Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise, ... vs M/S Balmer Lawrie & Co. Ltd. on 23 August, 2001
Equivalent citations: 2001(78)ECC565, 2000ECR338(TRI.-CHENNAI)
ORDER
Shri S.L. Peeran
1. These four Revenue appeals arise from the order in Appeal No.40/95 (M) (D) dated 30.11.95 passed by the Commissioner (Appeals) confirming the order of the Assistant Commissioner holding the assessee, a PSU, for grant of exemption under Notification No. 13/92 CE dated 1.3.92 holding that the goods are lubricating preparations. While holding so, the learned Commissioner (Appeals) relied upon the judgment of the Tribunal in the case of CCE vs.Century Enka Limited reported in 1943 (71) ELT 782 (Tribunal), that of the Hon'ble Supreme Court in the case of CCE vs. Bombay vs. Parle Exports Ltd reported in 1988 (34) ELT 741 (SC) and also in the case of Bombay Chemicals Pvt Ltd vs., CCE Bombay reported in 1995 (77) ELT 3 (SC). The CEGAT in the case of CC. Vs. Century Enka Ltd. (supra) had taken a view that "spin finished oil" which is a preparation of a kind used for oil and grease treatment of textile machine is a lubricating preparation and entitled to exemption. The Supreme Court in the case of Bombay Chemicals Pvt Ltd. Vs. CCE reported in 1995 (77) ELT (3) has held that "when two views in a Notification are possible it should be construed in favour of the subject as the Notification is a fiscal enactment....." The Revenue is not disputing the classification of the product under chapter heading 34.03 which classifies the lubricating preparation, and also the test result obtained from the Chemical Examiner. The learned Commissioner (Appeals) examined the material on record and has held as under in para 3.2 to 4.3 as follows:
3.2. During hearing, it has been claimed that in the context of leather, softening of the fibres of leather is deemed to be lubricating leather in accordance with trade under-standing as well as under HSN nomenclature. They also filed copies of certain case laws and a letter written by Central Leather Research Institute to the appellants which indicates that fat liquors are employed in leather processing for the purpose of lubrication of leather matrix and adding soft feel and handled to leathers. These are substances which are chemically active and serve to reduce inter fibre cohesion. Fat liquors have functional groups which interact with reactive centres in the leather and serve to alter the surface charges of leather matrices. These need to be classified strictly as lubricating preparations employed for softening of leathersfibres and matrices. They also filed copies of certain passages from technical books to claim support in (sic) this regard.
4.1. I have carefully gone through the records of the case. I find that some confusion has arisen on account of the tariff entry under chapter heading 34.03 distinguishing lubricating preparations (including cutting oil preparations, bold or nut release preparations, and mould release preparations based on lubricants) on the one hand, and preparations of a kind used in oil or grease treatment of textile materials, leather, furekins or other materials. Since the exemption notifications is worded so as cover only lubricating preparations, a controversy has arisen as to whether preparations of a kind used for oil or grease treatment of leather would come within the scope of lubricating preparations even if they happen to lubricate leather. According to the Chemistry of Fatliquoring Emulsions written by Clinton E.Rotzsch, in the Introduction, it is mentioned as follows:
"Proper lubrication of leather is essential for its most effective utilisation. The mode of lubrication will depend on the type of leather under consideration and the ultimate purpose for which it is intended. Most lubrication procedures employ a water medium in which oil is carried into the leather by means of an emulsion". Further it is stated that, "Since leather must be lubricated by removing oil from water, the following broad definition will be most meaningful to the tanners an emulsion is a dispersion of the liquid in another, both liquids under normal circumstances being quite immiscible."
In another chapter "Fatliquor practice and theory" written by Malcalm H.Battles, it is stated that, "Oil and greases incorporated into leather are generally classified as leather lubricants. To day there is a general agreement that the main function of the incorporated oil is to influence the degree of fiber cohesion which takes place during drying."
"For many centuries, the leather lubricants were incorporated into the leather by simply smearing wet leather with mixtures of greases and oils. The use of oil in water emulsions, now called fatliquors, originated during the twentieth century."
4.2. All the above technical literature would clearly show that fatliquors are used as lubricating preparations to process leather before it is dried so as to reduce fiber cohesion. Therefore even if they come under the description 'preparations of a kind used in leather' since they are used to lubricate leather, they are lubricating preparations. In this connection, the observations of the Supreme Court in the case of Bombay Chemical Pvt. Limited Vs. Collector of Central Excise, Bombay reported in 1995 (77) ELT 3 (SC) is relevant:
"One of the settled principles of construction of an exemption notification is that it should be construed strictly, but once a goods is found to satisfy the last by which it falls in the exemption notification, it cannot be excluded from by construing such notification narrowly. Serial No.18 of exemption Notification No.55/75 mentions broad categories of goods which are entitled to exemption. Once a goods it found to fall even narrowly in any of these categories, there appears no justification to exclude it. The test of strict construction of exemption notification applies at the entry, that is whether a particular goods is capable of falling in one or the other category but once it falls then the exemption has to be construed broadly and widaly". It is further stated in the above judgment that "The reasoning of the Tribunal that if an expression is capable of a broader and a narrower meaning, then it is the latter which could be preferred does not appear to be correct. When entries are descriptive of category of goods they have certain characteristics. Therefore, when a question arises whether a particular goods is covered in any category or not, it has to be examined if it satisfies the characteristic which go to make it a goods of that category. And whether in trade circle it is under-stood as such and it if is a goods of technical nature then whether technically it falls in the one or the other category. Once it is found that a particular goods satisfies the test then issue which arises from consideration is whether it should be construed broadly or narrowly".
