in Form CT-2 had been obtained
c by the Ahmedabad Electricity Company Ltd. on
  26.06.1996. The refund claims were rejected by the
  Assistant Commissioner. The Commissioner of C:entral
  Excise (Appeals) confirmed the demands of excise duty
  for the period from 01.01.1996 to 25.06.1996 and thE! order
  rejecting the refund claim. The appellant then filed
0
  appeals before the Tribunal r'hich dismissed the same
  holding that as the statutory requirement of conditional
  exemption notification had not been complied with by the
  appellant it was not entitled to the exemption benefit.

E Civil Appeal No.8048 of 2004:

       The appellant herein produces inter alia Naphtha. By
  Notification no. 3/2001-CE dated 01.03.2001 issued under
  Section SA of the Central Excise Act, 1944, the Central
F Government exempted inter alia Naphtha cleared for the
  intended use in the manufacture of fertilizers from excise
  duty subject to conditions specified in the anne>1:ure to
  the notification. In the annexure to the exemption
  nc1tification, one of the conditions specified wa1s that
  where such use is elsewhere than in the factory of
G production, the exem'ption shall be allowed if the
  procedure set out in the Central Excise (Remc1val of
  Goods at Concessional Rate of Duty for Manufaclture of
  Excisable Goods) Rules, 2001 is followed. Rule 3(1)1 of the
  2001 Rules provided that a manufacturer who inte·nds to
H
 INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 969
            CENTRAL EXCISE, VADODARA

  receive subject goods for specified use at concessional         A
· rate of duty, shall make an application in quadruplicate
  in the Form at Annexure-1 to the jurisdictional Assistant
  Commissioner or Deputy Commissioner of Central
  Excise, as the case may be. lndo Gulf Corporation
  Limited placed an order on 16.07.2001 on the appellant          B
  for supply of Naphtha for the purpose of manufacture of
  fertilizers and furnished a letter to the appellant saying it
  has made an application to the Commissioner of Excise
  for authorization for dispatch of one rake of Naphtha. The
  appellant supplied Naphtha to lndo Gulf Corporation             c
  Limited and while clearing the aforesaid Naphtha from its
  factory did not make any payment of Central Excise duty.
  The Commissioner of Central Excise made demand of
  duty on the Naphtha cleared on 16.07.2001 and also
  imposed a penalty equivalent to the duty amount. On             0
  appeal, the Tribunal held that under the exemption
  notification, the appellant could be exempted from duty
  on Naphtha supplied to the manufacturer of fertilizer only
  if the conditions specified in the exemption notification
  are fulfilled; that one of the conditions specified in the      E
  exemption notification was that where the goods were to
  be used elsewhere than in the factory of production, the
  exemption would be allowed if the procedure set out in
  the 2001 Rules was followed and in this case Rule 3(1)
  of 2001 Rules has not been followed, inasmuch as, the
  manufacturer, namely, lndo Gulf Corporation Limited had         F
  not submitted application in the form at Annexure~1 for
  obtaining Naphtha without payment of duty and that as
  the condition of the exemption notification was not
  complied with, the appellant was not entitled to clear
  naphtha without payment of excise duty and accordingly          G
  sustained the demand of excise duty. The Tribunal further
  held that penalty was also imposable on the appellant,
  but in the facts and circumstances of the case reduced
  the pen.alty amount.
                                                                  H
    970      SUPREME COURT REPORTS                   [2012] 2 S.C.R

A         Dismissing all the appeals, the Court

    In re: Civil appeal nos. 4530-4532 of 2005

        HELD: 1.1. The proviso in the exemption notifi1(:ation
   makes it clear that for availing the exemption two
B conditions must be satisfied: First, that it is proved to the
   satisfaction of the excise officer that the goods arE! used
   for intended use specified in Column (5) of the Table
   annexed to the exemption notification and second, where
   such use is elsewhere than in the factory of production,
C the procedure set out in Chapter X of the Rules is
   followed. One cannot, therefore, accept the contention of
   the appellant that if the first condition is satisfied, i . e. it is
   proved to the satisfaction of the Central Excise officer that
   the goods are used for the intended use, the exemption
D has to be granted. Unless the second condition is also
   satisfied, i.e. the procedure set out in Chapter X of the
   Rules is followed where the use of the goc1ds is
   elsewhere than in the factory of productio1ri, the
   exemption cannot be granted under the exemption
E ·notification. [Para 7] [978-G-H; 979-A-C]

