Customs, Excise and Gold Tribunal - Delhi
Heeral Enterprises And Anr. vs Collector Of Customs And Anr. on 16 December, 1985
Equivalent citations: 1986(7)ECC26, 1986(6)ECR743(TRI.-DELHI), 1986(25)ELT269(TRI-DEL)
ORDER
S. Venkatesari, Senior Vice-President
1. These are 15 appeals in all, arising out of the levy of additional duty of Customs (commonly referred to as "countervailing duty" or "C.V.D.") on consignments of Micro-crystalline Wax imported by M/s. Heeral Enterprises, Bombay, (referred to for convenience as "M/s. Heeral"). The additional duty was levied at the time of clearance of the consignments for home consumption at the rate appropriate to Tariff Item 11A(2) in the Central Excise Tariff Schedule. (The sub-items in this schedule underwent renumbering in 1982, consequent on the deletion of the original sub-item (2), relating to L.P.G., and the renumbering of sub-item (3) "waxes" as sub-item (2). Though these appeals relate to cases occurring before as well as after the amendment and renumbering, it has been assumed for convenience that the applicable entry throughout was sub-item (2), with the description "waxes"). It was the contention of M/s. Heeral that the relevant Central Excise Item was T.I. 68, and on this basis they filed appeals to the Collector (Appeals) in each of the 15 cases before him. (For convenience the first appellate authority in all the cases is referred to as the "Collector (Appeals)"). Four out of the 15 appeals were allowed by the Collector (Appeals), holding that the applicable item was T.I.68. Against these four orders the Collector of Customs, Bombay, has come up in appeal to the Tribunal, and these appeals bear Nos. C.213/ 85-C, C.214/85-C, C.361/85-C and C.362/85-C. In the other 11 cases the Collector (Appeals) rejected the appeals, upholding the classification adopted by the Customs authorities, namely T.I.11(2). Against these orders M/s. Heeral had come up to the Tribunal and these constitute the remaining 11 appeals which are covered in this order.
2. The basic question involved in all the appeals is whether the Micro-crystalline Wax imported by M/s. Heeral would be covered by the said sub-item (2) of Item 11 of the Central Excise Tariff. We reproduce below the main heading of the items as well as sub-item (2):-
"11A ALL PRODUCTS DERIVED FROM REFINING OF CRUDE PETROLEUM OR SHALE (WHETHER LIQUID, SEMI-SOLID OR SOLID IN FORM), NOT OTHERWISE SPECIFIED, INCLUDING LUBRICATING OILS AND GREASES AND WAXES -
XXX XXX XXX
(2) Waxes
XXX XXX XXX
In brief, the argument of M/s. Heeral is that, although Microcrystalline Wax is obtained from crude petroleum, it cannot be said to be derived from the refining of crude petroleum, because it is the result of a two-stage operation. In the first stage base lubricating oil is derived from crude petroleum. In the second stage Microcrystalline Wax is obtained from the base lubricating oil. Therefore, according to them, since Microcrystalline Wax is not directly derived from crude petroleum, it is not covered by the main heading and accordingly it is also not covered by sub-heading (2). Therefore, it would fall under the residuary entry, namely Tariff Item 68.
3. As against this the contention of the Department in brief is that the Microcrystalline Wax is undeniably derived from crude petroleum, it being immaterial that this is the result of a two-stage and not a single-stage operation; and that in any event, since "waxes" have been specified in sub-item (2), and Microcrystalline Wax is undoubtedly a wax, it is clearly covered by that sub-item.
4. At Shri Sundar Rajan's request, and with Shri Sheth's concurrence, we in the first instance heard Shri Sundar Rajan for the Collector. He drew our attention to the description of Item 11A (reproduced in para 2 above). He submitted that his main argument would be that "waxes" were specified in the main heading and also in sub-item (2). Therefore, it was unnecessary for the purpose of this case to enquire closely whether waxes including Microcrystalline Wax were covered by the generic description "all products derived from refining of crude petroleum or shale".
