Custom, Excise & Service Tax Tribunal
M/S. Indian Oil Corporation Limited vs Commissioner Of Central Excise & S.T., ... on 19 June, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/26/2011 & E/10639/2013 (Arising out of OIO-8-21/DEMAND/COMMR-I/2010 dated 05.10.2010 and OIO-24-44/DEMAND/CEX/COMMR/BRC-I/2012 dated 31.12.2012, passed by Commissioner Central Excise, Service Tax & Customs, Vadodara) M/s. Indian Oil Corporation Limited : Appellant (s) VERSUS Commissioner of Central Excise & S.T., Vadodara : Respondent (s) Represented by : For Appellant (s) : Shri Willington Christian, Advocate For Respondent (s) : Shri Jeetesh Nagori, Authorised Representative For approval and signature : Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes CORAM : Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Hon'ble Member (Technical) Date of Hearing : 18.05.2015 Date of Decision : 19.06.2015 ORDER No. A/10818-10819/2015 dated 19.06.2015 Per : Mr. H.K. Thakur; These appeals have been filed by the appellant with respect to two Orders-in-Original passed by commissioner of Central Excise and Customs, Vadodara for different periods. As the issue involved in both these appeals is the same, therefore, the same are taken up for disposal under this common order. 2. This matter was heard at length on 09.4.2015 during which both sides made their arguments. Learned AR also placed reliance on the judgment of Apex Court in the case of IOCL vs. CCE - [2010 (259) ELT 172 (SC)]. Shri Willingdon Christian, (Advocate) appearing on behalf of the appellant sought time to file written submission which was allowed and order was reserved. 3. Shri Willingdon Christian (Advocate) during hearing on 09.4.2015 and through the written submissions, inter-alia, made the following arguments (i) That appellant is manufacturing Linear Alkyl Benzene Feed Stock (LABFS) and Low Aluminum Rolling Oil (LARO) (ii) That OIO dated 30.9.2010 passed by the Adjudicating authority does not dispute the classification of both the above products under CETH 2710.29 but the second OIO dated 31.12.2012 (Appeal No. E/10639/2013) both LABFS and LARO have been held to be classifiable under CETH 2710.99. (iii) That Revenue is of the opinion that both these products are not eligible to exemption under Notification No. 75/84-CE as the said exemption is applicable to such Kerosene which is ordinarily used as illuminant in oil burning lamps. Learned Advocate made the bench go through the relevant tariff entries and the exemption notification. (iv) That as per tariff description under CETH 2710.29 Kerosene represents a group of hydrocarbons which should have following characteristics. (a) It is a mineral oil (b) It should have smoke point of 18mm or more (c) It should have FBP not exceeding 3000C; and (d) It should not be mineral Colza Oil and turpentine substitute (v) That both LABFS and LARO manufactured by the appellant have these characteristics and will be classified under CETH 2710.29 and will be eligible to Notification No. 75/84-CE which exempts all categories of Kerosene and no specific Chapter heading or sub-heading is mentioned in the exemption notification and no intended use/condition is specified in Column -4 of Serial No 52 of the exemption Notification No. 75/84-CE. (vi) That as per case Law CCE Vs IOCL [2003 (157) ELT 41 (Tri.)] in their own case, Larger Bench has held that all kinds of mineral oils, except those specifically excluded from 2710.29, are to be classified under 2710.29. That similar view was taken by 5 member Larger Bench in the case of CCE vs. Reliance Industries Limited [2000 (19) ELT 29 (Tri. LB)]. (VII) That definition of Kerosene given in CETH 2710.29 will be applicable to the word Kerosene used in Serial No. 52 of Notification No. 75/84-CE. (viii) That as per the ratio laid down by Apex Court in the case of GSFC vs. CCE [1997 (91) ELT 3(S.C)] the word Kerosene should be applicable to all the mineral oils which satisfy the yard sticks mentioned in CETH 2710.29. (ix) That interpretation made by Apex Court in the case of LOCL vs. CCE [2010 (259) ELT 172 (SC)], with respect to Notification No. 5/98-CE and 5/99-CE, cannot be held to be applicable to interpretation of a different exemption Notification No. 75/84-CE. (x) That on facts also the present case is different as no condition/end use has been specified in Notification No. 75/84-CE where a specific definition of Kerosene was given in Notification No. 5/98-Central Excise in the case before Apex Court in IOCL vs. CCE (supra). Learned Advocate made the bench go through Para- 17 of this judgment to distinguish the wordings used in Notification No. 5/98-CE and 75/84-CE. (xi) That an exemption has to be interpreted on its own wordings and no words used in the notification can be added as per law laid down in the case CCE vs. Sunder Steels Limited [AIR 2005 SC 1307 =2005 (181) ELT 154 (SC)]. 