Customs, Excise and Gold Tribunal - Mumbai
Ipcl vs Commissioner Of Central Excise on 27 January, 2005
Equivalent citations: 2005(185)ELT44(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. M/s. Indian Petrochemical Corporation Ltd. (hereinafter referred to as the appellants) are, inter alia are engaged in the manufacture of various petrochemicals falling under Chapters 27 and 29 of the Central Excise Tariff, 1985. During the processing of raw materials for the manufacture of petrochemicals, the appellants get a stream, called C-4 Raffinate, which is cleared to various job workers, for recovery and manufacture of poly-isobutylene on job work basis. The unreacted stream is returned to the appellants [termed C-4 Raffinate (return stream)]. The poly-isobutylene is cleared on payment of duty by the job workers.
2.1 A show cause notice dated 1-2-2003, proposing to reclassify the 'C-4 Raffinate' cleared, as classified by the appellants, under sub-heading 2711.12 and to deny the concessional rate of duty under Sr. No. 24 of Notification No. 6/2000-C.E., dated 1-3-2000 and Sr. No. 34 of Notification No. 3/2001-C.E., dated 1-3-2000 & to demand differential duty based on the aforesaid proposal was issued to the appellants.
2.2 (a) The basic ground given in the show cause notice is that the C-4 Raffinate constitute of various butylenes which taken together range from 72 to 76% and therefore the C-4 Raffinate would merit classification under subheading 2711.12 in view of Rule 3(a) read with Rule 3(b) of Rules for Interpretation of the Schedule to Central Excise Tariff, 1985.
(b) This notice also proposed to invoke the extended period of limitation on the ground that the appellants did not disclose to the department the composition of C-4 Raffinate. It was further alleged in the show cause notice that the appellants deliberately suppressed the facts of presence of predominance of butylenes in C-4 Raffinate with intent to evade payment of duty. The following documents were relied upon in the show cause notice for the purpose of the aforesaid proposal :-
(1) Panchnama dated 3-7-2001 drawn at the factory premises of M/s. CPL (one of the job workers).
(2) File No. A/7 seized from the factory premises of M/s. GPL vide the above panchnama.
(3) Letter dated 17-10-2001 of M/s. GPL. (4) Statement of Shri R.R. Mirchandani, Manager (Excise & Customs) of the appellants recorded on 11-7-2001. (5) Photocopy of Test Report No. RCL/BDC/C.Ex/124, dated 17-10-2001 addressed to Superintendent Central Excise, Range I, Division IV, Vadodara issued by Chemical Examiner, Central Excise & Customs, Revenue Laboratory, Vadodara. (6) Declaration under Rule 173B filed by the appellants. (7) Statements of Shri Kishor M. Naik, Manager (QC) in the appellant company. (8) Copy of invoice of the appellants company, Dahej for the clearance of C-4 mix. (9) Letter dated 15-9-2001 of the appellants company.
(10) Quotation/proforma invoice dated 8-5-2001 of M/s. Hydrogas India, Mumbai.
(11) Statement dated 11-7-2001 of Shri V.K. Agarwal, Production Manager of the appellants company.
(12) Analysis report of C-4 mix submitted by the appellants company Dahej.
3.1 A Perusal of the material indicates, C-4 Raffinate to be a mixture of several hydrocarbons, such as iso-butane, butane-1, iso-buitene (iso-butylene) trans-2-butene, cis-2-butene, 1-3 butadiene, 1-2 butadiene, etc. Thus C-4 Raffinate is not constituting a specific petroleum constituent gas but it is a mixture of several hydrocarbons, with proportion of each hydrocarbon varying. One Illustrative composition, as per Test Report, showing components of C-4 Raffinate (as appearing in Paragraph 5.1.1 and Paragraph 5.5 of the above show cause notice) is as under:
As per Paragraph 5.1.1 of show cause notice (Tested at M/s. GPL) Sr.No. Parameters Specifications Observations 1 Colour Water white Water white 2 Boilaway Traces Traces 3 Alkalinity i.e. PH Neutral Sl. Alkaline 4 Inorganic Chloride 2ppm Max Traces 5 Components by G.C. 6 Methane Actual Traces 7 Ethane -do- Traces 8 Propane -do- 0.0212 9 Propylene -do- 0.0333 10 i-Butane -do- 10.3215 11 N-Butane -do- 15.6434 12 Propadiene 0.125% Max. Trace 13 Butene-I Actual 20.1766 14 Iso-Butene 35.0% Min. 41.8663 15 t-Butene-2 Actual 7.1373 16 c- Butene-2 Actual 4.7836 17 1-3-Butadine 2.0% Max. 0.0179 18 Total Acetylene 0.35% Max. Traces 19 NMP 10 ppm Max.