5. Shri Sundar Rajan cited two judicial decisions to the effect that the term "including" is one of extension, used to enlarge the meaning of a term. These are the following:-
(1) AIR 1961 Patna 242 - S.M. James and Anr. v. D. Abdul Khair.
(2) 1972 T.L.R. 226 Gujarat - Commissioner of Income-tax v. R.M. Amin.
6. Shri Sundar Rajan then proceeded to the individual appeals, starting with those where the decision was in favour of the Revenue.
Appeal No. C.167/82-C.
7. Shri Sundar Rajan referred to the letter dated 29.12.1981 addressed by the Deputy Collector of Customs, Bombay, to M/s. Heeral. That letter reproduced a note by the Deputy Chief Chemist, relating to Microcrystalline Wax. It contained extracts from a book titled "Industrial Waxes" by H. Bennet (this will be referred to later in this order). The note ended with the Deputy Chief Chemist's opinion, which ran as follows:-
"Thus, while confirming that microcrystalline wax is derived from the refining of base lubricating oil it is not possible to agree that it is not a product obtained in the refining of crude petroleum. In my opinion, it is covered by item 11A of CET."
The Assistant Collector referred to the test report of the Customs laboratory on the goods imported, which ran as follows:-
The sample is mineral wax in the form of lumps. It has got the characteristics of microcrystalline wax."
The Assistant Collector followed this with an observation which was besides the point. He ended by holding that since the item was a mineral product, i.e. mineral wax, it had been correctly classified under Item 11A (3).
8. The Collector of Customs (Appeals) gave the following findings:-
"An exhaustive technical opinion has been given the Deputy C.C. regarding process of derivation of microcrystalline wax from Crude Petroleum. It is observed that in the process of refining of crude petroleum, a fractional distillation is being carried out. Some products are separated as distillate and some of them remains in the distillation flask (still in this case) along with base lubricating oil. These are further separated by the processes such as solvent extractions.
So the issue is, microcrystalline wax may not be getting as a distillation product of crude petroleum. However, it cannot said that it is not obtained by the refining of crude petroleum as it is separated out by solvent extraction from the remnants in the still."
He accordingly rejected the appeal. Shri Sundar Rajan submitted that the rejection was correct, as Microcrystalline Wax was a petroleum product and was specified in Item 11 A. ' Appeal Nos. C.452/84-C, C.2168/85-C to C.2175/85-C (9 appeals).
9. All these nine appeals arise out of a combined Order of the Collector (Appeals). In the Orders-in-Original reference was made to the test report. The Assistant Collector observed that heading No. 11A(2) was for waxes and covered all waxes. He held that when the goods were covered under a specific heading the claim for classification under heading No. 68 was not tenable, and rejected the appeal. The Collector (Appeals) upheld the Assistant Collector's order, with the following observations:-
"The term "waxes" as shown in item 11A(2) of the CET is comprehensive and does not make any difference as to whether it is directly derived from refining of crude petroleum or shale or otherwise. The heading of item 11A of the CET at the time of importation of the product was the following:-
"All products derived from refining of crude petroleum or shale (whether liquid, semi-solid or solid in form) not otherwise specified, including lubricating oils and greases and waxes".
Therefore this heading only means waxes of all sorts irrespective of their derivation from refining of crude oil or otherwise are covered under Item 11A of the CET and specifically mentioned as item 11A(2) of the CET. In view of this, the charging of this product to C.V. duty under item 11A of the CET by the lower authority appears to be correct and the Assistant Collector appears to have rightly rejected the appellant's claims for refund of duty."
Appeal No. C.696/84-C.
10. The Order-in-Appeal was in similar terms to the order in the case of Appeal No. C.452/84-C. (The Order-in-Original was not filed, but was apparently on the same lines as those in the other cases).
11. Shri Sundar Rajan thereafter took up the cases where the decisions of the Collector (Appeals) were against the Revenue.
Appeals Nos. C.213/85-C and 214/85-C.
12. The order of the Collector (Appeals) was a combined order disposing of two appeals to him. The appeals were allowed in the following terms:-
"At appeal stage, the appellants reiterate their contention stating that waxes covered by CET item 11A(2) are derived directly from crude oil whereas the imported wax in question viz. microcrystalline wax which is derived from the lubricating oil and therefore not cogered by CET item 11A(2). They have produced suppliers' certificate and have cited various tariff advices on calcined Coke Liquid Paraffins Petroleum Jelly in support of their contention.
