Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Indian Petrochemicals Corporation ... on 7 February, 1989
Equivalent citations: 1991(31)ECC326, 1989(23)ECR373(TRI.-DELHI), 1990(46)ELT173(TRI-DEL)
ORDER
G. Sankaran, Senior Vice-President
1. This appeal is directed against Order-in-Appeal No. M-1632/BD-735/86 dated 30-1-1987, passed by the Collector of Central Excise (Appeals), Bombay, whereby he set aside the Order-in-Original dated 31-10-1985, passed by the Asstt. Collector of Central Excise, Baroda, and upheld the respondents' claim for classification of their product "Heavy Normal Paraffins" ("HNPs" for short) under Item 7 of the First Schedule to the Central Excises & Salt Act, 1944 ("CET" for short) and not under Item 68 of the Schedule, as ordered by the Assistant Collector. The Collector (Appeals) further directed consequential relief to the respondents.
2. We have heard Shri A.S. Sundar Rajan, JDR, for the appellant-Collector and Shri N.V. Raghavan Iyer, for the respondents.
3. M/s. Indian Petrochemicals Corporation Ltd. (the respondents) filed a classification list on 20-3-1982 for their products including Heavy Normal Paraffins (HNPs). This classification list was filed persuant to the changes made in the tariff nomenclature by the amendments brought about by the Finance Bill of 1982. On the basis of the respondents' declaration that HNPs were derived from refining of crude petroleum or shale, the classification was approved by the proper officer on 31-3-1982 directing classification of HNPs under Item 11A(4) of the CET. It appears that the excise authorities felt later on that the classification was not correct since HNPs were obtained by processing of kerosene and not by refining of crude petrolem or shale. The Asstt. Collector of Central Excise, Baroda, therefore, issued a show cause notice dated 17-6-1982 to the respondents intimating reclassification of the product from Item 11A(4) to Item 68 of the CET. They were also advised that the reclassification took effect immediately from the date of the show cause notice and that the modification of the approved classification was done under Rule 173B(5) of the Central Excise Rules, 1944 (the "Rules" for short). They were also asked to show cause why reclassification should not be given effect to from 28-2-1982 and why the amount of duty short levied should not be recovered from them under Section 11A of the Central Excises & Salt Act, 1944. The respondents were allowed to avail themselves of the procedure for provisional assessment as laid down in Rule 9B. By their reply dated 14-9-1982, the respondents contended that HNPs had been correctly classified under Item 11 A, CET. In due course, the Asstt. Collector passed an order dated 30-11-1984 holding that the product was classifiable under Item 68, CET with effect from 28-2-1982 and ordered finalisation of the provisional assessments. In appeal, this order was set aside by the Collector (Appeals) by his order dated 31-12-1984 on the ground that it had been passed in violation of the principles of natural justice. Thereafter, the Asstt. Collector, after hearing the respondents, passed another order on 7-11-1985 reclassifying the product under Item 68, CET and ordering finalisation of the provisional assessments taking into consideration the rates of duty applicable to Item 68 from time to time. It is this order which was set aside in appeal by the Collector (Appeals) by the impugned order.
4. A few more relevant facts require to be noticed. The respondents do not produce kerosene themselves but obtain duty paid kerosene from the refineries and subject it to processing within their factory premises, declared under Rule 140(2) as a 'Refinery'. The process of manufacture of HNPs from kerosene, as described by the respondents, is as follows:
"The U.O.P. Molex is a continuous process for the separation of normal paraffins from co-boiling hydrocarbons by means of selective adsorption from the liquid phase. The adsorbent employed is a molecular sieve with a 5 A0 pore diameter. The pore diameter of the sieve is selected so that the n-paraffins molecule can pass through the pores into cavities within the crystal structure, while the other species are excluded.
The molex process, simulates counter-current contact between adsorbent and feed to adsorb the n-paraffins. After being washed with a non-descriptive liquid, the n-paraffins bearing adsorbent is contracted in simulated counter-current flow by a desorbeht liquid which displaces the feed range n-paraffins from the pores.
Exciting the molex chambers are two streams in the extract and the Raffinate. These streams enter their respective columns for recovery of the desorbent components from the feed range material.
Extract column bottoms are sent to a splitter column which separates the heavier paraffins from the light paraffins. The overhead stream of product splitter column is the normal paraffin stream used for further processing in Pacol and is sent to storage tanks. The bottom stream is heavy normal paraffin (HNP) which is also sent to storage for despatching to product transfer department."
5. There is no dispute on the results obtained on test of samples drawn from HNPs on different dates. The test reports read as follows :-
"The Sample is in the form of colourless mineral oil having following characteristics :
(1) Flash point is above 25 ° C. (2) Smoke point is above 18 mm.
(3) It has final boiling point not exceeding 300 C."
6. Item 7, CET, relating to 'Kerosene', as it stood prior, and subsequent, to the Finance Act, 1982, read as follows :-
Prior to the Finance Act, 1982 "Kerosene, that is to say, any mineral oil (excluding mineral colza oil and turpentine substitute) which has a flame height of eighteen millimetres or more and is ordinarily used as an illuminant in oil burning lamps.
Explanation I. - The expression "mineral oil" has the meaning assigned to it in Explanation I to Item No. 6."
Explanation II. - Not reproduced as not relevant.