       1.2. In the facts of the present case, the RCO was not
  to be used in the factory of the appellant but at thn place
  of generation of electricity by the Ahmedabad Electricity
F Company Ltd. Hence, the second condition laid d1own in
  the proviso was also to be complied with. The language
  of' Rule 192 of Chapter X of the Rules is clear tlhat for
  availing concession from excise duty on excisable goods
  used in a specified industrial process, a person must
  obtain a registration certificate from the Collector and that
G "the concession shall, unless renewed by the Collector,
  cease on the expiry of the registration certificate".
  Admittedly, the registration certificate of the appellant
  expired on 31.12.1995•. Hence, the exemption granted
  under the notification ceased on 31.12.1995. The fresh
H registration certificate in favour of the AhmE!dabad
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 971
           CENTRAL EXCISE, VADODARA

Electricity Company Ltd. was issued on 26.06.1996 and          A
it is found on a reading of the copy of the CT-2 certificate
annexed as Annexure PS that the registration certificate
was not for any period prior to 26.06.1996. As the
procedure laid down in Rule 192 of Chapter X of the
Rules has not been complied with, the appellant is not         8
entitled to avail the exemption of excise duty under the
exemption notification during the period from 01.01.1996
to 25.06.1996. [Para 8) [979-D; 980-E-H]

     Mis Chunni Lal Parshadi Lal v. Commissioner of Sales
Tax, U.P., Lucknow (1986) 2 SCC 501: 1986 (1) SCR 891; C
Commissioner of Customs (Imports), Mumbai v. Tullow India
Operations Ltd. (2005) (189) ELT 401 (SC); Commissioner
of Central Excise, New Delhi v. Harichand Shri Gopal 2010
                                                                   •
(260) ELT 3 (SC); Thermax Private Limited v. The Collector
of Customs (Bombay), New Customs House (1990) 4 SCC D
440; Collector of Customs, Bombay v. J.K. Synthetics Limited
(1997) 10 SCC 224; Collector of Central Excise, Jaipur v. J. K.
Synthetics 2000 (2000) 10 SCC 393; Commissioner of
Central Excise, New Delhi v. Hari Chand (2011) 1 SCC 236:
2010 (13) SCR 820 - referred to.                               E

In re: Civil Appeal No.8048 of 2004:
     2.1. By the exemption notification the Central
Government exempted the excisable goods from duty
"subject to the relevant conditions specified in the           F
Annexure" to the exemption notification. It will be clear
from Para 3 of the Annexure to the exemption notification
that the exemption shall be allowed if it has been proved
to the Central Excise Officer having jurisdiction that the
goods are cleared for the intended use specified in            G
column 3 of the table. In addition to this condition, there
is a further condition in Para 4 of the Annexure to the
exemption notification that where the intended use is
elsewhere than the factory of production, the exemption
shall be allowed if the procedure set out in the 2001 Rules    H
        972      SUPREME COURT REPORTS          · [2012] 2 S.C.R.


    A. is followed. The plea of the appellant that as the Naphtha
        cleared from the factory of the appellant has be•m used
        for manufacture of fertilizer, the appellant W•luld be
      . entitled to exemption even if the condition spec:ified in
        Para 4 of the Annexure to the exemption notifie:ation is
        not followed, is not acceptable. [Para 5] [983-D-H; 984-A-
    8 13]                                                .