I have carefully considered the impugned order as well as the appellants' submissions. From the wording of description of CET item 11A, I find that only such wax as is manufactured in continuous chain from crude petroleum or shale would be assessable under that item. Accordingly, I admit the appellant's contention for assessment of CVD under CET item 68 and allow the appeal on this count."
13. With reference to this order Shri Sundar Rajan pointed out that the order was passed on 31.10.84. the same Collector (Appeals) had, on 24.12.83, passed orders on a batch of appeals (covered by appeals Nos. E.452/ 84-C etc. referred to in para 9 above). In dealing with these appeals he had taken the contrary view, namely, that Item 11A(2) meant waxes of all sorts. Shri Sundar Rajan pointed out that while passing his orders dated 31.10.84 the Collector (Appeals) had not made any reference to his earlier orders or the reasoning behind those orders. The Collector (Appeals) had recorded a finding that only such wax as was manufactured in continuous chain from crude petroleum or shale would be assessable under Item 11 A. He had not however given any reasoning in support of this finding. Shri Sundar Rajan submitted that the finding in these cases was not based on any reasoning and was contrary to the reasoned order passed by the same Collector (Appeals) earlier. It was therefore not correct and should be set aside.
Appeals Nos. C.361/85-C and 362/85-C.
14. The combined order of the Collector (Appeals) covering these two cases was in identical terms to the order covered by appeals Nos. C.213/85-C and 214/85-C. Shri Sundar Rajan had the same arguments to advance in respect of these appeals.
15. Shri Sundar Rajan cited the decision of the Supreme Court in the case of Dunlop India Ltd. (AIR 1975 SC 597) to the effect that "when an article has, by all standards, a reasonable claim to be classified under an enumerated term in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphange of the residuary clause". Me submitted that this principle applied with full force to the present case where "waxes" were specified in the tariff item and the sub-item thereunder.
16. In the end Shri Sundar Rajan submitted that the four appeals of the Collector should be allowed, and the orders of the Assistant Collector ' in those cases should be restored; and that the appeals of M/s. Heeral should be rejected.
17. Appearing on behalf of M/s Heeral, Shri Sheth submitted a list of nine points (some of them overlapping) in their favour. It would be convenient to deal with his arguments in the same order.
Point No. 1:
18. Shri Sheth submitted that the issue was fully covered by the decision of the Tribunal in the case of Nav Bharat Enterprises (P) Ltd. (1983 ELT 1134). That case related to liquid paraffin and the items considered were T.I.8., T.I.11A and T.I.68. It was held that T.I.68 was applicable. The Tribunal had relied on an unreported judgment of the Gujarat High Court in the case of Mehta Bros. v. Superintendent of Central Excise (Special Civil Application No. 1175 of 1970). The Tribunal had also referred to Tariff Advice No. 34/80 dated 26.5.1980 of the Central Board of Excise and Customs. The Bench had observed as follows:-
"We feel that Item 11A can be Ruled out both because of the ruling of the Gujarat High Court quoted above and of the ruling of the CBEC in its tariff advice No.34/80 dated 26.5.80 which establish that liquid paraffin not being derived from the refining of crude petroleum would not be assessable under Item 11 A. We agree that 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."
19. The Bench pointed out that, the last sentence in the above paragraph, on which strong reliance was placed, appeared to contemplate processes other than a process of separation of Microcrystalline Wax already present in the crude petroleum from the other constituents of the crude petroleum. At this stage Shri Sheth referred to Shri K.I. Desai, Proprietor of M/s. Heeral, who was also present. Shri Desai agreed that Microcrystalline Wax with the same chemical composition was present in crude petroleum, as extracted from the earth, though it could be separated out only after a sequence of treatments.