4. Shri K. Sivakumar (AR) appearing for the Revenue argued that LABFS and LARO manufactured by the appellant are not cleared as Kerosene in the Public Distribution System (PDS) and can not be classified as Kerosene under CETH 2710.29. Learned AR brought to the notice of the Bench case law of CCE Vs IOCL [2003 (157) ELT 41 (Tri.)]. It was his case that the judgment in this case was delivered immediately after the introduction of new tariff with effect from 28.02.1986, while in the present proceedings the period pertains to June 1991 to February 1994. That since dispute pertains to a different period, therefore Revenue can seek a different classification in view of the law laid down by the Apex Court in the case of BSNL vs. UOI [2006 (2) STR 161 (SC)]. Learned AR made the Bench go through the tariff description under heading No. 2710 with respect to Kerosene prevailing during the period involved in these demands:- Heading No. Sub-heading No. Description of Goods Rate of duty (1) (2) (3) (4) 27.10 2710.19 -Other -Kerosene (which is ordinarily used as 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 smoke point of eighteen millimetres or more and has a final boiling point not exceeding 3000C 2710.21 --Aviation Turbine Fuel Rs. 1000 per KL at 150C. 2710.29 --Other Rs. 500 per KL at 150C. 2710.99 --Other 20% plus Rs. 250 per tonne. 4.1 Learned AR emphasized that for the earlier show cause notice, Revenue is seeking classification under 261029 of the CETH and for the later period show cause notice, the classification is claimed under CETH 271099. It was strongly argued by the learned AR that both LABFS and LARO are not cleared by the appellant as Kerosene and the same are also not ordinarily used for illuminate in oil burning lamps. 4.2 So far as admissibility of exemption under Notification 75/84-CE is concerned, learned AR argued that only those Hydrocarbon/ mineral oils which are cleared as Kerosene under PDS will be eligible for exemption under Notification No. 75/84-CE as held by Hon'ble Supreme Court in the case of IOCL vs. CCE, Vadodara [2010 (259) ELT 172 (SC)]. It was strongly emphasized by the learned AR that even if the interpretation given by Hon'ble Supreme Court was with respect to Notification No. 05/98-CE dated 02.6.1998, still the ratio laid by the Apex Court will be applicable to the facts of the present proceedings. Learned AR made the Bench go through the judgment passed by the Hon'ble Supreme Court and argued that in Notification No. Notification No. 05/98-CE and No. 05/99-CE, there was no condition in the exemption notification that Kerosene should be distributed only through PDS. That in the case before Hon'ble Supreme Court there was no dispute that the same Kerosene was supplied for industrial use and such use was only to the extent of 1% of the total Kerosene manufactured by IOCL. In these factual matrix also it was held by the Hon'ble Apex Court that Kerosene falling under 2710.29 when cleared for inudstrial use, the same will not be entitled to exemption under Notification No. 5/98-CE. 4.3 Learned AR also argued that an exemption notification is to be read with words used in the notification and definition of Kerosene given in CETH can not be pressed into service while interpreting the exemption notification. It was also his case that while allowing exemption, there should be strict interpretation. In support of his arguments, learned AR relied upon the following case laws:- (a) CCE vs. IPCL 1990 (46) ELT 173 (Tri.) (b) Indian Airlines Limited vs. CC, Cochin 2002 (150) ELT 496 (Tri. Del.) (c) Indian Airlines Limited vs. CC, Cochin/ Bangalore 2002 (180) ELT 502 (Tri. Bang.) (d) IOCL vs. CCE, Vadodara 2010 (259) ELT 172 (SC) (e) Orient Traders vs. Commercial Tax Officer, Tirupati 2009 (237) ELT 447 (SC). (f) CCE, Trichy vs. Rukmani Pakkwell Traders 2004 (165) ELT 481 (SC) (g) Plasmac Machine Mfg. Co. Pvt. Limited vs. CCE 1991 (51) ELT 161 (SC) (h) Novapan India Limited vs. CCE & Cus. Hyderabad 1994 (73) ELT 769 (SC) (i) CCE, New Delhi vs. Hari Chand Shri Gopal 2010 (260) ELT 3 (SC) (j) CCE, Kanpur vs. Flock India Pvt. Limited 2000 (120) ELT 285 (SC). 5. Heard both sides and perused the case records. The issue involved in these appeals is as to what could be the classification of LABFS and LARO manufactured by IOCL. Whether the same is classifiable under CETH 2710.29 as claimed by the appellants or the same should be classified elsewhere as not Kerosene. The second issue involved is whether the benefit of Notification No. 75/84-CE will be admissible to the products LABFS and LARO manufactured by the appellant. 5.1 So far as the issue of classification of the products manufactured appellant has placed reliance on the judgment of CCE, Bombay vs. Reliance Industries Limited [2000 (119) ELT 26 (Tri. LB)] and CCE vs. IOCL [2003 (157) ELT 41 (Tri.)]