And as per Paragraph 5.5 of show cause notice (Tested at M/s. IPCL) is -
Sr. No. Product Unit Content 1 Propane + Propylene % 0.01 2 Propadiene% % 0.01 3 Methyl Acetylene Ppm <25 4 1-3-Butadiene % Traces 5 1-2-Butadiene Ppm <25 6 Iso-Butane % 2.46 7 n-Butane % 9.24 8 Butene-1 % 32.85 9 Iso-Butene % 35.26 10 Trans-Butene-2 % 12.03 11 Cis-Butene-2 % 8.11 12 Ethyle Acetylene Ppm <25 13 Vinyl Acetylene Ppm <25 14 CSs ppm Ppm <25 15 Dinner Ppm <25 16 NMP Ppm <10
3.2 The appellants had classified C-4 Raffinate under 2711.19 as "other liquefied petroleum gases" and the said classification was approved by the Department as far back as in 1988.
4.1 Commissioner of Central Excise passed impugned Order-in-Original No. 13/BRC-I/MP/2003, dated 27-8-2003 holding
(i) C-4 Raffinate to be classifiable under sub-heading No. 2711.12 and not eligible for concessional rate of duty.
(ii) The duty demand was reduced by deducting the duty payable @ 16% from the total amount realized by the appellants for the sale of C-4 Raffinate to arrive at the assessable value. Accordingly, the Commissioner in the impugned order confirmed the demand of Rs. 8,68,58,7817- and also imposed equivalent amount of penalty.
4.2 Aggrieved by the aforesaid order passed by the Commissioner of Central Excise are the present appeals.
5.1 Before proceeding to classify an entity, identification of the entity is required. This identification is to be distinguished from the step which follows, namely an inquiry whether one or more of the tariff provisions apply to the entity identified. Once an entity is identified, appropriate heading/sub-heading is to be located in the Tariff for that purpose the Statutory Rules of Interpretation, the description and scope of the coverage as per the relevant notes, in the Tariff and HSN are required to be referred, to arrive at the heading for an appropriate classification. The material herein when examined, with the above background reveals -
(i) The predominance in percentage in the entity C-4 Raffinate is of the Cis, trans & Iso Butene in mix form is not in contest. The entity is a mixture of isomers of butylenes molecules with certain other organic molecules. The Chemical Dictionaries speak of 'bulylene' as -
The definition of 'butylene' by various dictionaries is as under.
I. In Hawley's Condensed Chemical Dictionary (Eleventh Edition) Butylene
"One of the liquefied petroleum gases butane-1, cis-butene-2, transbutene-2, and isobutene"
II. In Me Graw-Hill Dictionary of Scientific and Technical Terms (Fifth Edition) Butylene "Any of three isomeric alkene hydro-carbons with the formula Cilis; all are flammable and easily liquefied gases."
III. In Exxon USA Lubricants Encyclopedia : butylenes Butylene "Any of three isomeric flammable, gaseous hydrocarbons of the molecular structure C4H8; commonly derived from hydrocarbon cracking."
(b) "Butylenes" has been defined in the Authoritative Technical Publication as under.