Subsequent to the Finance Act, 1982 "Kerosene (which is ordinarily used as an illuminant in oil burning lamps), and aviation turbine fuel, that is to say, any mineral oil (excluding mineral colza oil and turpentine substitute) which has a smoke point boiling point not exceeding three hundred degrees of Centigrade thermometer -
(i) Aviation Turbine Fuel
(ii) Others Explanation I - The expression 'Mineral Oil' has the meaning assigned to it in Explanation I to Item No. 6."
Explanation II and Explanation III - Not reproduced as not relevant.
To complete the picture, Explanation I to Item 6, CET ("Motor Spirit") is also reproduced below:
"Explanation I - 'Mineral Oil' means an oil consisting of a
single liquid hydrocarbon or a liquid
mixture of hydrocarbons (except for associated
impurities) derived from petroleum, coal, shale,
peat or any other bituminous substance and
includes any similar oil produced by synthesis
or otherwise.
" Explanation II - Not reproduced as not relevant.
7. It may be seen from the test results on HNPs that the product conforms to the specifications laid down in Item 7, CET, as it stood after the Finance Act, 1982, as regards smoke point and final boiling point. This position is not in dispute (the period of the present dispute is from 1-3-1982 to 28-2-1983). That the goods are not ordinarily used as illuminant in oil burning lamps is also not in dispute. The goods are sold by the respondents to small scale units for further processing for plasticizers.
8. Shri Sundar Rajan, for the appellant-Collector, submitted that though specification-wise the goods conform to the prescriptions in Item 7, CET, they did not answer to the description of 'Kerosene' or 'Aviation Turbine Fuel' (ATF). For a product to fall under Item 7, it should first be 'Kerosene' or 'ATF'. If it is kerosene or ATF, it should be a mineral oil as defined in Explanation I to Item 6. It should be a mineral oil derived from petroleum. It should not be a derivative of a product derived by refining of petroleum. The Physical specifications laid down in Item 7 have also to be satisfied. Only then would a product qualify for assessment under Item 7. Prior to the 1982 Finance Act changes, the goods were not being classified under Item 7. The 1982 Finance Act brought into the scope of Item 7 only ATF in addition to Kerosene which was already within its scope. Therefore, the subject goods did not fit into Item 7.
9. Shri Sundar Rajan referred to, and relied upon, in the above context, the Gujarat High Court judgment dated 3-11-1970 in S.C.A. No. 1175 of 1970 in the case of Mehta Bros. v. Superintendent of 1.0. C. Range, Division No. II, C Ex. Office, Ahmedabad.
The goods in that case were the result of heating of a mixture of mineral oil (spindle oil, lubricating oils) with sulphuric acid, sodium carbonate and Fuller's earth when the base mineral oil became colourless and odourless. The question was whether the resultant oil would fall under Item 11A, CET. Item 11A, as it stood at the material time, covered all products derived from refining of crude petroleum or shale (whether gaseous, liquid, semi-solid or solid in form), not otherwise specified. The H.C. held that only the base mineral oil would be a product derived from refining of crude petroleum and that the processed oil would not be such a product. The latter was not derived from refining of crude petroleum. It has derived from processing of mineral oil which, in its turn, was derived from refining of crude petroleum. The Court ruled that a product, to be excisable under Item 11A, must be the immediate result of refining of crude petroleum and not one containing, as its ingredient, a product derived from refining of crude petroleum.
10. Shri Sundar Rajan submitted that the ratio of the aforesaid judgment applied to the facts of the present case. 'HNPs' were not the direct result of refining of crude petroleum but the result of processing of kerosene which, in its turn, was the product of refining of crude petroleum.'HNPs' were not kerosene and were known by a different name and had different characteristics and uses. Therefore, it would not be correct to classify them under Item 7, CET.
11. In support of his contentions, Shri Sundar Rajan relied on para 6 of the Tribunal's order in the case of Nav Bharat Enterprises (P) Ltd. v. Collector of Customs, Madras 1983 (13) E.L.T. 1134. In this case, the Tribunal held, following the Gujarat High Court's judgment in Mehta Bros. case (supra), that liquid paraffin, not being derived from refining of crude petroleum, would not fall under Item 11A, CET. It further held: "A product must be derived from refining of crude petroleum and not be a product obtained by reforming, blending or otherwise treating products derived from the refining of crude petroleum". Reliance was also placed on the Supreme Court's judgment in Collector of Central Excise, Kanpur v. Krishna Carbon Paper Co. 1988 (37) E.L.T. 480. The Supreme Court held that in order to ascertain the correct meaning of a fiscal entry reference to a dictionary is apt to be a somewhat delusive guide as it gives all the different shapes of meaning. Where no definition is provided in the statute itself, for ascertaining the correct meaning of a fiscal entry, the correct guide is the context and the trade meaning. The trade meaning is one which is prevalent in that particular trade where those goods are known or traded. If special type of goods is the subject matter of a fiscal entry, then that entry must be understood in the context of that particular trade, bearing in mind that particular word. Where, however, there is no evidence either way, then, the definition given and the meaning following from the particular statute at the particular time would be the decisive test. It was further held that where a word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless a contrary intention is clearly expresed by the Legislature.