4.3. It may be stated that in accordance with the above judgment, trade as well as technical understanding is that fat liquors are construed as lubricating preparations for use one leather. Therefore they come under the broad category of lubricating preparations and are entitled to the benefit of exemption under Notification 13/92. The CEGAT decision relied upon by the Assistant Collector also supports this view. In view of the above observations, the Assistant Collector's order cannot be hold as either improper or illegal and therefore the application to review the above order is rejected.
2. The Revenue is aggrieved with the order of the learned Commissioner (Appeals) and contends that chapter heading 34.03 of HSN makes a clear distinction between the "lubricating preparation" and "preparation of a kind". Thus the goods covered in this chapter heading clearly falls only in either of these categories and not both and the lubricating preparations mentioned in heading 3403 is clearly for metallic applications as explained in HSN, which has persuasive value and only these are eligible f or exemption under the said Notification and therefore, the HSN noted should be adopted. They further contend that the learned Commissioner (Appeals) has failed a appreciate the implication of the Chemical Examiner's categorical report that the impugned 'fat liquor' is a preparation of a kind used in leather industry and therefore, the item cannot be treated as lubricating preparation as there is difference and distinction between the two and the both authorities below have erred in coming to the conclusion that the item in question is lubricating preparation and hence the Revenue appeals are required to be allowed.
3. We have heard Shri Sundararajan learned DR for the Revenue and Shri J.Sankararaman, learned Counsel for the PSU-respondents.
4. The learned DR forcefully and effectively argued and contended that there is difference between lubricating preparation and preparation of a kind used in Industry. He contends that what is used in metallic applications and leather makes clear difference and distinction and the item cannot be considered to be falling within the ambit of the Notification in question for grant of the benefit of "lubricating preparation of a kind used in leather industry". Therefore, the judgment of the Tribunal and the Hon'ble Supreme court are distinguishable and he prays for allowing the Revenue appeals.
5. The learned Counsel for the respondent gave a detailed written synopsis which is taken on record. He contends that the fat liquor i.e. the lubricating preparation had answered to the description falling under heading 34.03 and it is lubricating preparation and the item is not obtained from petrol or oil or bituminous minerals and it is eligible for the benefit of Notification in question. It is his contention that the classification is not disputed by the Revenue and so also with regard to the fact that it does not contain any petroleum oils or oils obtained from bituminous minerals is proved beyond doubt by the report given by the Chief Chemist Central Revenue Central Laboratory, New Delhi vide letter CX 14 EX 193 dated 25.2.94. He submits that the impugned product is lubricating preparation only. It is his contention that HSN explanatory note does not have applicability for interpretating a Notification. The only plea raised is that it is mentioned in the HSN which is not the criteria for granting the benefit of the exemption Notification. It is further contended that the trade, technical opinion and the technical literature support their plea that the item in question is lubricating preparation and its classification is under heading 3403 which is not disputed. It is his further submission that once it is found that it is a lubricating preparation the question whether they are preparation of a kind used for machine for greasing in textile machine does not arise for consideration as held by the Tribunal in the case of CC vs. Century Enka Ltd. Reported in 1994 (71) ELT 782. He therefore, contends that there is no infirmity in the impugned order and the Revenue appeals are required to be rejected.
6. We have carefully considered the submissions and the records of the case. We are satisfied that there is no infirmity in the impugned order. The learned Commissioner (Appeals) and the Assistant Commissioner after detailed examination have categorically held that the item in question satisfies the terms of he Notification inasmuch as the item in question is a "lubricating preparation". The grounds raised by the Revenue is that in terms of HSN for classification of a product under heading 3403 there is difference and distinction between lubricating preparation and the one used in for machine purpose of a preparation of a kind used in industry. We are not these appeals concerned with the question of classification of the item falling under chapter 34 or its exclusion. For the purpose of grant of exemption of a Notification, the plea with regard to applicability of HSN explanatory note cannot be considered. The reason being that the terms of a Notification is comprehensive and there is no scope for any intentment or drawing a different inference than the words used in the Notification. The Notification has to be strictly construed. The words there is are that it exempts lubricating preparations, not containing petroleum, oils or of oils obtained from bituminous minerals and falling under heading 34.03 of the Schedule to the Central Excise Tariff Act, 1985, which heading is also not disputed by the Revenue. Further the technical literature clearly supports the view expressed by the lower authorities. Further the point which is not disputed is about the item being a lubricating preparation in the leather industry and the Revenue wants to exclude it as they want to contend that the item to be categorized "as a preparation of a kind used in Industry". As stated above, we are not dealing with the classification issue but considering as to whether the item to be held to be "lubricating preparation" and whether it contains any petroleum oils obtained from bituminous minerals falling under hading 34.03. There is no dispute about the item falling under heading 3403 and about it not containing petroleum oils obtained from bituminous minerals. Thus the benefit of the exemption Notification cannot be denied. We notice that the similar issue has been considered by the Tribunal in the case of CC vs. Century Enka Ltd (supra) and have held that Spin Finish Oil was found to be lubricating preparation and the question whether they are preparation of kind used for oil or greasing in textile machines need not be answered. The Commissioner (Appeals) had relied upon the judgment rendered by the Hon'ble Supreme Court in the case of Bombay Chemicals vs. CCE (supra) which squarely applies to the facts of the present case and we see no reason to take a different view. We find no merit in the Revenue appeal and the appeals are dismissed.
(Dictated and pronounced in open Court)