1. In Kirk-Othmer Encyclopedia of Chemical Technology (Volume 11) "Butylenes"
"Butylenes are C4H8 mono-olefin isomers : 1-butene, cis-2-butene, trans-2-butene and isobutylene (2-methylepropene). These isomers are usually coproduced as a mixture and are commonly preferred to as the C4 fraction. These C4 fractions are usually obtained as by-products from petroleum refinery and petrochemical complexes that crack petroleum fractions and natural gas liquids."
In terms of the definition of 'butylene' as given in Hawley's Condensed Chemical Dictionary, 'butylene' is one of the liquefied petroleum gases butane-1, cis-butene-2, trans-butene-2 and isobutene. In view of the definition, understanding of the entity 'butylene' as given, in other technical books, has to be constructed.
(ii) The appellants also relied upon the specification of LPG as per IS 4576-1999 and the following documents for the purpose of establishing that the C-4 Raffinate (return stream) is nothing but liquefied petroleum gas and therefore eligible for the concessional rate of duty in terms of Notification Nos. 6/2000-C.E., dated 1-3-2000 and 3/2001-C.E., dated 1-3-2001.
(a) Copy of letter dated 25-9-2002 addressed by IPCL to Chief Controller of Explosives, Nagpur;
(b) Letter dated 27-9-2002 issued by Chief Controller of Explosives granting the required permission after satisfying that the specification of C-4 Raffinate conforms to LPG as per IS 4576-1999;
(c) Test Report dated 26-9-2002 issued by Indian Oil Corporation Ltd., (Refinery Division, Vadodara) confirming the test results of C-4 Raffinate samples sent to them for analysis is as per IS 4576-1999 specification for LPG.
They have also filed an affidavit dated 12-6-2003 given by Dr. M. Ravichandranathan, Chief of Research & Development of the appellants in support of the submission that C-4 Raffinate produced by the appellants is a mixture of number of isomers of butylenes in its liquefied petroleum gas form.
(iii) The Commissioner had conveniently ignored the definition of butylenes as given & in Hawley's Condensed Chemical Dictionary and has misconstrued the term "any" as given in the definition of butylenes in the other technical books. In view of the definition of butylene as given in Hawley's Condensed Chemical Dictionary, the liquefied petroleum gases like butene-1, cis-butene-2, trans-butene-2 and isobutene individually can be treated as butylenes. In other words, a mixture of these isomers cannot be treated as a butylene. The mixture of isomers of butylene mentioned above alone can be referred to as 'butylenes' (plural).
(iv) That cis butylene, trans butylene and Isobutylene are different Chemical compounds & how they are to be understood is evident from the following material -
(a) Butylene has a number of isomers like (a) normal butylenes (n-butylene). (b) Iso-butylenes (c) Cis-butylene. (d) Trans-butylene. Any one of these isomers taken alone or individually would be a butylene. Thus, an entity consisting of any one of these isomers alone would be called as butylene ("singular").
(b) However, if a product is a mixture of any two or more isomers of butylenes, then such a product would be called as butylenes ("plural"'). Such a product containing mixture of isomers of butylenes would not be called butylenes ("singular").
(c) In the various sub-headings under Heading 27.11 of HSN there is a sub-heading 2711.13. In that sub-heading the term 'Butanes' is employed. In sub-heading 2711.14 singular Ethylene, Singular propylene, Singular butylene and Singular butadiene are referred. There is no reference to "plural" butylenes or "plural" propylenes in this sub-heading 2711.14 of HSN. There is a reference of the "plural" butanes in sub-heading 2711.13. This itself demonstrates that there is a clear cut distinction between "singular" butylene and "plural" butylenes (we are not concerned with butanes in the present case). However, HSN has referred to only for showing the difference between "singular" butylene and "plural" butylenes.
(v) The show cause notice had relied upon the Test Report dated 17-10-2001 in respect of the sample of C-4 Raffinate drawn on 8-10-2001. In terms of this report, the C-4 Raffinate consists of butene-1, iso-butene, t-butene, c-butene apart from iso-butane. Thus, the C-4 Raffinate is a mixture of iso-butylene (butene), n-butylene (butane, t-butylene, c-butylene. Therefore, C-4 Raffinate naturally being a mixture of isomers of butylene would be correct described as butylenes ("plural") and not "butylenes" ("singular").
