Customs, Excise and Gold Tribunal - Delhi
Oil And Natural Gas Corpn. Ltd. vs Collector Of Customs And Central Excise on 16 July, 2007
JUDGMENT T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Appeal No. KVV/95/92/B III dated 29.04.1992 passed by the Collector of Customs (Appeals), Bombay.
2. The appellants were clearing a product known as lean gas emerging after extraction of LPG from natural gas. The classification of above product was in dispute. Proceedings were initiated by the Revenue against the appellants. In the order-in-original dated 4.2.84, a demand of Rs. 45.43 crores proposed in show cause notice was confirmed by classifying the product under the erstwhile Tariff Item 11A(5) and 11AA(2). Another Order-in-Original dated 28.8.84 was also passed directing the appellants to file classification list and price lists. In this order, a penalty of Rs. 5,000/- was imposed. On appeal, the Collector (Appeals) passed order in appeal dated 18.9.86 upholding the above orders in original. However, the Tribunal vide Final Order dated 25.8.87, (1989 (42) ELT 420) held that the process of emergence of lean gas after extraction of LPG from natural gas amounts to manufacture. So, it was held that the product was not classifiable under Tariff Item 11A(5) and 11AA(2) but under Tariff Item 68. It was also held that the appellants are eligible for exemption and deductions. On remand, the adjudicating authority passed the order-in-original dated 5.2.88 whereby in addition to seven show cause notices issued earlier, another seven show cause notices for later period were adjudicated. The adjudicating authority confirmed the total demand of Rs. 61.64 crores classifying the product under Tariff Item 68. The details of the show cause notice and the demand confirmed are given below:
S. No. SCN dated Period Demand
1. 30.12.1981 31.3.81 to 30.11.81 88,55,021
2. 31.3.1982 1.8.81 to 23.12.81 2,02,64,063
3. 12.7.1992 24.12.81 to 31.3.82 1,40,04,075
4. 30.9.1982 1.4.82 to 30.6.82 1,29,71,058
5. 1.1.1983 1.7.82 to 30.11.82 3,55,38,457
6. 28.5.1983 1.12.82 to 31.3.83 2,67,63,007
7. 13.10.1983 1.4.83 to 31.8.83 1,18,41,471
8. 6.4.84 1.9.83 to 31.1.84 5,20,62,817
9. 31.7.84 1.2.84 to 30.6.84 13,15,73,169
10. 1.1.85 1.7.84 to 30.11.84 14,00,25,395
11. 7.6.85 1.12.84 to 28.2.85 4,02,60,000
12. 6.9.85 1.3.85 to 15.3.85 64,90,000 16.3.85 to 31.3.85 77,88,000
13. 3.10.85 1.4.85 to 30.6.85 3,29,53,452
14. 6.1.86 1.7.85 to 25.7.85 1,92,07,813 Total 61,64,27,814
3. On appeal, the Collector (Appeals) passed the impugned order in appeal dated 29.4.92 upholding the demand. The appellants are highly aggrieved over the impugned order in appeal. Hence, they have come before this Tribunal for relief.
4. S/Shri V.K. Lakshmikumaran and Ravi Raghavan, learned Advocates appeared for the appellants and Shri Sanjay Kumar, learned JDR for the Revenue. The learned Advocates urged the following submissions:
(1) The show cause notice at S. No. 1-10 above proposed classification of the product under Tariff Item 11A(5) or 11AA(2) as the case may be. But the impugned order confirming the demand classifying the product under Item 68 is beyond the show cause notice. It is settled law that the demand cannot be confirmed under the Tariff Heading not proposed in the show cause notices. In the following decisions, it has been consistently held that the demand cannot be confirmed under the classification not proposed in the show cause notice:
(1) Hindustan Polymers Co. Ltd. v. CCE 1999 (106) ELT 12 (SC) (2) Reckitt & Colman of India Ltd. v. CCE (3) Warner Hindustan Ltd. v. CCE (4) Vaspar Concepts (P) Ltd. v. CCE (5) ONGC Ltd. v. CCE 2002 (149) ELT 1182 (6) Dabur India Ltd. v. CCE 2000 (126) ELT 1195 (7) Dabur India Ltd. v. CCE (2) The quantification of the duty demand is also incorrect. The demand if any should only be on the quantity of lean gas cleared. The demand quantified also includes the quantity of natural gas cleared as such without extraction of LPG. Thus the demand is to be requantified on this basis. (3) It was further submitted that the requantification has to be done taking into account the deductions on account of royalty, sales tax, transportation, cum duty etc. (4) Further, the appellants are entitled for certain exemption notification benefits on account of captive consumption. If the benefits are given, the demand will be further reduced. (5) It was also submitted that the appellant is of the view that the lean gas is not excisable. However, during the hearing, the learned advocate did not press this point and fairly conceded that the quantification of the duty can be done on the basis of classification of the product under Item 68.
5. The learned JDR reiterated the impugned order in appeal.
6. On a very careful consideration of the issue, we find that in respect of show cause notice in S. Nos. 1-10, the proposed classification was under the Tariff Item 11A(5) and 11AA(2). Therefore, the confirmation of demand of duty on the basis of classification under Tariff Item 68 will be beyond the scope of show cause notice. Hence in the light of the case laws cited by the learned advocates, the demands from S. No. 1-10 of the show cause notices are not sustainable and hence, they are set aside. However, the demands confirmed in respect of show cause notices in S. No. 11-14 can be sustained under Tariff Item 68 in accordance with the decision of the Tribunal. The appellants have stated that the actual demand has to be requantified taking into account the various deductions permissible as also the Exemption Notifications to which the appellants are entitled. There was also a plea that deductions has to be given in respect of the portion of natural gas in the impugned product, as natural gas is not excisable and to that extent, the value of the product should be redetermined. Hence, we are remanding the issue of requantification of duty liability in respect of show cause notices in S. No. 11-14 in the light of the submissions made by the Appellants. The adjudicating authority shall consider the submissions made by the appellant and decide the matter in accordance with the law within 4 months from the date of receipt of this order.
(Dictated in the open Court)