Holding

The concessional excise duty rate under Notifications 5/98‑CE and 5/99‑CE is available only for kerosene that both has a smoke point of 18 mm or more and is ordinarily used as an illuminant in oil‑burning lamps, i.e., kerosene supplied to the Public Distribution System, not to industrial consumers.

Summary

Indian Oil Corporation Ltd., a manufacturer of kerosene, claimed a concessional excise duty rate under Notifications 5/98‑CE and 5/99‑CE, which were intended for kerosene used as an illuminant in oil‑burning lamps. The Department denied the claim, holding that the benefit was only for kerosene supplied to the Public Distribution System (PDS) and not to industrial consumers. The Supreme Court examined the object of the notifications and the meaning of the word “ordinarily” in the context of the statutes. It concluded that the notifications require both a smoke point of at least 18 mm and ordinary use for illumination, conditions satisfied only by kerosene cleared to the PDS. Consequently, the benefit could not be claimed for kerosene sold to industrial users. The Court affirmed the Tribunal’s order and dismissed the appeals with costs.

Issues considered

Whether kerosene cleared to industrial consumers is eligible for the concessional excise duty rate under Notifications 5/98‑CE and 5/99‑CE.
How the term “ordinarily used as an illuminant in oil burning lamps” should be interpreted in the notifications.
Whether the object of the notifications limits the concessional rate to kerosene supplied to the Public Distribution System.
Whether the two conditions (smoke point ≥18 mm and ordinary use for illumination) are conjunctive requirements for the concession.

Legislation cited

Central Excise Act, 1944s. 11A, s. 35L(b)
Central Excise Rules, 1944s. Rule 173Q
Central Excise Tariff Act, 1985

Subjects

excise dutykeroseneconcessional ratepublic distribution systemordinarilysmoke pointindustrial consumersCentral Excise Act

Judgment

[2010] 13 (ADDL.) S.C.R. 358

A M/S. INDIAN OIL CORPORATION LTD.
v.
COMMNR. OF CENTRAL EXCISE, VADODARA
(Civil Appeal Nos. 7041-7043 of 2002)
OCTOBER 22, 2010
B
[D.K. JAIN AND T.S. THAKUR, JJ.]

Central Excise Act, 1944 - Excise duty - On certain
category of kerosene products - Subjected to concessional
C rate by Notification Nos. 5198-CE and 5199-CE - Kerosene
product cleared by assessee to industrial consumers -
Entitlement of the assessee to the benefit of concessional rate
of duty - Held: In view of the object of the Notifications, the
benefit of concessional rate of duty is available 0nly on the
D kerosene cleared by the assessee to Public Distribution
System and not to industrial consumers - Central Excise Tariff
Act, 1985 - Chapter sub-heading 2710.90 - Notification No.
5198-CE dated 2. 6. 1998 - Notification No. 5199-CE dated
28.2.1999.
E
The appellant-assessee was manufacturer of
petroleum products, including 'Superior Kerosene'. By
Notification No. 5/98-CE dated 2.6.1998, a certain category
of kerosene products i.e. which has smoke point of 18
mm or more and which is ordinarily used as an illuminant
F in oil burning lamps, were subjected to concessional rate
of duty. By subsequent Notification No. 5/99-CE dated
28.2.1999, the rate of the excise duty on the kerosene
products envisaged und<~r Notification No. 5/98 was
further reduced. The assessee, who had cleared the
G kerosene to the industrial consumers, claimed the
concessional rate of duty under both the Notifications.
The benefit was denied by the respondent-Department.
The order was confirmed upto Customs, Excise and Gold
(Control) Appellate Tribunal. Therefore, the instant
H 358
INDIAN OIL CORPORATION LTD. v. COMMNR. OF 359
CENTRAL EXCISE, VADODARA
appeals were filed. A

Dismissing the appeals, the Court

HELD: 1. The object of providing concessional rate
of duty, on the kerosene used for illuminating oil burning
lamps, was to provide some relief to those economically B
backward sections of society who use kerosene for
illumination and other domestic purposes and, therefore,
the benefit of concessional rate of duty was available
only on the kerosene cleared by the assessee to the
Public Distribution System. [Para 13] [366-C] c
2. In the light of the object and context of the
notifications, it becomes abundantly clear that the word
"ordinarily" used in the Notifications implies that the
kerosene must be ordinarily used for illumination D
purposes, and it would be immaterial if the kerosene is
also used for other domestic purposes. [Para 16] [367-8]

