JUDGMENT

Bharucha, J.-The proper construction of the words "derived from" will determine this appeal against a judgment and order of the Customs, Excise & Gold (Control) Appellate Tribunal.

2. The appellants are a refinery, recognised to be such by the Union of India. They manufacture ethylene, butylene and propylene ("the said products"). It is their contention that the said products fall within Item 11 AA of the Excise Tariff and that they are entitled to the benefit of an Exemption Notification issued in respect of that Item on 21st December, 1967,as amended from time to time, under Rule 8 of the Central Excise Rules. The Revenue contends, basing itself on a Trade Notice dated 24th November, 1984, that the said products are manufactured from raw naphtha and, therefore, are not classifiable under Item 11AA but under the residuary Item 68.

3. Item 11AA deals with petroleum gases. Sub-item 2 thereof, which is relevant, reads thus :

"Other petroleum gases and gaseous hydrocarbons derived from refining of crude petroleum or shale."   (Emphasis supplied)

5. The said Exemption Notification applies to goods falling, inter alia, under Item 11AA if they are "produced in any premises (other than the premises wherein refining of crude petroleum or shale or blending of non-duty paid petroleum products is carried on) declared under sub-rule (2) of rule 140 of the Central Excise Rules, 1944, to be a refinery". If the said products are held to fall under Item 11AA, the said Exemption Notification, it is not in dispute, will apply.

5. The Tribunal noted the argument on behalf of the Revenue that the said products were "not derived directly from refining crude petroleum. Refining of crude petroleum means the first product obtained by refining of crude petroleum. The products in dispute in this case are derived from cracking raw naphtha" which was obtained by the appellants from the oil refineries. The Tariff Advice upon which the Revenue sought to change the classification of the said products from Item 11AA(2) to Item 68 took the ground that the said products were not "derived directly" from crude petroleum. The Tribunal stated that the point for decision was whether, for the purpose of classification under Item 11AA(2), a product should be derived directly from the refining of crude petroleum. Relying on a judgment of the Gujarat High Court, it held that for a product to be excisable under that Item it "must be the immediate result of refining of crude petroleum." The said products were not derived directly from the crude petroleum but were obtained from raw naphtha purchased from oil refineries. Accordingly, the Tribunal accepted the contention of the Revenue that the said products were not excisable under the said Item but under the residuary Item 68.

6. Learned counsel for the appellants placed reliance upon the judgment of this Court in The Tata Oils Mills Co. Ltd. v. Collector of Central Excise1. The question before this Court related to an Exemption Notification; it exempted "soap as is made from indigenous rice bran oil or from a mixture of such oil with any other oils" from a certain part of the excise duty leviable thereon. This Court held that the requirement of the notification was that the soap manufacture should be from rice bran oil as contrasted with other types of oil. That was the ordinary meaning of the words used. The words might be construed literally, but they had to be given their fullest amplitude and interpreted in the context of the process of soap manufacture. There were no words in the notification to restrict it only to cases where rice bran oil was directly used in the factory claiming exemption and to exclude cases where soap was made by using rice bran fatty acid derived from rice bran oil. The whole purpose and object of the notification was to encourage the utilisation of rice bran oil in the process of manufacture of soap in preference to various other kinds of oi