Custom, Excise & Service Tax Tribunal
M/S F.S. Chemicals Pvt. Ltd vs C.C.E. Lucknow on 4 February, 2015
CUSTOMS, EXCISE & SERVICE TAX, APPELLATE
TRIBUNAL, NEW DELHI, PRINCIPAL BENCH,
COURT NO. III
BENCH-DB
E/Stay/3314-3323/2009
Appeal No. E/3233-3242/2009
[Arising out of Order-In-Original No. 20-29/Commissioner/LKO/CX/2009 dated: 31.08.2009, issued in C.No. V(30) Adj./LKO/23/2008/9762 dated 10.09.2009, passed by Commissioner of Central Excise, Lucknow]
E/Cross/2841/2012
Appeal No. E/1262/2012
[Arising out of Order-In-Original No. 67-68/CE/LKO/2012 dated: 16.02.2012 passed by Commissioner of Central Excise, Lucknow]
Appeal No. E/3106/2012
[Arising out of Order-In-Original No. 326-CE/LKO/2012 dated: 23.07.2012 passed by Commissioner Central Excise, Delhi-II]
For approval and signature:
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
Hon'ble Mr. Rakesh Kumar, Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s F.S. Chemicals Pvt. Ltd. Appellants
Vs.
C.C.E. Lucknow Respondent
AND C.C.E. Lucknow Appellants Vs. M/s F.S. Chemicals Pvt. Ltd. ...Respondent Appearance:
Mr. Bipin Garg & Mr. G.S. Bisht, Advocates for the Appellants Mr. Yashpal Sharma, AR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing /decision:04.02.2015 Final ORDER NO. 50361-50372 /2015 Per Rakesh Kumar (for the Bench):
The facts giving rise to these appeals are in brief as under:
1.1 M/s FS Chemicals (P) Ltd, A-5/2 UPSIDC, Industrial Area, Malwan Distt. Fatehpur (hereinafter referred to as the Assessee) manufacture a product called organic composite solvent and according to them the same is classifiable under heading 3814 of the Central Excise Tariff. The Assessee, accordingly, cleared the goods on payment of duty applicable for the product of heading 3814. The Department, however, was of the view that the goods are other motor spirit classifiable under sub-heading 27101119 of the Central Excise Tariff and accordingly, the same in addition to the basic excise duty of 16%, would also be liable for special excise duty at the rate of 16% ad valorem. It is on this basis that the Commissioner by a common order in original dated 31.08.2009 in respect of ten Show Cause Notices for the period from March 2005 to May 2008 confirmed total duty demand of Rs. 3,87,60,509/- against the Assessee along with interest thereon under section 11AB and imposed penalty of equal amount on them under section 11AC. The Commissioner in this order, relying upon the Chemical Examiners Report stating that the Flash point of the product is below 25?C and its boiling point range is 35?C to 110?C and specific gravity at 22?C is 0.7101, held that the product, in question, is Other Motor Spirit covered by sub-heading 27101119 of the Central Excise Tariff. Against this order of the Commissioner, the appeal no. E/3233 to 3242/2009 have been filed along with stay applications.
1.2 For the period from October 2008 to January 2010, the Jurisdictional Additional Commissioner by two separate orders confirmed the total duty demands of Rs. 1,17,54,675/- and 93,08,987/- against the assessee by classifying the same product as Other Motor Spirits under sub heading 27101119 of the tariff, along with interest and beside this, he also imposed penalties of the same amount under section 11AC. However, on appeals being filed to Commissioner (Appeals), against these orders, the Commissioner (Appeals) by two separate orders, set aside the Additional Commissioners order and allowed the appeals. Against these orders of the Commissioner (Appeals), the appeal No. E/1262 & 3106/2012 have been filed by the Revenue. In respect of the Appeal No. E/1262/2012, the Assessee have filed a cross objection which is registered as E/CO/2841/2012.