12. Replying to the above contentions for the Department, Shri Raghavan Iyer, for the respondent, submitted that it was well settled that the commercial parlance test would not apply to the determination of the scope of a tariff entry if the statute contained a definition of the terms used in the entry. In this connection, he relied on the Supreme Court's judgment in Asian Paints India Ltd. v. Collector of Central Excise 1988 (35) E.L.T. 3 (SC) to the effect inter alia that where a word has not been defined, it must be construed in its popular sense. Reliance was placed also on the observations of the Patna High Court in I.T.C Ltd. & Anr. v. Collector of Central Excise & Ors. 1988 (35) E.L.T. 69 (Pat.) to the effect that the entries in the Schedule of a taxing statute, in the absence of a definition, must be understood as in common or commerical parlance. Yet another authority cited was the Tribunal's order in Collector of Central Excise, Bolpurs. Eastern Chemofarb Limited 1988 (34) E.L.T. 173 (Tribunal) (para 13) which reads as follows :-
"As the notification itself gives meaning of maleic resin what is to be seen is whether the respondents products come within the definition. If they do, any other consideration like technical or chemical or scientific understanding would not be relevant. If they do not, then even if they be under scientific, technical or chemical understanding maleic resin, this would not fit in the meaning of the definition or make any difference [Dunlop (India) Ltd. v. Union of India - AIR 1977 SC 597 = 1983 (13) E.L.T 1566 relied on].
13. Continuing, Shri Raghavan Iyer submitted that the subject goods were "mineral oil" as defined in the Tariff Item No. 7 read with Explanation I to Item 6. The test report also showed that it was a mineral oil. HNPs were a mixture of hydrocarbons and, though not immediately derived from petroleum, were ultimately derived from it. Even if it was not considered to fall within the first part of the definition of 'mineral oil' in Explanation I to Item 6, it was a similar product obtained by "synthesis or otherwise". The process in the present case was not synthesis but was covered by the term "otherwise". It was separation by fractionation. A few authorities were cited by Shri Raghavan Iyer in support of the contention that the word "includes" in Explanation I to Item No. 6 (which is relevant also for Item No. 7) would expand the scope of the entry beyond its normal scope if the word was not present (these will be referred to later). Ther Gujarat High Court judgment in the Mehta Brothers case {supra) was on Item No. 11A and not on Explanation I to Item No. 7.11A contained the words "derived from refining of crude petroleum...". These words were not to be found in Item No.7. As such the ratio of the judgment was not applicable to the facts of the present case.
14. On the scope of Item 7 CET, Shri Raghavan Iyer submitted that it covered not only kerosene, as commonly understood, conforming to the definition. The words in parenthesis after the word kerosene should be understood to signify that kerosene should be ordinarily but not inevitably used as an illuminant. This is because the item prescribed technical specifications in defining kerosene. The scope of the item would be more than what is dictated by the normal commercial parlance test. Full effect should be given to the definition without confining the meaning to the commercial parlance test. In this context, the Orissa High Court's judgment in State of Orissa v. Dina Bandhu Sahu STC (1969) Vol. 24,233 was cited.
15. Shri Raghavan Iyer then submitted that Item No. 7 CET was comprised of two sub-items. (1) A.T.F., (2) "Others" (in plural). The latter sub-item took within its scope not only kerosene as commonly understood but other mineral oils also, so long as they conformed to the definition contained in the entry. If this were not so, the two sub-items would have been (1) A.T.F. (2) Kerosene.
16. The Department itself had understood Item Nos. 6 to 11A of the Central Excise Tariff Schedule as including not only straight products of refining of petroleum but also those produced out of feed stock. Central Excise Notification No. 276/77, dated 21-12-1977 was cited in this connection. As laid down in the Supreme Court's judgment in the case of J.K. Steel v. Union of India 1978 (2) E.L.T (J 355) followed by the Tribunal in PIB Co. v. C.C.E., Calcutta 1988 (35) E.L.T. 130, notifications could be looked into for ascertaining the scope of entries in the excise tariff schedule.
17. If it was held that the subject goods would fall under Item No. 7, CET, Shri Raghavan Iyer submitted, the matter could go back to the authorities for examination of the case with reference to Notification No. 276/77. In this context, he submitted that there could not be repeated taxation with reference to the same tariff description. In this context, reliance was placed on para 13 of the Privy Council's judgment in Vacuum Oil Co. v. Secretary of State and para 29 of the Tribunal's order in Srinivasa Metal Industries v. C.C.E., Guntur 1987 (30) E.L.T. 578 (Tribunal). Shri Raghavan Iyer fairly pointed out that there were also certain decisions to the contrary.
18. In his rejoinder, Shri Sundar Rajan submitted that the Gujarat High Court judgment in the Mehta Bros, case was concerned with the word "derived" in Item No. HA. The observations of the Court would, therefore, equally apply to the same word occurring in Explanation I to Item No. 6 which was relevant for interpreting Item No. 7. Item No. 7 would cover only kerosene and A.T.F. and goods similar to them and conforming to the definition in the item. The present goods, though they conformed to the definition, did not answer to the description "Kerosene" as commonly understood. In this context, he relied on the observations of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra 1983 (13) E.L.T. 1582 (SC) (paras 5 & 6).
19. Shri Sundar Rajan further submitted that if the Explanation I to Item No. 6 were to cover all mineral oils, there was no need for the Explanation. The expression "that is to say" in Item No. 7 did not widen the scope of the item. The word "others" in Item No. 7 should be read as "other" and not others. Insofar as kerosene was concerned Item No.7 was restricted in its scope to mineral oils conforming to the definition but also ordirarily used as illuminant in oil burning lamps. Otherwise, the words in parenthesis occurring immediately after the word "Kerosene" would be redundant.
20. Continuing, Shri Sundar Rajan submitted that the question of double taxation did not arise in the present case since the goods fell under Item No. 68 and not 7. The processes applied to kerosene changed the character, name and use of the product and new goods emerged. In this connection, he referred to the Tribunal's observations in para 7 of its order in Bongaigaon Refinery & Petrochemicals Ltd. v. C.C.E., Shillong 1985 (22) E.L.T. 189.