           2.2. The condition specified in Para 4 in the Annexure
      to the exemption notification states that where the intend
      use is elsewhere than in the factory of production, the
    C exemption shall be allowed if the procedure set out in the
      2001 Rules is followed. In the facts of this case, the
      Naphtha produced by the appellant in its factory was to
•     be used for the manufacture of fertilizer elsewhere than
      in its own factory, i.e. in the factory of lndo Gulf
    o Corporation Limited. Hence, the exemption c:ould be
      allowed only if the procedure set out in the 2001 Rules
      was followed. [Para 6] [983-C-G]
            2.3. Rule 3(1) of the 2001 Rules makes it amply clear
       that the manufacturer, who intends to use subject goods
    E for specified use at concessional rate of duty, shall make
       an application in quadruplicate in the Form at Annexure-
       1 to the jurisdictional Assistant Commissioner or Deputy
      ·commissioner of Central Excise, as the case may be.
       Admittedly, no such application was made by llndo Gulf
    F Corporation Limited in the form at Annexure-1 to the
       jurisdictional Assistant Commissioner or Deputy
       Commissioner of Central Excise. As the proc1:!dure set
       out in the 2001 Rules has not been followed, the appellant
       was not entitled to exemption on the Naphtha cleared
    G from its factory for supply to lndo Gulf Corporation
       Limited for manufacture of fertilizer. [Para 7] [984-G-H;
       985-A-B]
                            Case Law Reference:
    H         1986 (1) SCR 891         referred to       Para 4
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 973
           CENTRAL EXCISE, VADODARA

    (2005) (189) ELT 401 (SC) referred to           Para 5      A
    2010 (260) ELT 3 (SC)        referred to        Para 6
    (1990) 4 sec 440             referred to        Para 6
    (1997) 10 sec 224            referred to        Para 6      B
    (2000) 10 sec 393            referred to        Para 6
    2010 (13) SCR 820            referred to        Para 6

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4530-4532 of 2005.                                              c
    From the Judgment & Order dated 15.03.2005 of
Customs, Excise and Service Tax Appellate Tribunal, West
Zonal Bench, Mumbai in Appeal Nos. E/2329/99, E/2734/2000
and E/835/37.                                                   D
                              WITH
C.A. Nos. 8048 of 2004.

    Alok Yadav, M.P. Devanath, Krishna Mohan Menon,
Rajesh Kumar for the Appellant.                                 E

    Anup Choudhary, Ashok K. Srivastava, Sunita Rani Singh,
B. Krishna Prasad, Anil Katiyar for the Respondent.

    The Judgment of the Court was delivered by
                                                                F
    A.K. PATNAIK, J.

CIVIL APPEAL NOs. 4530-4532 OF 2005:

    1. These are appeals under Section 35L (b) of the Central
Excise Act, 1944 against the order dated 15.03.2005 of the      G
Customs, Excise and Service Tax Appellate Tribunal, West
Zonal Bench, Mumbai, (for short "the Tribunal").

     2. The facts very briefly are that the appellant produces.
inter alia Reduced Crude Oil (for short "RCO"). By Notification H
         974   SUPREME COURT REPORTS                  [2012] 2 S.C.R.


  A   No. 75/84-CE dated 01.03.1984, the Central government in
      exercise of its powers under Sub-Rule 1 of Rule B of the
      Central Excise Rules, 1944 (for short "the Rules") exempted
      goods described in Column 3 of the table annexed to the
      notification from so much of the duty of excise as is specified
 B in the notification subject to the intended use, or the conditions,
      if any, laid down in Column 5 of the table annexe~d to the
      notification. One of the goods exempted from excisei duty by
     the notification was RCO, if produced only from indigenous
      crude oil subject to intended use as fuel for generation of
 c electrical energy by electricity undertakings owned or controlled
     by the Central Government or any State Government or any
      State Electricity Board or any local authority or any licensee
      under Part-II of the Indian Electricity Act, 1910 except those who
     produce electrical energy not for sale but for their own
 0 consumption or for supply to their own undertakings. The
     proviso in the notification stated two conditions subject to which
     the exemption was granted and one of the conditions was that
     where the intended use is elsewhere than in the 'factory of
     production, the procedure set out in Chapter X of th1~ Rules is
 E , followed. Rule 192 in Chapter X of the Rules provided inter alia
     that where the Central Government has by notification under
     Rule 8 sanctioned the remission of duty on excisalble goods
     other than salt used in a specified industrial process and it is
     necessary for this purpose to obtain an excise mgistration
     certificate, he should submit the requisite application along with
 F the proof of payment of the registration fee and shall then be
     granted a registration certificate in the proper form. Rule 192
     further provided that the concession shall, unless mnewed by
    the Collector, cease on the expiry of the registration certificate.