Points Nos. 2 and 4:
20. Shri Sheth submitted that on a proper interpretation of T.I.11 A, Microcrystalline Wax could not be said to fall under that item, as it was not derived from the refining of crude petroleum. The Deputy Chief Chemist's report, quoted in the Deputy Collector's order dated 29.12.81 made it clear that Microcrystalline wax was derived from the refining of base lubricating oil and not from the refining of crude petroleum.
Point No. 3:
21. The meaning of T.I.T1A could only be satisfactorily determined in the light of the language of the entry and its context. The mere fact that "waxes" were mentioned did not mean that all waxes would be covered by the entry. Shri Sheth cited a decision in Volume 40 STC p.572 in the case of S. Subba Rao to the effect that the preceding words should be taken into account. He also referred to an English decision where it was held that while interpreting the word "including" the earlier words had to be taken into account.
Point No. 5:
22. Shri Sheth referred to Tariff Advice No. 7/69 of the Central Board of Excise and Customs wherein it was held that calcined Petroleum Coke would not come within the scope of T. 1.11 A as it was not derived directly, from the process of refining crude petroleum or shale but manufactured out of petroleum coke which had already met its duty liability. He also referred to the Board's Tariff Advice No. 34/80 holding that liquid paraffin would not fall under T.I.11A (see para 18 above).
Points 6, 7 and 8:
23. Shri Sheth submitted that the suppliers of the goods had certified as follows:-
"We hereby certify that Shell microcrystalline wax Imp is manufactured from base stock on (sic) lubricating oil which is derived from crude and not directly from crude oil".
M/s. Heeral had furnished a certificate from the Indian Institute of Technology, Bombay, stating that Microcrystalline Wax was not a direct product of the refining of crude oil. This was also confirmed by the extract from book on "Industrial Waxes" by the well-known author H. Bennet.
Point No. 9:
24. According to Shri Sheth, M/s. Indian Petro Chemicals Ltd. manufactured polypropylene waste wax. This had been classified under T.I.68. Classifying their product under T.I.11A would amount to discrimination against them. (It is not necessary for us to discuss this argument, since assessment of different goods differently cannot be characterised as "discrimination").
25. Shri Sheth added that the "waxes" which were covered by T. 1.11 A were "slack waxes" which were obtained at the first stage of distillation of crude petroleum and could be said to be directly derived from crude petroleum. Microcrystalline Waxes, which could be obtained only by a long process of separation, were not directly derived from crude petroleum and were not therefore covered by T.I.11 A.
26. Shri Sheth therefore submitted that all the appeals should be decided in favour of M/s. Heeral, holding that T.I.68 was the applicable item.
27. We have carefully considered the arguments advanced on both sides. There are certain undisputed facts which may be set out in the first instance:-
(1) Microcrystalline Wax is one of the constituents of crude petroleum. It is obtained by separation from the other constituents and not by a process of chemical change;
(2) There is a sequence of operations for separating out the various constituents of crude petroleum. Microcrystalline Wax is obtained at the conclusion of this sequence of processes and not from the initial process of distillation; and (3) Paraffin wax distillate is obtained in the initial process of distillation, and paraffin wax is obtained by cooling and filtering this distillate. Microcrystalline Wax on the other hand is obtained from the residual fraction after distillation, which also contains heavy residual lubricating oil and asphalt.
28. The above position emerges from the book on "Industrial Waxes" by H. Bennet, which both sides have treated as authoritative. The detailed description containing in that context is reproduced below:-
"Both paraffin and microcrystalline waxes are separated from crude petroleum, but the process of manufacture and the resulting products are quite different.
As crude petroleum is subjected to distillation by heating in a still at atmosphere pressure, the following products are removed in the order of their increasing boiling points: light petroleum gasses, gasoline, naphtha, kerosene, gas oil, paraffin wax distillate, light, neutral lubricating oil fractions, and a residue in the still that will not distill overhead at atmospheric pressure without decomposition. Paraffin wax is separated from the paraffin-wax distillate by the relatively simple process, while the microcrystalline wax, which cannot be distilled without decomposition, is separated by a complex series of solvent separations from the residue remaining in the still.