21. We have carefully considered the submissions of both sides and perused the record. There is no dispute on the position that the subject goods - HNPs - were found on repeated tests to confrom to the prescriptions in Item No. 7, CET, as to smoke point and final boiling point. It is also an indisputed position that the goods are not used as illuminant in oil burning lamps. The question is whether, even so, the goods fall under Item No. 7, CET, as contended by the respondents. It they do not, the classification will be under Item No. 68, as contended by the appellant-Collector.
22. It is nobody's case that the subject goods are known as kerosene as the expression is ordinarily understood. But, is Item No. 7, CET, insofar as kerosene is concerned, limited to kerosene as ordinarily understood and ordinarily used as illuminant in oil burning lamps? Or, will it be taken in any mineral oil that conforms to the definition of the terms "Kerosene and A.T.F' in the entry though not used as illuminant in oil burning lamps? According to the definition, any (which will include every) mineral oil which has a smoke point of 18 mms. or more and has a final boiling point not exceeding 300°C falls within the definition of Kerosene and A.T.F. in the entry. There is, however, an internal clue to the scope of the entry. It is in the explicit exclusion of mineral colza oil and turpentine substitute which but for the exclusion would have fallen within the entry. It leads to the inference that, barring these two specifically excluded products, every mineral oil conforming to the definition of Kerosene and A.T.F. would be covered by Item No. 7. That this is the intention of the legislature is also borne out by the structure of the sub-items, the first one being A.T.F. and the second being "others". If only kerosene was intended to be covered, there was no need for the entry "others" in plural. It should have simply read "kerosene". In which event, a given product to fall under the entry "kerosene" must not only conform to the definitional specifications in the entry but also must be known and understood in commercial parlance as kerosene which is ordinarily used as illuminant. The use of the word "others" gives rise to the distinct inference that the word was meant to cover not only kerosene as commonly understood but also any other mineral oil, other than A.T.F. and, of course, mineral colza oil and turpentine substitute, conforming to the definitional specifications. How, then, to explain the presence of the words "which is ordinarily used as illuminant in oil burning lamps" in parenthesis after the word "kerosene" in the opening phrase in the entry? In this connection, it may be useful to refer to the definition of "Kerosene" in the two books referred to at the Bar.
Kerosene. "A refined petroleum distillate, normally boiling between 150° and 300° C and with a flash point above 24.4°C (78°F). It is used for illumination, heating and cooking, as motor fuel, and solvent for bitumen and household insecticides, etc. Some of its important properties are smoke point and viscosity."
(Glossary of Terms used in Petroleum Industry and Conversion Tables Published by Statistics Division Petroleum Information Service, New Delhi - an encyclopaedia of terminology in use by various branches of the petroleum industry).
(Page 145) Kerosene." A refined petroleum distillate; a fraction or cut between gasoline and gas oil with the temperature of distillation ranging between 105°F and 300°F depending upon specifications.
Kerosene (colour). Colour may be an indication of the amount of refinement and of the substance causing a smoky flame and wick deposits. Kerosene begins with water white, sometimes called superfine. The next is slightly off-white, and called prime white, followed with the standard white which is the darkest shade, frequently called export white because it conforms generally with the colour or exported kerosene."
(The Petroleum Dictionary by David F. Tver and Richard W. Berry published by Van Nostrand Reinhold Company). (Page 187-88) It may be seen from the above, and even otherwise it is a matter of common knowledge, that kerosene is used not only for illumination but also for heating and cooking, as solvent etc. Use for illumination is thus but one of its uses. It is again a matter of common knowledge that kerosene is used at least in urban households not so much for illumination as for heating and cooking. It would therefore be reasonable to presume that the words in parenthesis after 'Kerosene' are only meant to identify the product and not to define its scope and coverage. This view gains strength if we look at the definitions of mineral colza oil and turpentine substitute, the excluded products. They are:-
"Mineral turpentine (See "petroleum spirits") Petroleum spirits A refined petroleum distillate with vola-tility, flash point and other properties making it suitable as a thinner and solvent in paints, varnishes and similar products.
Mineral colza A mineral seal oil, sometimes mixed with lard oil. It is used in miners' lamps as a substitute for colza or rapeseed oil."
[Glossary of terms used in Petroleum Industry and Conversion Tables] "Petroleum spirits A water-white petroleum distillate having a minimum flash point of 100°F and an end point of under 410°F; used as a paint thinner and solvent; also called mineral spirits."
[The Petroleum Dictionary by David F. TVER and Richard W. Berry] It may be seen that the indicated uses of one of the products are other than as illuminants. Even so, it would have fallen under Item 7 CET but for it being specifically excluded. This necessarily implies that so long as an oil conforms to the definition of "mineral oil" in Explanation I to item 7 read with Explanation I to item 6, CET, and to the smoke point and final boiling point criteria laid down in item 7, it would fall for classification under item 7.
23. The Revenue has placed reliance on the judgment of the Gujarat High Court in the Mehta Bros. case (supra) - This was with reference to Item 11A as it stood prior to the 1982 Finance Act. The Item read :-
"All products derived from refining of crude petroleum or shale...."