. It is the case of the appellant that it has been held by the five Members Bench in the case of CCE, Bombay vs. Reliance Industries Limited Heavy Normal Paraffin (HNP) is classifiable under CETH 2710.29 and not under CETH 2710.99 when parameters specified in CETH 271029 are fulfilled. It is observed that so far as classification of the products manufactured by the appellant is concerned the issue is no more res-integra in view of the case law of CCE vs. IPCL [1990 (46) ELT 173 (Tri.)]:- 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 3000C falls within sub-item (2) though it may not be Kerosene as ordinarily understood and ordinarily used as an illuminant in oil burning lamps. In view of the above observations made by the Larger Bench of the Tribunal in the case of CCE vs. IPCL (supra), the word used in 2710.29 is Others and not Kerosene. Even five Member Bench in the case of CCE, Bombay vs. Reliance Industries Limited (supra) has held that Heavy Normal Paraffin (HNP), even if is not known as Kerosene will be classified under 271029. From the description of Kerosene given in tariff heading 2710, product like mineral colza and turpentine substitute are not held to be classifiable under 271029 as they are classified under 271091 and 271092 etc. The description given in CETH 2710 is interpreted by the judicial pronouncements that mineral oils meeting with the parameters specified, will be classified under 2710.29 even if they are not known as Kerosene in common parlance. In view of above it is held that products LABFS and LARO will be classifiable under 2710.29 as claimed by the appellant. 5.2 So far as admissibility of exemption under Notification No. 75/84-CE to the appellant is concerned, appellant is of the view that only word Kerosene is mentioned in the exemption notification without any condition or end use prescribed. It is the case of the appellant that word Kerosene used in the exemption notification will cover all mineral oils mentioned in CETH 2710 if they satisfy parameters specified therein, except mineral colza and turpentine substitutes. Revenue, on the other hand is of the view that various case laws relied upon by the appellants are with respect of classification of different Hydrocarbons under CETH 2710. It is the case of the Revenue that parameters given in CETH 2710 for Kerosene can not be put into service for interpreting the word Kerosene used in the exemption notification. Revenue has relied upon the judgment of Hon'ble Supreme Court in the case of IOCL vs. CCE, Vadodara (supra). Appellant has strongly argued that Apex Courts judgment is with respect to Notification No. 5/98-CE dated 02.6.1998 and the same can not be used for interpreting a different notification i.e. Notification No. 75/84-CE. We are not inclined to accept the arguments made by the appellant because the word Kerosene has been interpreted by the Apex Court in this judgment and certain observations have been made. Learned AR also relied upon the judgment in the case of Orient Traders vs. Commercial Tax Officer, Tirupati [2009 (237) ELT 447 (SC)]. Para 18 of this case law is relevant where the Apex Court has made following observations:- 18.?It is well established principle that the exemption notifications are to be construed strictly, reference may be made to State of Jharkhand & Others vs. Tata Cummins Limited and another, 2006 (4) SCC 57 and Kartar Rolling Mills v. CCE, New Delhi - 2006 (4) SCC 772. If the intention of the legislature is clear and unambiguous, then it is not open to the courts to add words in the exemption notification to extend the benefit to other items which do not find mention in the notification. In the present case, there is no ambiguity in the expression used in the G.O. The intention of the State Government is clear that only gold bullion and specie is entitled to the concessional rate of tax. Under the circumstances, the same cannot be extended to the silver as claimed by the assessee. 5.3 From the above case laws, it is observed that Courts are not permitted to add any words in the language of exemption notification. Further, Hon'ble Supreme Court in the case of Novopan India Limited vs. CCE & Cus. Hyderabad 1994 (73) ELT 769 (SC) has held as follows in Para 18:- 18. We are, however, of the opinion that, on? principle, the decision of this Court in Mangalore Chemicals - and in Union of India vs. Wood Papers referred to therein - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas vs. H.H. Dave [1978 (2) E.L.T. (J 350) (SC) = 1969 (2) S.C.R. 253) that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption. 