 G       3. The Ahmedabad Electricity Company Ltd. had obtained
   a registration certificate in Form CT-2 under Rule 192 of
   Chapter X of the Rules and on the strength of such registration
   certificate, purchased RCO from the appellant availing the
   exemption from excise duty under Notification No. 75/84 dated
 H 01.03.1984 (for short 'the exemption notification'). The



. \,•'
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 975
   CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

registration certificate obtained by the Ahmedabad Electricity A
Company Ltd. expired on 31.12.1995 and a fresh registration
was granted in its favour on 26.06.1996. After issuing two show-
cause notices, the Assistant Commissioner of Central Excise
passed two orders demanding excise duty of Rs. 32,35,485/-
from the appellant for RCO supplied to the Ahmedabad B
Electricity Company Ltd. during the period 01.01.1996 to
25.06.1996 on the ground that the said company did not have
a registration certificate in Form CT-2 under Rule 192 of
Chapter X of the Rules during this period and, therefore, the
RCO supplied by the appellant to the Ahmedabad Electricity        c
Company Ltd. during this period was not exempt from excise
duty. The appellant paid the excise duty and subsequently
applied for refund contending that the registration certificate in
Form CT-2 had been obtained by the Ahmedabad Electricity
Company Ltd. on 26.06.1996. The refund claims were rejected 0
by the Assistant Commissioner. Thereafter, the appellant filed
appeals before the Commissioner of Central Excise (Appeals)
who .confirmed the demands of excise duty for the period from
01.01.1996 to 25.06.1996. The appellant then filed three
appeals before the Tribunal against the orders of
Commissioner of Central Excise (Appeals) confirming demand E
and the order rejecting the refund claim. By the impugned order,
the Tribunal dismissed the appeals saying that as the statutory
requirement of conditional exemption notification had not been
complied with by the appellant it was not entitled to the
exemption benefit.                                                 F

     4. Mr. Alok Yadav, learned counsel for the appellant,
submitted that the Tribunal failed to appreciate that the RCO
supplied by the appellant to Ahmedabad Electricity Company
Ltd. was in fact used as fuel for generation of electrical energy G
and therefore the appellant was entitled to the benefit of the
exemption of excise duty under the exemption notification. He
cited the decision of this Court in M/s Chunni Lal Parshadi Lal
v. Commissioner of Sales Tax, U.P., Lucknow ((1986) 2 SCC
501) wherein it was held that a dealer can prove by any way H
    976      SUPREME COURT REPORTS                 [2012] 2 S.C.R.


A other than the way contemplated by Rule 12A of the U.P . Sales
  Tax Rules, 1948 that the goods purchased from him were for
  resale. According to Mr. Yadav, the registration certificate in
  Form CT-2 is not the only way to prove that the goods sold by
  the appellant to the Ahmedabad Electricity Company Ltd. were
B used as fuel for generation of electricity. He also relied on
  Commissioner of Customs (Imports), Mumbai v. Tullow India
  Operations Ltd. [(2005) (189) ELT 401 (SC)[ wherein this Court
  held that ONGC being a government company would get the
  requisite exemption, subject, of course, to its fulfilling the
C condition of obtaining the essentiality certificate. He argued
  that the appellant being a government company should not be
  denied the exemption on a technical ground that there was no
  registration certificate during the period 01.01.1996 to
  25.06.1996.

D   ' · 5. Mr. Anup Chaudhary, learned senior counsel appearing
   for the respondent, on the other hand, submitted that the
   exemption notification stipulated in the proviso the conditions
   under which the exemption from excise duty would be available
   and if the conditions were not fulfilled, the exemption would not
E be available to the manufacturer. He submitted that one of the
   conditions was that where the goods were to be used in a place
  other than in the factory of production, the procedure set out in
  Chapter X of the Rules is to be followed. He submitted that the
  procedure laid down in Rules 192 to 196 BB in Chapter X of
F the Rules, therefore, have to be followed, and if the procedure
  is not followed in any case, the exemption cannot be granted
  under the exemption notification. He submitted that since under
  Rule 192, the Ahmedabad Electricity Company Ltd. was
  required to obtain a registration certificate in Form CT-2 and
G the said company did not obtain a certificate for the period
  01.01.1996 to 25.06.1996, RCO supplied by the appellant to
  the Ahmedabad Electricity Company Ltd. during this period was
  exigible to excise duty. He cited the judgement of the
  Constitution Bench of this court in Commissioner of Central
H Excise, New Delhi v. Harichand Shri Gopal [2010 (260) ELT
 INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 977
    CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