These words are not to be found in Item 7 with which we are concerned in the present case. Therefore, the judgment does not, prima facie, have relevance to the present matter. However, as Shri Sundar Rajan has pointed out the expression "mineral oil" appearing in Item 7 has the meaning assigned to it in Explanation I to Item 6. This Explanation defines "mineral oil" as an oil consisting of a single liquid hydrocarbon or a liquid mixture of hydrocarbons (except for associated impurities) derived from petroleum, coal, shale, peat or any other bituminous substance. The Gujarat High Court, in interpreting Item 11A, held that a product to fall under that Item should be the direct result of refining of crude petroleum or shale. The question is whether this ratio of the judgment will apply in construing Item 7. As may be seen the words used in the two items are not similar. Unlike the words "derived from refining" thus specifying not only the source from which, and the process by which, the product should be derived, Item 7 only postulates that a product to fall under it should be derived from petroleum etc. It does not specify the process. It would not therefore be correct to say that the ratio of the Gujarat High Court's judgment applies to the interpretation of Item 7. So long as a given product's source can be traced back to petroleum it does not appear, in our opinion, that it should be an immediate derivative from petroleum. It could be derived from a derivative of petroleum. That this would be the correct way to interpret the entry, would be borne out if we have a closer look at the Explanation I to Item 6, which is also applicable to Item 7. The definition of mineral oil embraces not only an oil as defined earlier but also includes any similar oil produced by synthesis or otherwise. Evidently, an oil produced by synthesis need not be a derivative from petroleum. The similarity referred to in the Explanation would appear to be not to the source from which the synthetic product is derived but to its being a single liquid hydrocarbon or liquid mixture of hydrocarbons. In the present case, it is an undisputed position that the HNPs are derived from kerosene which is, in turn, derived from petroleum. In our view, therefore, whether one considers HNPs as a derivative of a derivative of petroleum or as a product resulting from the processing of Kerosene, it would appear to be squarely covered by Explanation I to Item 6.
24. Shri Sundar Rajan has argued that Heavy Normal Paraffins are not mineral oils. We are unable to accept this contention. The test reports show that the samples of the goods were found to be mineral oil. This apart, the definition of "mineral oil" in Explanation I to Item 6, CET, which is the definition also for Item 7, takes in not only oils which are direct derivatives of refining of petroleum but "includes any similar oil produced by synthesis or otherwise". Admittedly, the present goods are not products of synthesis. They are products of subjecting 'Kerosene' to a process of separation by fractionation. The term "otherwise" in the aforesaid Explanation is of a very wide import and would take in the products of processing of mineral oils which are direct derivatives of refining of petroleum. In this connection, it is also relevant to note that the Petroleum Dictionary (referred to earlier) defines "mineral oil" in the following terms :-
"Refers to a wide range of products derived from petroleum and within the viscosity range of products spoken of as oils. The term mineral implies that the oil is not derived from living animals or plants".
The definition of the term in "Glossary of terms used in petroleum industry" (referred to earlier) is also in the following terms :-
"Generally speaking, this term refers to a wide range of products derived from petroleum and within the viscosity range of products spoken of as oils".
It may be seen that a substance to be mineral oil must, therefore be of mineral origin (as opposed to animal or vegetable original), derived from petroleum and within the viscosity range of products spoken of as oils. When the test reports show that the samples of the goods were found to be mineral oil and the term has been defined in the manner set out above, we see no reason why the subject goods cannot be considered as mineral oil within the meaning of Explanation I to Item 6 and of Item 7, CET.
25. In the case State of Orissa v. Dina Bandhu Sahu (1969) 24 STC 233 before the Orissa High Court (cited by Shri Raghavan Iyer) the question was whether Jeera (cumin seed), Dhania (coriander seed), Panmohuri (ani seed), Methi (fenugreek), Postak (papavar rhoeas) and Pippali (long paper) are oil seeds within the meaning of Section 14 of the Central Sales Tax Act, 1956. Section 14(vi) defined oil seeds thus :-
"Oil seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in industry, or in the manufacture of varnishes, soaps and like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like".
The High Court differed from the view held by the Andhra Pradesh, Madhya Pradesh, Punjab and Madras High Courts to the effect that notwithstanding the said definition of oil seeds the word should be construed to mean what in common parlance is known as oil seeds, and held that if that was the intention of the Legislature, there was no necessity to elaborate the term further by explaining it to mean seeds yielding certain varieties of volatile and non-volatile oils used for certain specified purposes. The Explanation contained words and expressions which were not in popular usage. They were technical terms and had to be construed accordingly. In the view of the High Court, no question arose as to in what way the term oil seeds was understood in common parlance in view of the definition of the term. If a commodity satisfied the definition which the Legislature had given to the word, it was an oil seed within the meaning of that term. The principle laid down in the judgment is that where the Legislature uses an expression - may be an expression commonly used - and has proceeded to explain what it means, full effect has to be given to the definition and it is not permissible to rest content with what it popularly means. Resort can be had to the "popular understanding" theory only in the absence of any definition. The Court applied this principle to the facts of the case and negatived the contention of the State that the said seeds were not oil-seeds.
26. This judgment was carried in appeal to the Supreme Court by special leave. The Supreme Court dismissed the appeal filed by the State [(1976) 37 S.T.C. 583]. Though the Court did not see any reason to interfere with the order of the High Court in exercise of its powers under Article 136 of the Constitution, it observed that, having regard to the facts and the circumstances of the case, there was nothing wrong in the High Court's view that the said seeds were oil-seeds within the meaning of the definition of the term in the Central Sales Tax Act. (We may mention here that neither side placed the Supreme Court's judgment before us).