Paraffin wax, which has very little affinity for oil, is separated from the paraffin wax distillate by cooling and filtering in a common plate and frame filter press where the wax is retained on canvas filter leaves and the distillate oil passes through the canvas and is removed. Oil remaining in the wax filter cake is removed' by a sweating process which involves casting of wax in thin sheets and gradually raising the temperature to a point slightly below the melting point of the wax. In this process, the remaining oil runs out of the wax sheet leaving a paraffin wax which usually contains less than 0.5% oil.
Microcrystalline wax is present in the residual fraction from the still along with heavy residual lubricating oil and asphalt. Asphalt must be removed from the residue by conventional sulfuric acid treatment or one of the newer selective solvent processes before the wax can be separated. The microcrystalline wax is then removed as crude petrolatum from the residual lubricating oil by any one of several dewaxing processes which involve dilution with an organic solvent, chilling at 20-4CPF and separation of the crude petrolatum high-speed centrifuges. Microcrystalline wax has a great affinity for oil and thus the crude petrolatum still contains 40-70% oil. Therefore, it is then mixed with another portion of organic solvent, usually a different solvent from the one used in the initial dewaxing step, and heated to dissolve the wax and oil. The blend is then cooled to precipitate the wax which is separated from the oil and solvent on a filter. The solvent used for deoiling microcrystalline wax must be polar, whereas for deoiling paraffin wax other type of solvent may also be used. Since the microcrystalline wax holds oil very strongly, the last solvent step is usually repeated to give a wax with lower oil content."
29. It is in the light of the above basic facts that the matter has to be decided. The controversy is really on the interpretation of Item 11A and not on facts. Thus points 6, 7 and B advanced by Shri Sheth do not need further comment, as they only confirm the factual position as set out above.
30. On the legal aspect the main contention of M/s. Heeral is that any goods to be covered by Item 11A should be "directly" derived from the refining of crude petroleum. Admittedly, the word "directly" is not found in the tariff description. However, M/s. Heeral have quoted various authorities to the effect that the products must be directly derived, that, is, obtained by the initial process and not as a result of a consequence of processes.
31. With reference to Shri Sundar Rajan's main argument that "waxes" are specifically included in T.1.11 A and would therefore be covered, irrespective of the description "all products derived from refining of crude petroleum", M/s. Heeral have contended that these words must be taken as qualifying the word "waxes". This question also arises for consideration.
32. Taking the second question first, a number of judgments were cited by both sides regarding the significance of the term "including". Some of these authorities were not readily available to us. We however feel that the position is reasonably clear. No doubt the word "including" should be taken to be a term of extension or enlargement, which would have the effect' of bringing within the scope of a term of expression something which would ordinarily not fall within it. At the same time it is clear that what comes after the word "including" cannot be read in isolation from what comes before it. Thus, in the cases before us, the term "waxes", read in isolation and in its widest sense, would appear to cover beeswax or sealing wax, neither of which has any relation to crude petroleum. No one would contend that these articles would be covered by Item 11 A. This is because the term "waxes", specific though it is, has to be read in conjunction with the descriptive part of the item and cannot be totally divorced from it. The effect of specifying "waxes" would, according to our understanding, be that, so long as a wax is prima facie covered by the generic description, the presumption would be that it is included within the scope of the item. The burden would be on the person who contends that it is not included, to establish his proposition. In the light of the fact that Microcrystalline Wax is undoubtedly derived (whether directly or indirectly) from refining of crude petroleum, the burden would be on M/s. Heeral in this case to show that it is not one of the "waxes" covered by Item 11A and by sub-item (2) thereof.
33.This leads us to two further questions, namely:-
(1) Does the generic description require that a product should be "directly" derived from the refining of crude petroleum; and (2) If so, can Microcrystalline Wax be said to be directly derived from refining of crude petroleum?
34. As regards the first question, it is obvious that the tariff item itself does not anywhere say that the products should be "directly" derived. According to well-known principles of construction, an entry should normally be read as it stands and not be reading into it a word which is not there. However, in support of the view that the products should have been "directly" derived, our attention has been drawn to a number of decisions, which require serious consideration.