Commissioner of Customs, Mumbai vs. J.D. Orgochem
Ltd. (2008) 16 SCC 576; Viswa and Co. vs. The State of
Gujarat (1966) 17 S.T.C. 581 - referred to. E

3. From the perusal of the two Notifications, it is plain
that the benefit of concessional rate of duty extends only
to. that variety of kerosene that: (i) has a smoke point of
18mm or more, and (ii) is ordinarily used as an illuminant F
in oil burning lamps. It is manifest that these two
conditions are conjunctive and, therefore, the twin
conditions need to be satisfied in order to avail of the
concessional rate of duty. In the instant case, the fact that
.the assessee cleared kerosene manufactured by it to G
industrial consumers would entail that the assessee
cannot claim the benefit of Notifications No. 5/98-CE and
5/99-CE. [Para 17] [367-C-D]

Union of India and Anr. vs. Hemraj Singh Chauhan and
Ors. (2010) 4 SCC 290; State of A.P. vs. V. Sarma Rao and H

- ..
360 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.

A Ors. (2007) 2 sec 159 - relied on.

Union of India and Ors. vs. Vipinchandra Hiralal Shah
(1996) 6 sec 721 - referred to.

Case Law Reference:
B
(2008) 16 sec 576 Referred to Para 11
(1966) 17 S.T.C. 581 Referred to. Para 11
(201 O) 4 sec 290 Relied on. Para 14
c (1996) 6 sec 121 Referred to. Para 14
(2001) 2 sec 159 Relied on. Para 15

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
D 7041-7043 of 2002.

From the Judgment & Order dated 21.01.2002 of the
Central Excise & Gold (Control) Appellate Tribunal, New Delhi
in Appeal No. E/682-684/2001-C.

E Alok Yadav, M.P. Devanath for the Appellant.

P.P. Malhotra, ASG, S. Wasim A. Qadri, Ron Bastian, Anil
Katiyar for the Respondent.

The Judgment of the Court was delivered by
F
D.K. JAIN, J. 1. These civil appeals under Section 35L(b)
of the Central Excise Act, 1944 (for short "the Act) are directed
against the order dated 21st January 2002 passed by the
Customs, Excise & Gold (Control) Appellate Tribunal (for short
G "the Tribunal), as it then existed, whereby it dismissed the
appeal filed by the appellant, denying it the benefit of
concessional rate of Excise duty under Notifications No. 5/98-
CE and 5/99-CE.

2. Shorn of unnecessary details, the facts material for the
H
INDIAN OIL CORPORATION LTD. v. COMMNR. OF 361
CENTRAL EXCISE, VADODARA [D.K. JAIN, J.]
adjudication of these appeals, may be stated thus: A

The appellant viz. Mis Indian Oil Corporation Ltd, a public
sector undertaking, hereinafter referred to as the assessee, is
manufacturer of petroleum products, including "superior
kerosene" classified under Chapter sub-heading 2710.90 of the B
Central Excise Tariff Act, 1985 (for short "the Tariff Act").

3. By virtue of Notification No. 5/98-CE dated 2nd June
1998 certain excisable goods were brought under General
Exemption No. 66, and a certain category of kerosene products
were made subject to concessional rate of duty. It would be C
expedient to extract the relevant portions of the said notification:

"S. Chapter Description of goods Rate Conditions
No. or
heading D
No. or
sub-
heading
No.
E
(1) (2) (3) (4) (5)

27. 27 Kerosene, that is to 10% -
say, any hydro-carbon
oil (excluding mineral F
colza oil and white
spirit) which has a
smoke point of 18mm
or more (determi-
ned in the apparatus G
known as smoke point
lamp in the manner
included in the Bureau
of Indian Standards
H
362 SUPREME COURT REPORTS [2010) 13 (ADDL.) S.C.R.

A Specification ISi:
1448 (p,31)-1968 as
in force for the time
being) and is
ordinarily used as an
B illuminant in oil
burning lamps"

4. Thereafter, vide Notification No. 5/99 dated 28th
C February 1999, the rate of excise duty on the kerosene products
envisaged under Notification No. 5/98-CE, was reduced to 8%.
The relevant portion of the said notification reads as follows:

"S. Chapter Description of goods Rate Conditions
D No. or
heading
No. or
sub-
heading
E No.