(vi) Heading No. 2711.12 covered "butylene" (singular) only and not "butylenes" (plural). The difference between "'butylene" (singular) and "butylenes" (plural) has been explained in ground B1 to B4 supra. Therefore C-4 Raffinate is not classifiable under sub-heading No. 2711.12.
(vii) The finding of the Commissioner that butylene predominates and therefore it is C-4 Raffinate is classifiable under sub-heading 2711.12 is incorrect since the Commissioner had not appreciated the submissions made by the appellants on the basis of definition of "butylene" and the difference between "butylene" and "butylenes". Hence the basis adopted by the Commissioner to classify C-4 Raffinate under sub-heading 2711.12 is incorrect.
(viii) The reliance placed by the Commissioner on the analysis report supplied by appellants to Chief Controller of Explosives, Nagpur in order to rename C-4 Raffinate as LPG as per ISI specification 4576 is wholly misplaced. The analysis report shows the contents of all the butylenes as around 80 to 82%. The entire basis in the show cause notice is that as per the Test Reports the C-4 Raffinate contained of butene-1, cis-butene-2, trans-butene-2 and isobutene to the extent of about 83% in total and therefore butylenes (butene) predominates in the Return Stream of C-4 Raffinate. Therefore, it was alleged in the show cause notice that the product is classifiable as butylenes under sub-heading 2711.12. Thus only by adding percentage of the contents of all the isomers of butylene the department alleged that the product is butylene. However, for the reasons arrived at in paras above, mixture of isomers of butylene cannot be called as butylene (singular). Sub-heading 2711.12 covers only butylene (singular) and not butylenes (plural). Therefore, reliance placed by the Commissioner on the documents submitted by the appellants to the Chief Controller of Explosives for renaming C-4 Raffinate as LPG is wholly incorrect.
(ix) The term 'butylene' is well known term found in authoritative technical books like Chemical Dictionary or any other Chemical Books. Therefore, if the department view to classify a product as butylene, is to upheld then it must be shown by the department that it is bought and sold as butylene. The impugned order fails to establish that C-4 Raffinate is butylene meeting this test, in order to classify it as butylene under sub-heading 2711.12, the burden to establish this is squarely on the department as been held by the Apex Court in various decisions. The Commissioner without appreciating that the product in question is not bought and sold as butylene proceeded to hold that the appellants have not shown that the product is bought and sold as C-4 Raffinate that finding cannot be upheld.
(x) The finding of the Commissioner that butylenes predominates and therefore it is C-4 Raffinate is classifiable under sub-heading 2711.12 is incorrect since the Commissioner had not appreciated the submissions, as made by the appellants, on the basis of definition of "butylene" and the difference between "butylene" and "butylenes". Hence the basis adopted by the Commissioner to classify C-4 Raffinate under sub-heading No. 2711.12, is not upheld.
(xi) It is settled legal position that burden of proving that a product is hit by an exclusion clause contained in an exemption Notification is squarely on the department. In this regard reliance placed on the decision of the Supreme Court in Collector v. K. Mohan & Co. - 1989 (43) E.L.T. 811. This decision was applied and followed by CEGAT in Khanna v. CCE reported at 1996 (82) E.L.T. 109 is well founded and upheld.
(xii) In order to treat a product as butylene the product should be bought and sold in the market as butylene. Thus in trade and commercial parlance C-4 Raffinate should have been bought and sold and understood as butylene. The department has not led any evidence whatsoever to show that C-4 Raffinate is bought and sold as butylene. No trade opinion or technical opinion has been cited by the department in support of its claim.
(xiii) The department has solely and entirely gone by the aspect that about 74% of the product by composition are butylenes. This is a mere ipse dixit. There is no evidence whatsoever technical, commercial or otherwise that the product of such a composition is bought and sold as butylene. Even according to the impugned order the balance of around 26% of the product is not butylene. There is no evidence whatsoever that despite the presence of non-butylenes to the aforesaid extent of around 26%, the product is bought and sold as butylene. Therefore, the impugned order treating the C-4 Raffinate as butylene cannot be upheld.