35. One of these is Tariff Advice No. 7/69 of the Central Board of Excise and Customs. M/s. Heeral have filed what purports to be an extract from this tariff advice. The operative sentence reads as follows:-
"The Board are advised that since calcined petroleum coke is not derived directly from the process of refining crude petroleum or shale but manufactured out of petroleum coke which has already met its duty liability, this would not come within the scope of the Item 11A ibid and is not excisable."
The above extract does not contain any reasoning in support of the principle that a product should have been derived "directly". However, an operative consideration while issuing the tariff advice was that the calcined petroleum coke was manufactured out of petroleum coke (falling within the same entry) which had already met its duty liability. That consideration does not however apply to the present case, as will be seen from para 43 below.
36. Shri sheth had also referred to the Board's Tariff Advice No. 34/80 regarding liquid paraffin wax. In this tariff advice the following question was raised:-
"Whether Item 11A C.E.T, covers only those products which are derived from refining of crude petroleum or shale or whether it would cover those products which are derived from derivatives of crude petroleum or shale."
The question was not explicitly answered. However, the tariff advice continued as follows:-
"It is considered that liquid paraffin wax is assessable as a mineral oil under Item 8 of the Central excise Tariff. When packed and labelled, it will attract duty as a drug either under Item 14-E or under Item 68, as the case may be, depending upon whether it is a P or P Medicine or not."
From this it was implied that the answer to the question posed above was in the affirmative. Here again there was no discussion nor were any reasons given.
37. Shri Sheth had referred to the order of the Tribunal in the case of Nav Bharat Enterprises, wherein the Bench had observed "We agree that 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". This case also related to liquid paraffin, which was held to be assessable under Item 8 or under Item 68, as the case might be: in the case before it the correct assessment was considered to be under Item 68.
38. In coming to its conclusion in that case the Tribunal had relied on the Board's tariff advices as well as on an unreported judgment of the Gujarat High Court in the case of Mehta Bros. v. Superintendent of Central Excise (Special Civil Application No. 1175 of 1970). It may be observed that, while tariff advices from the Board would deserve due respect, they would have only persuasive effect and not binding force. Where, as in this case, the tariff advices do not give any reasons for a particular conclusion, their effect would be greatly diluted. What is much more important in the present context is the judgment of the Hon'ble Gujarat High Court, to which we now turn.
39. That judgment was an unreported one and neither of the parties to the present appeal placed a copy before us. We have however obtained from the records relating to the appeal of M/s. Nav Bharat Enterprises (1983 ELT 1134) the copy of the judgment which was filed before the Bench which heard that case. That copy is not certified or attested, but like that Bench we would not raise any objection to it for that reason. The real problem is that the copy is an imperfect one, with some obvious typographical mistakes and also certain omissions of words which are not easy to supply. Despite these difficulties we have given our careful attention to that judgment.
40. That case related to what was called a processed lubricating oil. The petitioners in that case purchased duty paid base lubricating oil. This oil was "processed" by adding to it sulphuric acid, sodium carbonate and active earth (Euller's earth) and subjecting the mixture to the process of heating by a stove. This processed oil was sold by the petitioners under their own trade name. The Central excise authorities sought to levy duty on this processed oil, arguing that it was a new chemical compound which could not be described as lubricating oil. The petitioners however contended that the oil continued to be lubricating oil.
41. The judgment of the Division Bench of the Hon'ble Gujarat High Court was delivered by his Lordship Shri P.N. Bhagwati, C.J. (as he then was). The judgment observed that the first question which arose was whether the processed oil was lubricating oil or some other different commodity.
The Hon'ble High Court first assumed that the processed oil continued to bear the character of lubricating oil. It was observed that, mineral oil used as base oil in the process being lubricating oil on which the duty had already been paid, it was difficult to see how excise duty could again be chargeable on processed oil which continued to be lubricating oil. The Hon'ble High Court went on as follows:-
"What is chargeable to excise duty under Item 11A is lubricating oil When lubricating oil is manufactured, it must bear the charge of excise duty. But when lubricating oil is merely processed and in the process lubricating oil does not lose its character as lubricating oil so that the processed oil is also lubricating oil, there can no charge of excise duty once again. It is the production or manufacture of lubricating oil which attracts the charges of excise duty and not the processing of lubricating oil as such. One may add chemicals to lubricating oil to a process by which its viscosity may be reduced, or enhanced. That would not attract the applicability of item 11A as long as the lubricating oil retains its character as lubricating oil and does not become as different excisable ' commodity.... We are, therefore, of the view that in the present case the processed oil would not be chargeable to excise duty under item 11A if it can be shown that the mineral oil employed by petitioners as base oil in the process is lubricating oil which has borne excise duty."