2. Heard both the sides.
3. Shri Bipin Garg, Advocate, the Ld. Counsel representing the Assessee, pleaded that the point of dispute in this case is classification of organic composite solvent, that according to assesse, this product is classifiable as organic solvents and thinners, not elsewhere specified under heading 3814 of the tariff according to the Department, this product is classifiable as Other Motor Spirits under sub heading 27101119 and in addition to the basic excise duty would also attract special excise duty, at the rate of 16% ad valorem, that for being classified as Other Motor spirit under heading 27101119, the product must confirm to the definition of motor spirit, as given in supplementary notes to chapter 27 according to which the motor spirit means any hydrocarbon oil (excluding crude oil) which has its flash point below 25?C and which either by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines, that for being classified as motor spirit, the product having flash point below 25?C is not enough and the other condition that the product either by itself or in admixture with any other substance, must be suitable for use as fuel in spark ignition engines, must also be satisfied, that the chemical examiners report relied upon by the Commissioner simply mentions its flash point as below 25?C but the report is totally silent about the other condition whether the product either by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines, that in view of this, the product, in question, cannot be classified as special boiling point spirits of sub heading 27101119, that it is in view of these facts, that the Tribunal in its earlier judgment in the case of Kuchchal Chemicals Ltd. vs CCE Lucknow reported in 2012 (288) ELT 585 (Tri. Del) wherein an identical issue was involved, has held that in absence of the chemical examiners report showing that the product either by itself or admixture with any other substance as suitable for use as fuel in spark ignition engines, the same cannot be specified as motor spirit, that in respect of this order of the Tribunal, the Central Board of Excise and Customs vide its letter dated 11.02.2013 has intimated to the Commissioner it has been decided not to file an appeal against this order, that same view has been taken by the Tribunal in the cases of CCE Meerut I vs Utkarsh enterprises, (final order No. 118/2010-Ex dated 23.02.2010) Jagdamba Petroleum (P) Ltd. vs. CCE Noida reported in 2004 (163) ELT 88 (Tri), a civil appeal filed by the Revenue against which, has been dismissed by the Apex Court vide judgment reported in 2007(212)ELT A112 SC], that the common ratio of all these judgment is that for classifying a product as a motor spirit, in addition to the boiling point being below 25?C, the chemical test should also establish as to whether the product either by itself or admixture with any other substance, is suitable for use as fuel in spark ignition engines and in absence of the chemicals examiners report on the second parameter, the product cannot be classified as motor spirit and that in view of this, the Commissioners order classifying the goods, in question, as other motor spirit under sub heading 27101119 is not correct and similarly, there is no infirmity in the order of the Commissioner (Appeals) upholding the classification of the goods as organic solvents not elsewhere specified under heading 3814.
4. Shri Yashpal Sharma, the Ld. DR defended the Commissioners order dated 21.12.2009 by reiterating the findings of the Commissioner and also assailed the orders of the Commissioner (Appeals) against which the revenue is in appeal by reiterating the grounds of the Revenues appeal. He pleaded that since, the flash point of the product, in question, is below 25?C, the product, in question, has been correctly classified under heading 27101119, and that for classification under this heading, the actual test as to whether the product by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines is not necessary.
5. We have considered the submissions from both the sides and perused the records. The point of dispute is as to whether the goods, in question, are classifiable as composite organic solvent, not elsewhere specified covered by heading 3814 of the Central Excise Tariff, or whether the same are classifiable as other motor spirit under heading 27101119. Heading 271011 covers light oils and preparations and one variety of the light oils is motor spirit. While heading 27101111 to 27101113 covers special boiling point motor spirit, heading 27101119 covers other motor spirits. The term motor spirit is defined in the supplementary notes to chapter 27 as any hydro carbon oil (excluding crude mineral oil) which has its flash point below 25?C and which either by itself or in admixture with any other substance is suitable for use as fuel in spark ignition engines. Thus, for classification as motor spirit the product must satisfy two conditions.-
(a) Its flash boiling point should be below 25?C and;
(b) The product either by itself or admixture with any other substance is suitable for use as fuel in spark ignition engines.
6. The question is as to whether the product satisfies the above two conditions has to be decided on the basis of actual chemical test and whether the products suitability, either by itself or in admixture with other substances for use as fuel in spark ignition engines can be presumed or preferred without actual test. In this case, the chemical examiners report while mentioning the flash point as below 25?C is totally silent about the other factor as to whether the product either by itself or in admixture with other substance is suitable for use as a fuel in spark ignition engines. Therefore, in our view, in view of inconclusive chemical report, the product, in question, cannot be classified under heading 27101119. We are supported in this view of the Tribunals Judgment in the case of Kuchchal Chemicals Ltd. vs CCE Lucknow reported in 2012 (288) ELT 585 (Tri. Del) and also Tribunals judgment in the case of Jagdamba Petroleum (P) Ltd. vs. CCE Noida(Supra), which stands affirmed by the apex court. Same view has also been taken by the Tribunal in the case of CCE Meerut-II vs Tuftween Petrochemical Ltd. reported in 2005 (179) ELT 409 (Tri.) and in the case of Silver Chem Industries (P) Ltd. vs CCE Mumbai reported in 2003 (155) ELT 204 (Tri. Mum), wherein the Tribunal held that for classifying a product as motor spirit, both the criteria regarding flash point being below 25?C and suitability for use, either by itself or in admixture with other substance, as fuel in spark ignition engine, must be satisfied by actual test. In view of this, we hold that while the order in original dated 31.08.2009 passed by the Commissioner is not sustainable, there is no infirmity in the orders in appeal no. E/1262 & 3106/2012 passed by the Commissioner (Appeals). Accordingly, while the appeal no. E/3222/09 to E/3242/09 filed by the Assessee are allowed along with the stay applications the appeal No. E/1262/2012 along with cross objection and appeal No. 3106/2012 filed by the Revenue are dismissed. Cross objection also stand disposed of.
(Dictated and pronounced in open court)
(S.K. Mohanty) (Rakesh Kumar) Member(Judicial) Member(Technical)
Neha
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