(xiv) There is therefore no doubt that the entity under classification dispute, a liquefied petrochemical gas, as a mixture, with no specific proportion of different organic compounds, & chiefly Isomers of butylene constituting the major part. The heading notes under heading 27.11 prescribe-
"They include in particular, the following case, whether or not VI. Butens (Butylenes) and butadienes, less than 90% pure (Brutens and Butad.... not less 90% pure fall in heading 29.01)"
& exclude -
"Separate chemically defined hydrocarbon (other than methane & propane) in a para or commercially pure state (heading 29.01). (As regards such hydrocarbon with added odo ri ferrous substance, see the General Explanatory Note to Chapter 29. Part (A), fifth paragraph. For ethane, ethylene, propene, butane, butanes and butadienes, there are specific purity criteric as indicated in paragraph II, III, IV & V above)"
A combined reading of the inclusion and exclusion notes would indicate that when constituent of butylenes is less than 90% in an entity under classification then it would remain classified under Heading 27.11 and when such percentage reach more than 90% they would be shifted to Chapter 29 of the Tariff read with the Chapter notes there under. Therefore, classification of a mixture, in the present proportations in this case, under 27.11 heading of the Tariff is confirmed. Proceeding for further sub-classification under subheadings of 27.11, it is found the Tariff Heading 27.11 is divided into-
Sr. No. Date Event
(i) 23-4-1984 Letter by Assistant Collector of Central Excise and Customs, Vadodara issued to IPCL informing that C-4 Raffinate (Return Stream) is not different from C-4 Raffinate. (Annexure-21)
(ii) 11-12-1984 Test Reports for comparison of receipt and Return Stream of C-4 Raffinate as seen by Assistant Collector of Central Excise, Division IV, Vadodara.
This test report clearly show the composition of the various hydro-carbons of the C-4 Raffinate as received and C-4 Raffinate as returned by the Gu-
jarat Petrosynthese Ltd. Therefore the percentage of composition of butylenes was known to the de-
partment. (Annexure-22)
(iii) 18-2-1991 The orders of Assistant Commissioner of Central Excise holding that C-4 Raffinate would fall under 2711.19 and would be eligible for benefit of Notifi-
cation No. 157/89, dated 17-7-1989 (Annexure-23).
the entity classified, under 2711.12 would be a 70% pure isomer of a butylene (i.e. without any other isomers) and not a mixture of isomers adding up & constituting upto 70%. Mixture of Isomers would be out of 2711.12 & be classified under sub-heading 2711.19 as that such heading of butylenes (of cis, trans & iso butylene) would encompass Butylenes (irrespective of intra percentage of (mixture) of different Isomers).
5.2 G.1 Demand of duty on C-4 Raffinate (Return Stream) was confirmed by the Collector of Central Excise, Vadodara vide order-in-original No. 9/MP/91, dated 23-1-1991 passed against M/s. Gujarat Petrosynthese Ltd. This order denied the complete exemption conferred by Notification No. 276/67 to C-4 Raffinate used in the manufacture of Poly-isobutylene. However, even so, the show cause notice raised the differential duty demand applying the rate of duty in terms of SI. No. 30 of Notification No. 75/84, as is clear from the duty calculation chart annexed to the show cause notice in that case. Thus, the department itself never treated C-4 Raffinate as butylene which was excluded from the Notification No. 75/84, SI. No. 30 thereof. The fact that the appellant's factory at Dahej had paid duty at the rate of 16% cannot be a ground to arrive that the entity, cleared by the appellant's factory at Vadodara also is to be treated as falling under sub-heading 2711.12 attracting duty at the rate of 16%. The legal position that there is no estoppel in taxing matter is well settled. If the contention of the Commissioner in this regard is accepted, the department also is bound by the classification done earlier from 1988 onwards, as shown in respect of C-4 Raffinate cleared by the appellants. Hence, reliance placed by the Commissioner on the documents seized from Hydrogas India to show that they had paid duty at the rate of 16% does net help the departments case.