(1) (2) (3) (4) (5)

28. 27 Kerosene, that is to say, '8% -
F any hydro-carbon oil
(excluding mineral
colza oil and white
spirit) which has a
smoke point of 18mm or
G more (determined in the
apparatus known as
smoke point lamp in
the manner included in
the Bureau of Indian
H Standards Specification
INDIAN OIL CORPORATION LTD. v. COMMNR. OF 363
CENTRAL EXCISE, VADODARA [D.K. JAIN, J.]
A
ISi: 1448 (p.31)-1968
as in force for the
time being) and is
ordinarily used ~s an
· illuminant in oil burning
lamps" B
. .

5. The.assessee claimed the benefit of concessional rate .
of duty under Notification No. 5/98-CE for their kerosene
products in their declaration effective from 2nd June 1998. C
Subsequently, in their declarations effective from 28th February
1999 and 4th August 1999 respectively, they claimed benefit
of concessional rate of duty under Notification No. 5/99. It is
pertinent to note that during the period 1998-99 and 1999-
2000, the tariff rate corresponding to Chapter sub-heading D
2710.90 was 15% and 16% respectively.

6. The Excise department issued three show cause
notices to the assessee, dated 31st March 1999, 12th July
1999 and 19th November 1999, for the periods September.
E
1998 to February 1999, March to. April 1999 and May to
September 1999, respectively; proposing to recover the
amounts of Rs. 86.089/-, Rs. 1,46.731/- and Rs. 47,012/-
respectively for the said periods.

7. On 18th April 2000, the Assistant Commissioner F
passed a common order in respect of the said three show
cause notices, whereby he confirmed the demand of Rs.
2, 79.832/- under Section 11 A of the Act, holding that the benefit
of concessional rate of duty under the said Notifications cannot
·be extended to kerosene products sold and used for industrial G
purposes. The Assistant Commissioner also imposed a penalty
of Rs. 10. 0001- under Rule 173Q of the Central Excise Rules,
1944.

8. Aggrieved by the said order, the assessee preferred an
H
364 SUPREME COURT REPORTS (2010) 13 (ADDL.) S.C.R.

A appeal before the Commissioner (Appeals), which was
dismissed by order dated 29th November 2000. The penalty
was, however, deleted by the Commissioner (Appeals).

9. The assessee, thereafter, carried the matter in appeal
B before the Tribunal. As afore-noted, the Tribunal has, vide the
impugned order, dismissed the appeal of the assessee, inter
alia, holding that:

"8. The Notifications were, obviously, meant to be
beneficial to the economically backward masses of people
c in our country insofar as the kerosene-related provisions
were concerned. The Notifications provided concessional
rates of duty in respect of kerosene which was ordinarily
used as illuminant in oil burning lamps ...................... .

D
In other words, the stock was ordinarily used as illuminant
in oil burning lamps and the benefit of the notifications was
rightly extended to the kerosene cleared through the PDS
to domestic consumers ....................................... .
E
9. The subject matter of this case is the stock of kerosene
which the appellants cleared to industrial users during the
period of dispute, on payment of duty at the concessional
rates under the notifications. The appellants have
F
estimated such clearances at about 1% of their total
production of kerosene of the said period. The appellants
have no case that any part of the said stock was used as
illuminant in oil burning lamps. They have not contested the
fact that the entire quantity was used for industrial pun;ioses.
G It follows that the sai.d stock of kerosene did not s'atisf~· -
description ordinarily used as an illuminant in oil burning
lamps and therefore did not attract the benefit of the
notifications. The fact that about 99% of the total production
of kerosene was ordinarily used as illuminant in oil burning
H
INDIAN OIL CORPORATION LTD. v. COMMNR. OF 365
CENTRAL EXCISE, VADODARA [D.K. JAIN, J.]
lamps is not determinative of the question whether the A
. remaining 1% (which was cleared to industrial users) was
ordinarily used as illuminant in oil burning lamps. Whether
the kerosene cleared to industrial users was suitable for
use in oil burning lamps as illuminant is also not relevant
to the said question.... ... .. . .. . . .. . ... . ... . ... . .... ... . ... . B

We are also not impressed by the learned DR's argument
that the word "ordinarily" used in the notifications should
be understood in the same way as that word used under C
Section 4 of the CE Act."