27. Applying the above principle to the facts of the present case, we see that the term "Kerosene", though a commonly understood term, has been defined by the Legislature and the definition contains the technical terms smoke point and final boiling point. If the intention of the Legislature was to restrict the scope of the term to "Kerosene" properly so called, and as popularly understood, there would appear to have been no need to define the term. This is all the more so because, as we have seen earlier, sub-item(2) read "Others" and not "Kerosene" which would have been the term employed if the intention was to restrict the total coverage of Item 7 to A.T.F. and Kerosene and the coverage of sub-item (2) to Kerosene. Since such is not the case, it appears to us that any mineral oil (excluding mineral colza oil and turpentine substitute), other than A.T.F., which has a smoke point of 18 mm or more and has final boiling point not exceeding 300°C falls within sub-item (2) though it may not be Kerosene as ordinarily understood and ordinarily used as an illuminant in oil burning lamps.
28. We shall now briefly refer to the other authorities cited before us by one or the other side.
29. In the case of Nav Bharat Enterprises (supra) relied upon by Shri Sundar Rajan, the question before the Tribunal was whether liquid paraffin was liable to duty under Item 8 or 11A or 68, CET. The Tribunal ruled out Item 11A in view of the Gujarat High Court's Judgment in the Mehta Brothers case and the Board's Tariff Advice which established that liquid paraffin was not derived from refining of crude petroleum. This decision has no application to the present case. We have already noted that the Gujarat High Court's Judgment in the Mehta Brothers case does not apply to the facts of the present case.
30. Shri Sundar Rajan also placed reliance on the Supreme Court's Judgment in the case of Krishna Carbon Paper Co. 1988 (37) E.L.T. 480 (SC). The ratio of this judgment has been set out in para 11 of this order. In our view, this judgment does not advance the case of the Revenue. This is because there is a definition of the term 'Kerosene' and 'A.T.F.' in the tariff entry. This definition, as we have seen, is based on scientific criteria. If the intention of the Legislature was to restrict the scope of the sub-item (2) to Kerosene as ordinarily understood, the sub-item should have, as we have observed, been "Kerosene" and not "Others". It is significant that the entry excludes, in terms, Mineral Colza Oil and Turpentine substitute which, as is evident from the entry itself, are not ordinarily understood as Kerosene but had apparently to be specifically excluded because they would have otherwise fallen within the entry having regard to their physical characteristics.
31. In the case of Asian Paints India Ltd. v. Collector of Central Excise 1988 (35) E.L.T. 3 (S.C) relied on by Shri Raghavan Iyer, the Supreme Court has observed that where a word has not been defined, it must be construed in its popular sense. This is the ratio of this judgment. It does not apply to the present case since the word 'Kerosene', though a popular term with a popular meaning, has been defined with reference to scientific criteria. To the same effect is the Patna High Court judgment in I.T.C. Ltd. and Another v. Collector of Central Excise & Ors. 1988 (35) E.L.T. 69.
32. On the meaning of the expression "including" there is a Supreme Court judgment in State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors. AIR 1960 SC 610. Shri Raghavan Iyer has referred to para 10 thereof. The Court has held that words used in an inclusive definition denote extension and cannot be treated as restricted in any sense (Stroud's "Judicial Dictionary" Volume 2, page 1415). In dealing with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation. The Patna High Court's judgment in Minerva Printing Works v. State of Bihar (1973) 32 STC 258 is also relevant. The entry construed was :-
"Paper including all kinds of paste board, mill board,...paper bags, cartons, ...blank registers, envelopes, labels...and flat files made out of paper."
The Court has held that the use of the word "including" connotes that the other articles mentioned thereafter may not be paper in the dictionary sense or in the common parlance sense, or some of them may be so. Whether they are so or not, all articles enumerated after the word must be deemed to be paper for the purpose of the notification.
33. In Hariprasad Shiv Sankar Sambhu & Another v.A.D. Divalekar & Ors. AIR 1957 SC 121, the Supreme Court has observed that it is true that an artificial definition may include a meaning different from or in excess of the ordinary acceptation of the word which is the subject of definition; but there must then be compelling words to show that such a meaning different from or in excess of the ordinary meaning is intended. Where, within the framework of the ordinary acceptation of the word, every single requirement of the definition clause is fulfilled, it would be wrong to take the definition as destroying the essential meaning of the word defined.
34. These authorities support our view that the subject goods, though not immediately derived from petroleum are covered by the inclusive definition in Explanation I to Item 6 and, therefore, Explanation I to Item 7 and that they fall under Item 7, though they are not Kerosene or ATF.
35. The Supreme Court judgment in State of Tamil Nadu v. Pyarelal Malhotra 1983 E.L.T. 1582 (SC) (para 5 and 6) was cited by Shri Sundar Rajan. The Supreme Court has observed that a definition is expected to the exhaustive. Its very terms may, however, show that it is not meant to be exhaustive. For example, a purported definition may say that the term sought to be defined "includes" what it defines, but, in that case, the definition itself is not complete. In the case before the Court, Entry No. (iv) in Section 14 of the Central Sales Tax Act spelt out all the various categories of goods covered by the entry. It read :
"Iron and Steel, that is to say, (i) to (xvi)."
The Supreme Court goes on to observe that the words "that is to say" are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word "includes" is generally employed. However, the Court further observes that the precise meaning of the words must vary with the context. In the context of the single point sales tax, the Court held that the purpose of enumeration would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it.