42. The Hon'ble High Court next considered another argument advanced on behalf of the Revenue, viz. that the processed oil was a new chemical compound. The Hon'ble High Court went on to observe as follows:-
"We may now consider the position on the assumption contended for (sic) on behalf of the respondents that the processed oil ceased to bear the character of lubricating oil but becomes a new chemical compound. If this be the correct view and that is what was vehemently urged on behalf of the Revenue as the correct view, it is difficult to see how the processed oil can be said to fall within the ambit and coverage of item 11 A. Item 11A on its plain terms applies to goods which inter alia satisfy the following description "All products derived from refining of crude petroleum or shale not otherwise specified". The processed oil would therefore, be subject to the liability to excise duty under item 11A only if it can be said to be a product derived from refining of crude petroleum not specified in any of the items of the first schedule. Now mineral oil which is used as base oil would certainly be a product derived from refining of crude petroleum but the processed oil would not be included in such description. It is not derived from refining of crude petroleum; it is not (sic) derived from processing of mineral oil which in its turn is derived from refining of crude petroleum. Merely because a product has as its ingredient a product derived from refining of crude petroleum, it cannot itself be held to be a product derived from refining of crude petroleum. A product to be excisable under item 11A must be the immediate result of refining of crude petroleum. Refining means purifying, removing impurities or [word or words omitted]. The product derived from refining of crude petroleum would be covered by item 11A but if a different commodity is produced or made by subjecting "Products derived from refining of crude petroleum" to a process, it would not fall within the plain language of item 11 A. The processing, in the present case in any event cannot be said to be included within the connotation of the word "refining". It is, therefore, not possible to accept the contention of the respondents that the commodity which come into being as a result of subjecting the mineral oil to the process of adding sulphuric acid, sodium carbonate and active earth (Fuller's earth) and heating it by stove is a product derived from refining of crude petroleum within the meaning of item 11 A."
With these observations the Hon'ble High Court allowed the petition. It was declared that the processed oil prepared by the petitioners was not chargeable to excise duty.
43. The above judgment of the Hon'ble Gujarat High Court was rightly given great weight by our predecessor Bench, as it appeared to be directly relevant to the case before them. However, the judgment makes it clear that there were material differences between the facts in case before the High Court and the facts in the case before us. These are as follows:-
(1) In that case the base lubricating oil which was used for manufacturing the processed oil had already borne duty under Item 11 A. In fact, it was the contention of the petitioners that the processed oil was also a lubricating oil. The observations of the Hon'ble Gujarat High Court reproduced at para 41 above show that they considered that in such a situation duty could not be Charged again. In the present case however there is no question of duty being chargeable twice. (Although the present appeals relate to the levy of additional duty on imported goods, the basic question is regarding the liability of such goods to excise duty, and the matter would therefore have to be examined as if the case was one relating to excise duty on goods manufactured). The question in this case was whether the Microcrystalline Wax would be liable to duty under Item 11A or under Item 68: in neither case was there any question of double levy of duty. That on first manufacture a commodity must bear excise duty has been clearly set out in the second extract from the judgment of the Hon'ble Gujarat High Court (vide para 41 above) wherein it has been observed that "when lubricating oil is manufactured, it must bear a charge of excise duty". The question of a double levy, whether under the same item or under different items, does not arise in the cases before us;
(2) In the case before the Hon'ble High Court, the "processing" undergone by the base lubricating oil was quite extensive and involved adding a number of other substances ("sulphuric acid, sodium carbonate and active earth or Fuller's earth) and subjecting the mixture to the process of heating by stove. In fact, it was contended on behalf of the Revenue that by virtue of such processing the processed oil had become a new chemical compound, and it was with reference to this assumption that the further observations of the Hon'ble High Court reproduced in para 42 "above were made. It was with reference to such extensive processing that the Hon'ble High Court considered that the "processing" fell outside the scope of the term "refining" in Item 11 A. It was with reference to this "process" that it was observed "refining means purifying, removing impurities or [word or words omitted].... The processing, in the present case in any event cannot be said to be included within the connotation of the word refining". In contrast, in the present case the process has been shown to be one of gradual separation of the constituents of the crude petroleum in a number of stages. There is no question of such extensive operations as adding sulphuric acid, sodium carbonate etc., or of a new chemical compound being formed. It would not therefore appear appropriate to apply to the present case the observations made by the Hon'ble Gujarat High Court with reference to the extensive "processing" carried out on the product which was before them.
