Customs, Excise and Gold Tribunal - Delhi
Jagdamba Petroleum P. Ltd. vs Cce on 7 October, 2003
Equivalent citations: 2004(91)ECC463, 2004(163)ELT88(TRI-DEL)
ORDER P.G. Chacko , Member (J)
1. This appeal filed by the assessee is against a common order passed by the Commissioner of Central Excise in adjudication of three show-cause notices dated 30.3.2001, 27.2.2002 and 15.11.2002. The impugned order confirmed the demands of Special Excise Duty (SED) amounting totally to over Rs. 1 crore as raised in the show-cause notices for the total period March 2000 to August, 2002. It also imposed a penalty of equal amount on the assessee under Section 11-AC of the Central Excise Act. The learned Commissioner passed the order after holding that the products namely 'special solvent' and 'other residue', on which the above demand of SED was raised, were correctly classifiable under sub hearing 2710.13 of the Schedule to the Central Excise Tariff Act, 1985 as claimed in the show-cause notices.
2. Examined the records and heard both the sides. The appellants are engaged in the manufacture of 'special solvent' and 'other residue' using naphtha as raw material. They classified the products under sub-headings 2710.90 and 2713.30 respectively in their classification declaration filed under Rule 173-B of the erstwhile Central Excise Rules, 1944 as also in the monthly returns filed by them during March, 2000 to August 2002. Accordingly they cleared the products on payment of Central Excise duty at the rate of 16% addlvalorem. The Department did not accept their classification. They held the goods to be correctly classifiable under sub-heading 2710.13 and, accordingly, demanded special excise duty on them at the rate of 16% adlvalorem under the Second Schedule to the Central Excise Tariff Act. They also alleged suppression and misdeclaration of facts against the assessee and held them to be liable to penalty. The assessee, however, did not submit any reply to the show-cause notices, nor did they appear for personal hearing before the adjudicating authority. Consequently, the impugned order was passed by the Commissioner against the assessee ex parte. In the present appeal, the assessee has inter alia plea of violation of natural justice. We have scrutinized the relevant aspects and are not impressed with this plea. We would rather like to dispose of the case on its merits.
3. Reiterating the relevant grounds of the appeal, the learned Counsel for the appellants submitted that the impugned order was based mainly on the personal knowledge of the adjudicating authority rather than on any evidence. Even the Chemical Examiner's report, referred to in the order, was not correctly appreciated. Referring to the text of Tariff Heading 27.10, the learned Counsel submitted that it was not only the flash point bu also the use of the product by itself or in admixture with any other substance that was relevant for deciding on the question whether the product was classifiable under sub-heading 2710.13 or 2710.90. But adjudicating authority did not render any clear finding on this aspect. It held that the goods may or may not be suitable for use as fuel by itself in spark ignition engines. It was, however, also held that the admixture of the products with other substance may be suitable for use in spark ignition engines. This finding recorded by the Commissioner was not supported by any evidence whatsoever. In this context, the Counsel relied on the Tribunal's decision in Silverchem Industries Pvt Ltd & Another Vs. CCE Mumbai [ 2003 (56) RLT 702] wherein it was held that classification of the product in question under sub-heading 2710.13 was not sustainable for want of evidence to show that the product was suitable for use as fuel in spark ignition engine though in met the flash point requirement of the said sub-heading. The Counsel also challenged the penalty imposed on the appellants by the Commissioner under Section 11-AC of the Central Excise Act. he submitted that, though the impugned order stated that the appellants had wilfully mis-stated classification of the products with intention to evade payment of duty, it did not disclose any basis for the finding. The penal action, therefore, was not sustainable.
4. The learned DR reiterated the findings of the Commissioner. He referred to the Chemical Examiner's report and claimed that the same supported the classification held by the Commissioner. The DR also referred to the declaration filed by the assessee under Rule 173-B and submitted that relevant particulars such as flash point were not disclosed therein. Suppression of facts was rightly found against them by the adjudicating authority.
5. We have examined the records and the submissions. The assessee has classified 'special solvent' and 'other residue' under sub-headings 2710.90 and 2713.30 respectively, both attracting basic excise duty at the rate of 16% adlvalorem and no special excise duty (SED). On the other hand, the Revenue wants both the items to be classified under sub heading 2710.13 which attracts SED also. Heading 27.10 is extracted below :-
"27.10 Petroleum oils and oils obtained from bituminous Minerals, other than crude; Preparations not else-where specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations
- Motor spirit, that is to say, any hydrocarbon oil (excluding crude mineral oil) which has its flash point below 25C, and which either by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines:
2710.11-Special boiling point spirits (other than Benzene-Toluol) with nominal boiling point range 55-115C 2710.12-Special boiling point spirits (other than Benzene, Benzol, Toluene and Toluol) with nominal boiling Point range 63-70C 2710.13-Other special boiling point spirits (other than Benzene, Benzol, Toluene and Toluol 2710.14-Naphtha 2710.15-Natural Gasoline Liquid 2710.19-Other 2710.90-Other
6. The reasons stated by the adjudicating authority for classifying the goods under sub-heading 2710.13 are that the flash points of the liquids are below 25C and that the goods are suitable for use as fuel either by themselves or in admixture with any other substance in spark ignition engine. The Chemical Examiner's report also shows the flash points of the samples below 25C. But this report also states thus:- "However, at present, it is not possible for this lab to say whether each of the products under reference by itself or in admixture with any other substance is suitable for use as fuel in spark ignition engine or otherwise." The report, therefore, is no basis for the finding recorded by the Commissioner that admixture of the subject goods with any other substance may be suitable for use as fuel in spark ignition engine. We find no other evidence, whether in the form of technical literature or otherwise, on record to support this finding of the Commissioner. In this context, we must mention the decision cited by the Counsel. In that case, the question considered by the Tribunal was whether certain fractions from naphtha were to be classified as special boiling point spirit under sub-heading 2710.13. The flash points of the liquids were below 25C. The Tribunal held that, apart from fulfilling this criterion, the goods should also meet the requirement of being suitable for use as fuel in spark ignition engine for the purpose of being classified under sub-heading 2710.13. There was no evidence to show that the naphtha fractions were suitable for use as fuel in spark ignition engine. The instant case is, factually, no different as there is no evidence on record to show that the goods under consideration are suitable for use as fuel either by themselves or in admixture with any other substance, in spark ignition engine. The Chemical Examiner's report is of no use insofar as this suitability condition is concerned. Hence the decision of the adjudicating authority classifying the goods under sub heading 2710.13 is not sustainable. The impugned order does not contain anything in rebuttal of the classification claimed by the assessee, either. We, therefore, approve the classification claimed by the assessee. As we have held the substantial issue in favour of the appellants, it goes without saying that the penalty imposed on them cannot be sustained. In the result, the impugned order is set aside and the appeal is allowed.