10. Hence, the present appeals.

11. Mr. Alok Yadav, learned counsel appearing on behalf
of the assessee, assailed the judgment of the Tribunal on the D
ground that the conditions mentioned in the notifications relate
only to the quality of the kerosene, which should be such that it
is capable of illumination, and the said conditions do not relate
to the end-user of the kerosene. Therefore, it is immaterial for
the purposes of the said notifications that the kerosene was
E
cleared to industrial users, as long as the said kerosene was
capable of illumination in oil burning lamps. Commending us
to the decision of this Court in Commissioner of Customs,
Mumbai Vs. J.D. Orgochem Ltd. 1and the decision of the
Gujarat High Court in Viswa & Co. Vs. The State of Gujarat2 ,
F
learned counsel contended that the word "ordinarily" used in the
notifications means "in the majority of cases, but not invariably",
and therefore, the fact that 1% of the kerosene manufactured
by the assessee was cleared to industrial users does not
change the fact that most of the kerosene manufactured by the
assessee was cleared to the Public Distribution System (for G
short "PDS").

12. Per contra, Mr. P.P. Malhotra, learned additional

1. c2oos) 16 sec 576 H
366 SUPREME COURT REPORTS [2010] 13 (ADDL) SC R.

A Solicitor General, while supporting the impugned Judgment
strenuously urged that the twin conditions contemplated in the
notifications should be fulfilled for attracting the concessional
rate of duty, and therefore, the assessee could not claim the
benefit of the said notifications as kerosene was supplied to
B industrial consumers.

13. It is manifest that the object of providing concessional
rate of duty on kerosene used for illuminating burning oil lamps
was to provide some relief to those economically backward
C sections of society who use kerosene·for illumination and other
domestic purposes, and therefore, the benefit of concessional
rate of duty was available only on the kerosene cleared by the
assessee to the PDS.

14. In relation to the import of the expression "ordinarily"
D used in the said notifications, it would be instructive to refer to
the observations made by this Court in Union of India & Anr.
Vs. Hemraj Singh Chauhan & Ors. 3 , wherein it was held that:-

"The word "ordinarily" must be given its ordinary meaning.
E While construing the word the Court must not be oblivious
of the context in which it has been used." (See also: Union
of Jndia & Ors. Vs. Vipinchandra Hirala/ Shah 4 ).

15. Similarly, in State of A.P. Vs. V. Sarma Rao & Ors. 5 ,
this Court held that:-
F
'The expression "ordinarily" may mean "normally", as has
been held by this Court in Kai/ash Chandra v. Union of
lndia 5 and Krishan Gopal v. Prakashchandra 7 but, the said

G 2. (19961 16 sec 576.
3. (2010) 4 sec 290.
4. (1996) 6 sec 721.
5. (2007) 2 sec 159.
6. (1962) 1 SCR 374.
H 7. (1974) 1 sec 12s.
INDIAN OIL CORPORATION LTD. v. COMMNR. OF 367
CENTRAL EXCISE, VADODARA [D.K. JAIN, J.]
expression must be understood in the context in which it A
has been used."

16. Therefore, in light of the object and context of the
notifications, it becomes abundantly clear that the word
"ordinarily" implies that the kerosene must be ordinarily used 8
for illumination purposes, and it would be immaterial if the
kerosene is also used for other domestic purposes.

17. From a bare perusal of the two notifications it is plain
that the benefit of concessional rate of duty extends only to that
variety of kerosene that: (i) has a smoke point of 18mm or C
more, and (ii) is ordinarily used as an illuminant in oil burning
lamps. It is manifest that these two conditions are conjunctive,
and therefore, the twin conditions need to be satisfied in order
to avail of the concessional rate of duty. In the instant case, the
fact that the assessee cleared kerosene manufactured by it to D
industrial consumers would entail that the assessee cannot
claim the benefit of Notifications No. 5/98-CE and 5/99-CE.

18. In light of the foregoing discussion, the impugned order
of the Tribunal cannot be flawed, and deserves to be affirmed
E
and we order accordingly. Resultantly, the appeals, being
devoid of any merit, are dismissed with costs, quantified at Rs.
20,000/-.

K.K.T. Appeals dismissed.