44. We are therefore of the view that the judgment of the Hon'ble Gujarat High Court in the case before them, being with reference to a set of facts which were materially different, would not be applicable to the case before us, where the goods under consideration can fairly be described as falling within the scope of "products derived from refining of crude petroleum". Once this description is found to be broadly acceptable, the fact that "waxes" have been specified in Item 11A would clinch the issue in favour of the inclusion of Microcrystalline Waxes within Item 11 A.
45. We have considered whether by coming to the above conclusion we would be going against the judgment of our predecessor Bench (which incidentally included one of the Members of the present Bench) in the case of Nav Bharat Enterprises. On the face of it such an objection could arise, in view of the observations made by our predecessor Bench in the course of its order (vide para 18 above). The consideration which led that Bench to hold that liquid paraffin was not assessable under Item 11 A, namely, the ruling of the Hon'ble Gujarat High Court and the Board's tariff advices, have been discussed above. It has been pointed out that the observations of the Hon'ble High Court were with reference to a different set of facts and would not be applicable to Microcrystalline Wax. It has also been pointed out that the Board's tariff advice, apart from the fact that it does not give the reasons for its conclusion, would have only persuasive value. The fact however remains that, based on these considerations, our predecessor Bench took the view that liquid paraffin would not be assessable under item 11 A, attributing as a reason that it was not directly derived from the refining of crude petroleum.
46. After very careful consideration we are of the view that the decision and observations of our predecessor Bench with reference to the assessment of liquid paraffin would not stand in the way of our taking the view that Microcrystalline Wax should be classified with reference to T.I.11 A. The deciding factor is that Item 11A and sub-item (2) thereof are specific with reference to "waxes". In para 32 above we have pointed out that in such a situation the burden will be on the assessee (who contends that this entry is not applicable) to establish this proposition. In the light of the analysis we have made, we find that this burden has not been discharged, and that on the contrary the Revenue has made out a credible case for inclusion of Microcrystalline Wax in Item 11 A. No doubt the observations of our predecessor Bench reproduced in para 18 above are widely worded, but for that very reason we have to be careful not to apply them indiscriminately. Each case is an authority for what it actually decides, and what was decided in that case was that liquid paraffin was not classifiable under Item 11 A. This case is differentiated by the very material factor of specific mention of "waxes" in the tariff item. Had "liquid paraffin" been likewise specified in the tariff item, we have little doubt that our predecessor Bench would have held it to be included in that item. In these circumstances, we do not feel that the decision of our predecessor Bench in the case of Nav Bharat Enterprises would stand in the way of the view which we are inclined to take.
47. In the result,. we hold that Microcrystalline Wax was liable to additional duty of Customs on import with reference to T.1.11 A and sub-item (2) or (3) as the case may be. We accordingly reject appeals Nos. C.167/82-C, C.452/84-C, C.2168/85-C to C.2175/85-C and C.696/84-C, filed by M/s. Heeral. We allow appeals Nos. C.213/85-C, C.214/85-C, C.361/85-C and C.362/85-C filed by the Collector of Customs, Bombay, and in each of these appeals we set aside the order of the Collector (Appeals) and restore the corresponding order of the Assistant Collector.