5.3 The fact that the department of explosives have specifically reported that the characteristics/properties of C-4 Raffinate matches with the specification of liquefied petroleum gas confirming to IS 4576 : 1999 and there is no objection to re-designate the C-4 Raffinate as liquefied petroleum gas, clearly shows that the C-4 Raffinate is commercially known as liquefied petroleum gas. Hence, the impugned order of the Commissioner holding that the appellants have failed to prove at any stage that the C-4 Raffinate was used as or is liquefied petroleum gas, is incorrect. Once the product is liquefied petroleum gas, so long as it is not a natural gas, the same is covered by the exemption Notification No. 6/2000 and 3/2001. The classification of the product as to whether it would fall under sub-heading 2711.19 would not be relevant.
5.4 The Commissioner has misread the analysis report submitted by the appellants to Chief Controller of Explosives, Nagpur. The mixture of isomers of butylenes contained in the C-4 Raffinate was around 80%. The appellant's submissions on the difference between "butylenes" (singular) and "butylenes" (plural) does not appear to be understood by the Commissioner in the impugned order. The submissions & findings with regard to the difference between the term "butylene" (singular) and "butylenes" (plural) are based on the concept of butylene as given in technical book. The Commissioner appears to have deliberately and conveniently ignored the definition as given in Hawley's Condensed Chemical Dictionary. Hence, his observation that there is no difference between "butylene" (singular) and "butylenes" (plural), is incorrect and unsustainable in law & in facts.
5.5 As regards the eligibility to the Notification Sr. No 24 thereof, it is found -
(i) SI. No. 24 of Notification No. 6/2000-C.E., dated 1-3-2000 confers partial exemption to "Liquefied Petroleum gases and other gaseous hydrocarbons other than natural gas, ethylene. propylene, butylene and butadiene", (emphasis supplied) In the aforesaid SI. No. 24 of Notification No. 5/2000, there is no comma after the words 'gaseous hydrocarbons'. Therefore, the expression "other than" appearing after the words "gaseous hydro carbons" and before the words "natural gas" would qualify only the words "natural gas". In other words, the following goods are covered by the aforesaid SI. Nos.
(i) Liquefied petroleum gas and other gaseous hydrocarbons with exclusion of natural gas,
(ii) Ethylene,
(iii) Propylene,
(iv) Butylene and
(v) Butadene.
The above submissions is reinforced by a comparison with SI. No. 30 of Notification No. 75/84-C.E., dated 3-3-1984 as introduced by Notification No. 120/86-C.E., dated 1-3-1986 which stood in the manner, dining the entire period from 1-3-1986 to 28-2-1994.
F.5 The said SI. No. 30 of Notification No. 75/94 reads thus :
"Liquefied petroleum gases and other gaseous hydrocarbons, other than natural gas, ethylene, propylene, butylene and butadiene".
as in the above Notification No. 75/84, there was a comma after gaseous hydrocarbons, unlike present Notification No. 6/2000, SI. No. 24 thereof.
Therefore, even if C-4 Raffinate is treated as Butylene SI. No. 24 of Notification No. 6/2000-C.E., would be applicable, specification of butylenes in the said SI. No. 24 is not for the purpose of its exclusion, but for the purpose of its specific enumeration and inclusion.
(ii) Even if the description of goods against SI. No. 24 of Notification No. 6/2000-C.E., is interpreted to mean that ethylene, propylene, butylenes and butadiene are also excluded, then C-4 Raffinate is not excluded since it is not exclusively a or any 'butylene' but is a mix of 'butylenes'. In view of the findings arrived in paras supra. However, since C-4 Raffinate is liquefied petroleum gas it is covered by the description of the "Liquefied Petroleum gases and other gaseous hydrocarbons" under SI. No. 24 of the above notification, Raffinate, even if it is assumed as butylene is not excluded from coverage of SI. No. 24 of the Notification No. 6/2000, but would stand included in the first part of the Notification as liquefied petroleum gases.