In the case before us, there is no enumeration, exhaustive or otherwise, after the words "that is to say". The words which follow the expression define the preceding expression, namely, Kerosene and A.T.F. Having defined Kerosene and A.T.F., the goods which are covered by the definition are grouped under two sub-items. The first sub-item is "A.T.F." with which we are not concerned. The second sub-item is, as we have noted, not "Kerosene" but "Others". This non-descript word must be given a meaning which should be derived from the context and the context is the definition which takes in any mineral oil other than the two excluded types and A.T.F., which conforms to the smoke point and final boiling point criteria.
36. Shri Raghavan Iyer has referred to the Karnataka High Court judgment in Ideal Jawa (India) Pvt. Ltd. v. Asst. Collector, Central Excise, Mysore & Ors. 1986 (24) E.L.T. 226 which, in turn, relies on the Supreme Court judgment in Indian Aluminium Cable v. Union of India 1985 (21) E.L.T. 3 (SC). The principle laid down is that the process of manufacture of a product and the end-use to which it is put cannot necessarily be determinative of the classification of the product under a fiscal schedule like the Central Excise Tariff. What is more important is whether the broad description of the article fits in with the expression used in the Tariff. The case before the Supreme Court referred to Item 27(a)(ii), CET, which read thus:-
"Aluminium -
(a)(ii) Wire bars, wire rods, and castings not otherwise specified."
The contention for the appellants was that properzi rods (made by the properzi process) were not aluminium wire rods since they were not the conventional wire aluminium rods falling under the said entry. It was the contention that properzi rods were the result of several processes and therefore they were distinct and different from aluminium rods mentioned in the entry. This contention was rejected by the Supreme Court. We do not see relevance of this judgment to the present case. It may be that HNPs do not quite fit in with the general description 'Kerosene' as commonly understood. But then, unlike Item 27(a)(ii), which was in issue before the Supreme Court, Item 7 with which we are concerned does not stop with specifying kerosene. It goes on to define the expression and the definition is of a wide amplitude taking within its sweep any mineral oil conforming to the criteria laid down therein. The present case is not analogous to the case before the Supreme Court.
37. Shri Sundar Rajan has cited the Tribunal's decision in the case of Bongaigaon Refinery & Petrochemicals Ltd. v. Collector of Central Excise, Shillong-1985 (22) E.L.T 189 (para 7). In this decision the Tribunal held, with reference to Rule 143A of the Central Excise Rules [which deals with special provisions with respect to goods processed or manufactured in premises declared to be refineries under Rule 140(2)] that it is an enabling provision whereby the owner of the goods may undertake certain operations on the goods in the refinery. There is no warrant to assume that the rule confers any exemption from duty on new excisable goods which may emerge as a result of the permitted operations. Shri Sundar Rajan's contention is that though the respondents' premises have been declared to be a refinery under Rule 140(2), the goods emerging during the course of processing, if they are excisable, are liable to be charged to duty. The rule as such does not confer any exemption. In the present case, the contention appears to be that even if the subject goods (HNPs) are held to fall under Item 7, CET, they would be liable to duty since they are the products of manufacture from Kerosene. We have already held that HNPs are different from kerosene and they are the result of a process of manufacture. If, therefore, they are liable to be charged to duty within the ambit of Item 7, CET, they will have to pay duty unless they are exempted by any notification issued under Rule 8(1). This aspect is dealt with elsewhere in this order.
38. Shri Iyer also referred to the Supreme Court judgment in Premier Tyres Ltd. 1987 (28) E.L.T. 58. The principle laid down in this judgment is that there is no general principle that there can be no double taxation in the levy of excise duty. Though the Court may lean in favour of a construction that will avoid double taxation. That case involved input duty relief. As worked out by the Department, the assessee would not have got the full credit of the entire duty paid on the input but only a certain percentage. It was contended therefore that charging duty on the final product on a value including the uncredited duty paid on the input would amount to double taxation. This contention was negatived by the Supreme Court. Here again, the relevance of this case is not quite clear. If we hold that HNPs are liable to duty under Item 7, they would not get charged to duty as Kerosene but as HNPs, a product different from Kerosene. The question of double taxation would arise only if Kerosene is charged to duty twice. Here, the classification of HNPs would be not as Kerosene but as "others" under sub-item (ii) of Item 7. Applying the principles laid down by the Supreme Court in Empire Industries Ltd. & Ors. v. Union of India & Ors. 1985 (20) E.L.T. 179 which were affirmed by a 5 - Member Bench of the Court in Ujgar Prints & Ors. v. Union of India 1988 (38) E.L.T. 535 (SC). We are of the opinion that the processes applied to Kerosene resulting in the manufacture of HNPs constitute "manufacture" for the purpose of levy of Central Excise duty and the sub-item (ii) of Item 7, CET, namely, "others" is wide enough to cover not only Kerosene but also HNPs which constitute a product different from Kerosene though derived from it. Thus, if HNPs are liable to taxation, it is not a case of double taxation. It would be a case of multi-stage taxation which is a common feature of the Central Excise Tariff Scheme.
39. Reference was also made by Shri Iyer to the Supreme Court judgment in Collector of Central Excise, Bombay v. Kiran Spinning Mills Ltd. 1988 (34) E.L.T. (para 4). The question in that case was whether cutting the long fibre (TOW) into short fibre (steple fibre) resulted in a new and different article. The Court held that there was only a change which, however did not bring into existence a new substance, though the short length fibre was known by a different name. However, since the tariff entry recognised a single description "man-made fibre" with no further sub-division based on the length of the fibre and even without any distinct enumeration of the various forms of fibre by cutting long fibres into short ones, it was held that the respondents did not bring into existence any new product so as to attract levy under the same tariff entry. We fail to see how this judgment is of any relevance to the present case. It is not the case, even of the respondents, that HNPs are Kerosene. They are the result of sophisticated processes applied to Kerosene and, though they conform to the smoke point and final boiling point criteria of Kerosene, have a different name, character and use and, as we have noted, sub-item (ii) of Item 7, CET, "others" is wide enough to cover a new product which would therefore attract levy.