 3 (SC)] in which it has been held that if a party wants remission A
 of duty, he has to follow certain prerequisites, the object of which
 is to see that the goods are not diverted or utilised for some
 other purpose under the guise of the exemption notification and,
 therefore, a plea that the goods were meant for intended use
 specified in the exemption notification has to be rejected.          B

        6. The question whether it was enough to prove to the
  satisfaction of the Central Excise Officer that the goods are for
  the intended use specified in the notification of exemption or
  whether in addition the procedure laid down in Rule 192 of          C
  Chapter X of the Rules was also to be complied with for
  availing concession under the exemption notification was raised
  before this Court in Thermax Private Limited v. The Collector
  of Customs (Bombay), New Customs House [1992 (61) ELT
  352 (SC)] = [(1990) 4 SCC 440] and a two-Judge Bench of this
  Court held that the possession of a license or production of a      D
  C-2 certificate as provided in Rule 192 of Chapter X of the
  Rules enables the applicant to secure the necessary
  concession and that the entitlement to the concession will
  depend on whether the purchaser is the holder of a L-6 license
  (or C-2 certificate) or not. These observations madein              E
  Thermax Private Limited v. The Collector of Customs
  (Bombay), New Customs House (supra) were held by a two-
  Judge Bench of this Court in Collector of Customs, Bombay
  v. J.K. Synthetics Limited [1996 (87) ELT 582 (SC)]= [(1997)
  10 sec 224] as not laying down principle and held to be limited     F
  to eligibility for concession under Rule 192 of the Rules. In the
  aforesaid decision in the case of Collector of Customs,
  Bombay v. J.K. Synthetic Limited (supra) this Court took the
  view that where there was evidence on record that show the
  intended use of the material, the benefit of exemption could be     G
  granted. In a subsequent decision in the case of Collector of
  Central Excise, Jaipur v. J.K. Synthetics [2000 (120) ELT 54
· (SC)] = [(2000) 10 SCC 393] a three-Judge Bench of this Court
  took the view that if there was substantial compliance of the
  procedure laid down in Chapter X of the Rules, exemption could      H
    978       SUPREME COURT REPORTS                     [2012] 2 S.C.R.


A   be granted. In the case of Commissioner of Central Excise,
    New Delhi v. Hari Chand Shri Gopal [2010 (260) ELT 3 (SC)]
    = [(2011) 1 SCC 236] a Constitution Bench of this Court
    considered the decisions of this Court in Thermax Private
    Limited v. The Collector of Customs (Bombay}, New Customs
B   House (supra) and Collector of Central Excise, Jaipur v. J.K.
    Synthetics (supra) and held that a provision for exe~mption,
    concession or exception, as the case may be, has to be
    construed strictly and if the exemption is available only on
    complying certain conditions, the conditions have to be
C   complied with. In the afpresaid decision, the Constitution Bench
    further held that detailed procedures have been laid down in
    Chapter X of the Rules so as to curb the diversion and
    utilization of goods which are otherwise excisable and the plea
    of substantial compliance or intended use therefore has to be
    rejected.
0
          7. When we strictly construe the exemption notification in
    this case, we find that the proviso in the exemption notification
    reads as under:

E         Provided that where any such exemption is subject to the
          intended use, the exemption in such case shall b4~ subject
          to the following conditions namely:-

          (i) That it is proved to the satisfaction of an officer not below
          the rank of the Assistant Collector of Central Excise that
F         such goods are used for the intended use speicified in
          Column (5) of the said Table: and

          (ii) Where such use is elsewhere than in the factory of~
          production, the procedure set out in Chapter X of the
G         Central Excise Rules, 1944, is followed.