(iii) The order of the Commissioner on the question of availability of exemption Notification No. 6/2000-C.E., dated 1-3-2000 and No. 3/2001-C.E., dated 1-3-2001 is purely based on the intention of the legislature on the basis of the Finance Minister's speech. However, it is a well settled legal position that the notification has to be interpreted on the basis of plain meaning of words and intention behind the notification cannot be a basis to interpret the notification. Commissioner has not refuted any of the submissions made by the appellants, on the interpretation of the notification. If the interpretation of the department on Sr. No. 24 of Notification No. 6/2000-C.E., dated 1-3-2000 and Sr. No. 34 of Notification No. 3/2001-C.E., dated 1-3-2001 is accepted, then the simple way of giving the description of the goods under the said Sr. Nos. of the Notifications, would have been "goods falling under sub-heading 2711.19", if the Government wanted to extend the concessional rate of duty in respect of liquefied petroleum gas and other hydrocarbons except natural gas. Hence the interpretation as adopted by the Commissioner based on the intention of the legislature on the basis of Finance Minister's speech is wholly incorrect.
5.6 The show cause dated 30-1-2003 proposed to demand differential duty on the C-4 Raffinate cleared by the appellants during the period from March 2000 to February 2002. The demand in the period from March 2000 to December 2001 is clearly barred by limitation since there was no suppression of fact, misstatement etc. in order to sustain the applicability of extended period of limitation under proviso to Section 11A(1) of the. The following list of dates and events clearly establish that the appellants had not suppressed any fact nor have they misdeclared the classification of the product and in fact, the department was always kept informed all the necessary facts.
The factory of the appellants and the factory of M/s. Gujarat Petrosynthese Ltd. (GPL) are situated within the jurisdiction of the same Division and Commissioner of Vadodara. The department had initiated proceedings against GPL demanding duty on C-4 Raffinate (Return Stream) cleared during the period from November 1984 to October 1985 alleging that GPL had dispatched processed goods/residue to the appellants under the guise of Return Stream. GPL was issued with Show cause notice dated 26-10-1989. The Collector of Central Excise, Vadodara who is having jurisdiction over the factories of the appellants and GPL passed order-in-original No. 9/MP9, dated 23-1-1991 holding that C-4 Raffinate Return Stream cleared by GPL is different in composition from C-4 Raffinate which was received by GPL from the appellants. This finding of the Collector itself shows that during the earlier proceedings against GPL, department had decided the composition of C-4 Raffinate as well as C-4 Raffinate (Return Stream).
The only allegation in the show cause notice for invoking extended period of limitation is that the appellants did not declare the composition of C-4 Raffinate. On this basis it has alleged that there was suppression of fact. However, in view of the fact that in 1984 itself the department had & seen the Test Reports of C-4 Raffinate as well as C-4 Raffinate Return Stream, would confirm the fact that department was fully aware of the fact & of composition of C-4 Raffinate.
Besides the appellants were required & were filing periodical classification list since beginning for C-4 Raffinate, classifying the same under subheading 2711.19. These classification lists were approved by the department, as back as 1988. Subsequently lists also continued to be approved under the same sub-heading 2711.19 during all the subsequent years, in the light of the approved classification list and the fact that the composition of C-4 Raffinate was known to the department as found herein, earlier, it cannot be alleged that there was suppression of fact. The fact that the classification lists have been approved by the department for C-4 Raffinate under sub-heading 2711.19 in the light of the fact that the composition of the same was known to the department also rendered the appellants having bona fide belief that the classification of C-4 Raffinate was correctly declared by them. Under these circumstances, the extended period of limitation cannot be invoked. The impugned order invoking the extended period of limitation cannot be upheld.
6.1 In view of the findings herein, on merits the classification under 2711.19 has to be upheld, the benefit of notification cannot be denied. Since no duty demands are being upheld no penalty can therefore be upheld.
6.2 In view of the findings, the order is to be set aside and appeals allowed.
6.3 Ordered accordingly.