REPORTABLE  IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NOS. 7041-7043 OF 2002

M/S  INDIAN  OIL  CORPORATION  LTD.

— APPELLANT  

VERSUS

COMMISSIONER  OF CENTRAL  EXCISE, VADODARA

— RESPONDENT  

J U D G M E N T

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 “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 adjudication of  

these appeals, may be stated thus:

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The appellant  viz.  M/s 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 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 expedient to extract the relevant portions of the  

said notification:

“S. No.

Chapter or  heading No.  

or sub- heading No.

Description of goods Rate Conditions

(1) (2) (3) (4) (5) 27. 27 Kerosene,  that is to say,  

any  hydro-carbon  oil  (excluding mineral colza  oil  and  white  spirit)  which has a smoke point  of  18mm  or  more  (determined  in  the  apparatus  known  as  smoke point lamp in the  manner  included  in  the  Bureau  of  Indian  Standards  Specification  ISI: 1448 (p.31)-1968 as  in  force  for  the  time  being)  and  is  ordinarily  

10% --

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used as an illuminant  in  oil burning lamps”

4. Thereafter, vide Notification No. 5/99 dated 28th 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. No

Chapter or  heading No.  

or sub- heading No.

Description of goods Rate Conditions

(1) (2) (3) (4) (5) 28. 27 Kerosene,  that is to say,  

any  hydro-carbon  oil  (excluding mineral colza  oil  and  white  spirit)  which has a smoke point  of  18mm  or  more  (determined  in  the  apparatus  known  as  smoke point lamp in the  manner  included  in  the  Bureau  of  Indian  Standards  Specification  ISI: 1448 (p.31)-1968 as  in  force  for  the  time  being)  and  is  ordinarily  used as an illuminant  in  oil burning lamps”

8% --

5. The assessee claimed the benefit of concessional rate of duty under  

Notification  No.  5/98-CE for  their  kerosene  products  in  their  declaration  

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effective from 2nd June 1998. 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  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, 1998 to February 1999, March to April  1999 and  

May to September 1999, respectively; proposing to recover the amounts of  

`86,089/-, `1,46,731/- and `47,012/- respectively for the said periods.  

7. On 18th April  2000,  the Assistant  Commissioner  passed a common  

order in respect of the said three show cause notices, whereby he confirmed  

the demand of  `2,79,832/-  under Section 11A 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  purposes.  The  

Assistant  Commissioner  also  imposed  a  penalty  of  `10,000/-  under  Rule  

173Q of the Central Excise Rules, 1944.  

8. Aggrieved by the said order, the assessee preferred an appeal before  

the  Commissioner  (Appeals),  which  was  dismissed  by  order  dated  29th  

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November 2000. The penalty was, however, deleted by the Commissioner  

(Appeals).

9. The  assessee,  thereafter,  carried  the  matter  in  appeal  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  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... …. …. …. …. …. ….. …. …. …. …. …. …. …. ….  …. …. .. 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... …. …. …. …. …. ….. …. …. …. …. ….  …. …. …. …. …. …. .. 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 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 purposes. It follows that the said stock of kerosene  did not satisfy the 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 lamps is not determinative of the question whether the  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  

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burning  lamps  as  illuminant  is  also  not  relevant  to  the  said  question…. ….. …. …. …. …. …. …. …. …. …. …… 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 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  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 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, 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  1 (2008) 16 SCC 576 2 [1966] 17 S.T.C. 581

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manufactured by the assessee was cleared to the Public Distribution  

System (for short “PDS”).

12. Per contra,  Mr. P.P. Malhotra, learned additional 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 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  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” 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:-

3 (2010) 4 SCC 290

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“The  word  “ordinarily”  must  be given  its  ordinary  meaning.  While construing the word the Court must not be oblivious of  the context  in which it  has been used.” (See also:  Union of  India & Ors. Vs. Vipinchandra Hiralal Shah4).

15. Similarly, in State of A.P. Vs. V. Sarma Rao & Ors.5, this Court held  

that:-

“The expression “ordinarily” may mean “normally”, as has been held  by this  Court  in  Kailash Chandra v.  Union of  India6 and  Krishan  Gopal v.  Prakashchandra7 but,  the  said  expression  must  be  understood in the context in which it 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  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 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.  4 (1996) 6 SCC 721 5 (2007) 2 SCC 159 6 (1962) 1 S.C.R. 374 7 (1974) 1 SCC 128

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In  the  instant  case,  the  fact  that  the  assessee  cleared  kerosene  

manufactured  by  it  to  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 and we order  

accordingly. Resultantly, the appeals, being devoid of any merit, are  

dismissed with costs, quantified at `20,000/-.

.……………………………………J.            (D.K. JAIN)  

                             .…………………………………….J.           (T.S. THAKUR)

NEW DELHI; OCTOBER 22, 2010.

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