    Thus, the proviso makes it clear that for availing the exemption
    l:wo conditions must be satisfied: First, that it is proved to the
    satisfaction of the excise officer that the goods are used for
H   intended use specified in Column (5) of the Table annexed to
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 979
   CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

the exemption notification and second, where such use is              A
elsewhere than in the factory of production, the procedure set
out in Chapter X of the Rules is followed. We cannot, therefore,
accept the contention of the learned counsel of the appellant
that if the first condition is satisfied, i.e. it is proved to the
satisfaction of the Central Excise officer that the goods are         s
used for the intended use, the exemption has to be granted. In
our considered opinion, unless the second condition is also
satisfied, i.e. the procedure set out in Chapter X of the Rules
is followed where the use of the goods is elsewhere than in the
factory of production, the exemption cannot be granted under          c
the exemption notification.

     8. In the facts of the present case, the RCO was not to be
used in the factory of the appellant but at the place of generation
of electricity by the Ahmedabad Electricity Company Ltd.
Hence, the second condition laid down in the proviso was also         D
to be complied with. Rule 192 of Chapter X of the Rules is
quoted hereinbelow:

     "RULE 192. Application for concession.-.
                                                                      E
     Where the Central Government has, by notification under
     rule 8, or section 5A of the Act, as the case may be,
     sanctioned the remission of duty on excisable goods other
     than salt, used in a specified industrial process, any person
     wishing to obtain remission of duty on such goods, shall
     make application to the Collector in the proper Form             F
     stating the estimated annual quantity of the excisable
     goods required and the purpose for and the manner in
     which it is intended to use them and declaring that the
     goods will be used for such purpose and in such manner.
     If the Collector is satisfied that the applicant is a person     G
     to whom the concession can be granted without danger
     to the revenue, and if he is satisfied, either by personal
     inspection or by that of an officer subordinate to him that
     the premises are suitable and contain a secure store-room
     suitable for the storage of the goods, and if the applicant      H
    980'     SUPREME COURT REPORTS                    [2012] 2 S.C.R.


A          agrees to bear the cost of such establishment as the
           Collector may consider necessary for supervising
           operation in his premises for the purposes of this Chapter,
           the Collector may grant the application, and the applicant
           shall then enter into a bond in the proper Form with such
B        · surety or sufficient security, in such amount and under such
           conditions as the Collector approves. Where, for this
           purpose, it is necessary for the applicant to obtain an
      " . Excise registration certificate, he shall submit the requisite
           application along with the proof for payment of registration
      · ' fee and shall then be granted a registration certificate in
c          the proper Form. The concession shall, unless renewed by
           the Collector, cease on the expiry of the registration
           certificate:

        Provided that, in the event of death, insolvency or
D       insufficiency of the surety, or where the amount of thE3 bond
        is inadequate, the Collector may, in his discretion. d13mand
        a fresh bond; and may, if the security furnished for a bond
        is not adequate, demand additional security."

E The language of Rule 192 of Chapter X of the Rules is clear
  that for availing concession from excise duty on excisable goods
  used in a specified industrial process, a person must obtain a
  registration certificate from the Collector and that "the
  concession shall, unless renewed by the Collector, cease on
F the expiry of the registration certificate". Admittedly, the
  registration certificate of the appellant expired on 31.1 ~~.1995.
  Hence, the exemption granted under the notification ceased on
  31,.12.1995. The fresh registration certificate in favour of the
  Ahmedabad Electricity Company Ltd. was issued on
  26.06.1996 and we find on a reading of the copy of the CT-2
G certificate annexed as Annexure PS that the registration
  certificate was not for any period prior to 26.06.1996. As the
  procedure laid down in Rule 192 of Chapter X of the Rules has
  not been complied with, the appellant is not entitled to avail the
  exemption of excise duty under the exemption noti'fication
H during the period from 01.01.1996 to 25.06.1996.
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 981
   CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

    9. The appeals are, therefore, dismissed but there shall           A
be no order as to costs.

CIVIL APPEAL N0.8048 OF 2004:

    This is an appeal under Section 35L (b) of the Central
Excise Act, 1944 against the order dated 02.07.2004 of the             B
Customs, Excise and Service Tax Appellate Tribunal, New
Delhi, (for short "the Tribunal").