40. The Delhi High Court in Metal Forge Pvt. Ltd. v. Union of India 1987 (32) E.L.T. 15 (para 17) has observed that whether transformation has taken place or not and whether a new or different article having distinct name, character or use has emerged or not is essentially a question of fact depending upon the facts and circumstances of each case. To become a new commercial article, the product must be goods of the taxable description and become that of a different taxable description. We have already held that HNPs are different from 'Kerosene' and constitute a new product. In our opinion, the non-descript term "Others" occurring in Item 7(ii) is not a specific description but a general description which will take in any mineral oil conforming to the smoke point and final boiling point criteria contained in the definition of the Item. If, therefore, a product falling under the said sub-item is processed and the resultant product is different from the first product, and also falls under the same sub-item, it will be liable to be charged to duty.
41. In Bombay Iron Foundry, Hyderabad v. Collector of Central Excise 1987 (32) E.L.T. 360 (A.P.), the Andhra Pradesh High Court held that the conversion (even by manufacture) of one type of iron in crude form into another would attract excise duty. The Item 26AA speaks of iron in crude form. When the duty is paid once on this commodity there is no occasion for levy at another stage. Acceptance of the contention of the Revenue would result in levy of excise duty twice on crude iron which is not contemplated by the scheme of the item. The High Court was construing Item 25, CET, which covered iron in any crude form (including pig iron and cast iron). This judgment, in our view, is not applicable to the facts of the present case. When the HNPs are charged to excise duty, it is not charged to duty as Kerosene for the simple reason and it is not Kerosene but a derivative of kerosene, resulting from a process of manufacture applied to Kerosene and sub-item (ii) of Item 7 is wide enough to cover both.
42. Shri Raghavan Iyer has also fairly drawn our attention to para 29 of the Tribunal's decision in Srinivasa Metal Industries, Rajamundry v. Collector of Central Excise, Guntur 1987 (30) E.L.T. 578. In this para, the Tribunal has extracted certain observations of the Supreme Court in the case of Tata Iron & Steel Co. Ltd. AIR 1976 SC 599. The observations runs thus:-
"There is nothing in Article 265 of the Constitution from which one can spin out the constitutional vice called double taxation....If on the same subject matter the Legislature chooses to levy tax twice over there is no inherent invalidity in the fiscal adventure save where other prohibitions exist."
As we have noted earlier, the present one is not an instance of double taxation but may be one multi-stage taxation, the observation referred to by Shri Iyer are not relevant to the present case.
43. Shri Iyer has referred to para 19 of the Bombay High Court's judgment in Garware Nylon Ltd. v. Union of India 1980 (16) E.L.T. 249 (Bombay). There is a good deal of discussion on Item 68 of the CET in this judgment. The observations which are relevant to the present matter are the following:-
The word 'other' cannot but be clarified. That word is suggestive of the connotation, being "not the same as one or more or some already mentioned or implied, separate in identity, distinct in kind". To give full meaning to that qualitative term, therefore, even an implication under a particular connotation of the word will have to be ruled out.
To be "other goods" it will have to be shown that it is not, either by express or implied mention, covered by any other item. These observations were cited in support of the contention that HNPs would fall under "others" in sub-item (ii) of Item 7, though HNPs were not the same thing as Kerosene. We agree with this contention for the reasons already elaborated. Since HNPs conform to the definition of Kerosene and sub-item (ii) of Item 7 does not confine itself to Kerosene, we are of the opinion that the appropriate classification is under that sub-item rather than the residuary entry Item 68, CET.
44. Shri Iyer referred to certain observations in the Supreme Court judgment in Nat Steel Equipment Pvt. Ltd. v. Collector of Central Excise 1988 (34) E.L.T. 8 (SC) to the effect that the Statute (CET) does not contemplate that goods classed under the words of "similar description" shall be in all respects the same. If it did these words would be unnecessary. These were intended to embrace goods similar to, but not identical with, those goods. These observations were with reference to Item 33-C of the CET which contained a definition of "domestic electrical appliances" as "electrical appliance" normally used in household and similar appliances used in hotels...". These observations are not of direct relevance to the present case where the word "similar" has not been used in Item 7 or its sub-item (ii). However, the observations do lend indirect support to our view that the goods falling for classification under sub-item (ii) need not be identical with kerosene but need be only similar to it and the similarity is, as we have noted, in conforming to the definition of Kerosene.
45. In the light of the foregoing discussion, our conclusions are :-
(a) the subject goods, namely, Heavy Normal Paraffins fell for classification during the material period under Item 7, CET ;
(b) the subject goods are the result of a process of manufacture applied to 'Kerosene' and are, therefore, excisable under sub-item (ii) of Item No. 7, CET;
(c) however, the question of applicability of Central Excise Notification No. 276/67-CE, dated 21-12-1967, as it stood at the material time, needs be examined by the Asst. Collector after due opportunity being given to the respondents.
46. Accordingly, the appeal is allowed and the matter remanded to the Asst. Collector who shall dispose of the claim of the respondents with reference to Notification No. 276/67-CE, dated 21-12-1967 after giving due opportunity to the respondents.