5.4 It is clearly laid down in the above case law by the Apex Court that normally it is practice that in case of any doubt or ambiguity, taxing provision is normally construed in favour of the assessee but when it is case of granting some exemption then there should be strict interpretation and in case of any doubt or ambiguity the benefit must go to the State. The word Kerosene used in the exemption Notification 75/84-CE therefore, cannot be understood by taking recourse to parameters given to Kerosene, under CETH 2710. The word Kerosene has to be understood with respect to interpretation/ understanding attributed by those who deal in Kerosene. This is the ratio laid by the Hon'ble Supreme Court in the case of IOCL vs. CCE, Vadodara [2010 (259) ELT 172 (SC)], and is relevant. In this case, Apex Court has interpreted the Serial No. 27 of exemption notification 5/98-CE dated 02.6.1998, where description of goods was given as follows:- Sr. No. Chapter or heading No. or sub-heading No. Description of goods Rate Conditions (1) (2) (3) (4) (5) 27 27 Kerosene, that is to say, any hydro-carbon oil (excluding mineral colza oil and white spirit) which has a smoke point of 18 mm or more (determined in the apparatus known as smoke point lamp in the manner included in the Bureau of Indian Standards Specification ISI : 1448 (p. 31)-1968 as in force for the time being) and is ordinarily used as an illuminant in oil burning lamps 10% -
5.5 After recording the facts of the case and rival submissions made by both sides, the Hon'ble Supreme Court made the following observations in Paras 13 to 17:-
13.? It is manifest that the object of providing concessional rate of duty on kerosene used for illuminating burning oil lamps was to provide some relief to those economically backward sections of society who use Kerosene for illumination and other domestic purposes, and therefore, the benefit of concessional rate of duty was available only on the kerosene cleared by the assessee to the PDS.
14.? In relation to the import of the expression ordinarily used in the said notifications, it would be instructive to refer to the observations made by this Court in Union of India & Anr. vs. Hemraj Singh Chauhan & Ors. - (2010) 4 SCC 290, wherein it was held that :-
The word ordinarily must be given its ordinary meaning. While construing the word the Court must not be oblivious of the context in which it has been used. (See also : Union of India & Ors. vs. Vipinchandra Hiralal Shah - (1996) 6 SCC 721).
15.? Similarly, in State of A.P. vs. V. Sarma Rao & Ors. - (2007) 2 SCC 159, this Court held that :-
The expression ordinarily may mean normally, as has been held by this Court in Kailash Chandra v. Union of India - (1962) 1 S.C.R. 374 and Krishan Gopal vs. Prakashchandra - (1974) 1 SCC 128 but, the said expression must be understood in the context in which it has been used.
16.? Therefore, in light of the object and context of the notifications, it becomes abundantly clear that the word ordinarily implies that the kerosene must be ordinarily used for illumination purposes, and it would be immaterial if the Kerosene is also used for other domestic purposes.
17.?From a bare perusal of the two notifications it is plain that the benefit of concessional rate of duty extends only to that variety of kerosene that : (i) has a smoke point of 18mm or more, and (ii) is ordinarily used as an illuminant in oil burning lamps. It is manifest that these two conditions are conjunctive, and therefore, the twin conditions need to be satisfied in order to avail of the concessional rate of duty. In the instant case, the fact that the assessee cleared kerosene manufactured by it to industrial consumers would entail that the assessee cannot claim the benefit of Notifications No. 5/98-C.E. and 5/99-C.E. 6 It is relevant to mention that in the case before the Hon'ble Supreme Court also the product involved was Kerosene and only1% of the Kerosene manufactured by the appellant IOCL was cleared to industrial users, though the product cleared to these users was also Kerosene. However, it was held by the Apex Court that for the purpose of exemption under Notification 5/98-CE, the same product will not be considered as Kerosene as the same is not cleared by IOCL through the PDS. In the present case before us, it is not disputed that the product LABFS and LARO are not cleared as Kerosene at all and only used for the purpose other than for illuminant oil for burning lamps or other domestic use. The ratio of the law laid down by the Hon'ble Supreme Court in the case of IOCL vs. CCE, Vadodara (supra), word Kerosene used in exemption notification No. 75/84-CE will have to be understood only with that category of Kerosene which is distributed through PDS as Kerosene. For the purpose of classification of mineral oils other than Kerosene cleared through PDS, these products will also be classified under CETH 2710.29, as held by various judicial pronouncements, but for the purpose of benefit under exemption notification 75/84-CE only those categories of Kerosene will be eligible which are distributed though PDS. Therefore, on admissibility of exemption Notification 75/84-CE, the case is to be decided in favour of the Revenue and against the appellant.
7. Appeal filed by the appellant are rejected so far as admissibility of Notification No. 75/84-CE is concerned, but stands allowed to the extent indicated in Para 5.1 above.
(Pronounced in the open Court on 19.6.2015) (P.K. Das) (H.K. Thakur) Member (Judicial) Member (Technical) ..KL 3