      2. The facts very briefly are that the appellant produces
inter alia Naphtha. By Notification no. 3/2001-CE dated                C
01.03.2001 (for short "the exemption notification") issued under
Section 5A of the Central Excise Act, 1944 (for short "the Act")
the Central Government exempted inter alia Naphtha cleared
for the intended use in the manufacture of fertilizers from excise
duty subject to relevant conditions specified in the annexure to       D
the notification. In the annexure to the exemption notification,
one of the conditions specified was that where such use is
elsewhere than in the factory of production, the exemption shall
be allowed if the procedure set out in the Central Excise
(Removal of Goods at Concessional Rate of Duty for                     E
Manufacture of Excisable Goods) Rules, 2001 (for short "the
2001 Rules") is followed. Rule 3(1) of the 2001 Rules provided
that a manufacturer who intends to receive subject goods for
specified use at concessional rate of duty, shall make an
application in quadruplicate in the Form at Annexure-1 to the
                                                                       F
jurisdictional Assistant Commissioner or Deputy
Commissioner of Central Excise, as the case may be. lndo Gulf
Corporation..l_imited placed an order on 16.07.2001 on the
appellant forsupply of Naphtha for the purpose of manufacture
of fertilizers and furnished a letter to the appellant saying it has
made an application to the Commissioner of Excise for                  G
authorization for dispatch of one rake of Naphtha. The appellant
supplied 2241.908 MT of Naphtha to lndo Gulf Corporation
Li~ited and while clearing the aforesaid Naphtha from its
factory did not make any payment of Central Excise duty. The
Qommissioner of Central Excise issued show cause notice                H
    982     SUPREME COURT REPORTS                  [2012] 2 S.C.R.


A dated 13.06:2002 to the appellant and after considering the
  reply of the appellant passed the order dated 30.09.2002
  confirming the demand of duty amounting to Rs. 44,71,902/-
  on the Naphtha cleared on 16.07.2001 and also imposed a
  penalty equivalent to the duty amount. The appellant filed an
B appeal against the order of the Commissioner before the
  Tribunal and the Tribunal held in the impugned order that under
  the exemption notification, the appellant could be exempted
  from duty on Naphtha supplied to the manufacturer of fortilizer
  only if the conditions specified in the exemption notification are
c fulfilled. The Tribunal further held that one of the conditions
  specified in the exemption notification was that where the goods
  were to be used elsewhere than in the factory of production,
  the exemption would be allowed if the procedure set oult in the
  2001 Rules was followed and in this case Rule 3(1) of 2001
  Rules has not been followed, inasmuch as, the manufacturer,
0
  namely, lndo Gulf Corporation Limited had not submitted
  application in the form at Annexure-1 for obtaining Naphtha
  without payment of duty and had only cleared the Naphtha
  without payment of duty on the basis of a letter dated
  16.07.2001 wherein it was mentioned that it has submitted its
E
  application to the Commissioner for issuance of authorization
  for dispatching one rake of Naphtha. The Tribunal held that as
  the condition of the exemption notification has not been
  complied with, the appellant was not entitled to clear naphtha
  without payment of excise duty and accordingly sustained the
F demand of excise duty. The Tribunal also held that as the
  appellant had cleared Naphtha without payment of duty and
  without getting the requisite Annexure-1 from its customer,
  penalty was also imposable on the appellant, but on the facts
  and circumstances of the case the penalty was excessive. The
G Tribunal accordingly reduced the penalty to Rs.1,00,000/- only.

       3. Mr. Alok Yadav, learned counsel for the appellant,
  submitted that as the Naphtha supplied to lndo Gulf Corporation
  Limited. was in fact used for manufacture of fertili2:er, the
H appellant was entitled to the benefit of exemption notification.
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 983
   CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

He further submitted that as the appellant was a government         A
company, he should not be denied the exemption on a technical
ground that the application at Annexure-1 was not submitted
to the authorities by the manufacturer of fertilizer as provided
in Rule 3(1) of the 2001 Rule~.
                                                                    B
      4. Mr. Anup Chaudhary, learned senior counsel appearing
for the respondent, on the other hand, submitted that one of the
conditions specified in the exemption notification was that
where the goods were to be used in the place other than in the
factory of production, the procedure set out in the 2001 Rules      C
has to be followed and in this case the procedure set out in
Rule 3(1) of the 2001 Rules has not been followed.

      5. We have considered the submissions of the learned
counsel for the parties and we find that by the exemption
notification the Central Government exempted the excisable          D
goods from duty "subject to the relevant conditions specified
in the Annexure" to the exemption notification. Paras 3 and 4
in the Annexure to the exemption notification read as follows:

    "3. The exemption shall be allowed if it has been proved        E
    to the satisfaction of an officer not below the rank of the
    Deputy Commissioner of Central Excise or the Assistant
    Commissioner of Central Excise, as the case may be,
    having jurisdiction that such goods are cleared for the
    intended use specified in column 3 of the table.
                                                                    F
    4. Where such use is elsewhere than in the factory of
    production, the exemption shall be allowed if the procedure
    set out in the Central Excise (Removal of Goods at
    Concessional Rate of Duty for manufacture of Excisable
    Goods) Rules, 2001 is followed."                                G

It will be clear from Para 3 of the Annexure to the exemption
notification that the exemption shall be allowed if it has been
proved to the Central Excise Officer having jurisdiction that the
goods are cleared for the intended use specified in column 3        H
    984      SUPREME COURT REPORTS                  [2012] 2 S.C.R.


A   of the table. In addition to this condition, there is a further
    condition in Para 4 of the Annexure to the- exeimption
    notification that where the intended use is elsewhere than the
    factory of production, the exemption shall be allowed if the
    procedure set out in the 2001 Rules is followed. We, therefore,
s   do not accept the submission of Mr. Yadav that as the Naphtha
    cleared from the factory of the appellant has been used for
    manufacture of fertilizer, the appellant would be entitled to
    exemption even if the condition specified in Para 4 of the
    Annexure to the exemption notification is not followed.
c        6. The condition specified in Para 4 in the Annexure to the
  exemption notification states that where the intend use is
  elsewhere than in the factory of production, the exemption shall
  ~e allowed if the procedure set out in the 2001 Rules is
  followed. In the facts of this case, the Naphtha produced by the
D appellant in its factory was to be used for the manufacture of
  fertilizer elsewhere than in its own factory, i.e. in the factory of
  lndo Gulf Corporation Limited. Hence)he exemption could be
  allowed only if the procedure set out in the 2001 R.ules was
  followed.
E
         7. Rule 3(1) of the 2001 Rules is extracted heminbelow:

          "Rule 3. Application by the manufacturer to 01btain the
          benefit. - (1) A manufacturer who intends to receive
        subject goods for specified use at concessional rate of
        duty, shall make an application in quadruplicate in the Form
       ·at Annexure-1 to the jurisdictional Assistant Commissioner
        or Deputy Commissioner of Central Excise, as; the case
        may be (hereinafter referred to as the said Assistant
        Commissioner or Deputy Commissioner)."
G
  Rule 3(1) makes it amply clear that the manufacturer, who
  intends to U'Se subject goods for specified use at concessional
  rate of duty, shall make an application in quadruplicate in the
  Form at Annexure-1 to the jurisdictional Assistant
H Commissioner or Deputy Commissioner of Central Excise, as
INDIAN OIL CORPORATION LTD. v. COMMISSIONER OF 985
   CENTRAL EXCISE, VADODARA [A.K. PATNAIK, J.]

the case may be. Admittedly, no such application was made        A
by lndo Gulf Corporation Limited in the form at Annexure-1 to
the jurisdictional Assistant Commissioner or Deputy
Commissioner of Central Excise. As the procedure set out in
the 2001 Rules has not been followed, the appellant was not
entitled to exemption on the Naphtha cleared from its factory    B
for supply to Inda Gulf Corporation Limited for manufacture of
fertilizer.

     8. We, therefore, do not find any merit in the appeal and
we accordingly dismiss the same. There shall be no order as      C
to costs.

B.B.B.                                   Appeals dismissed.