1989(02)LCX0047

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

 S/Shri S. Kalyanam, Member (J), K. Prakash Anand, Member (T) and D.C. Mandal, Member (T)

PACIFIC EXPORTS

Versus

COLLECTOR OF CUSTOMS

Order Nos. 55 to 57/1989-C, dated 15-2-1989 in C/Appeal No. 1954-1956/88-C

Advocated By : Shri Jaideep Patel, Advocates, for the Appellants.

Shri A.S. Sunder Rajan, JDR, for the Respondent

[Order per : K. Prakash Anand, Member (T)]. - These are three appeals relating to three orders-in-original passed by the Assistant Collector of Customs on a common issue, which have been disposed of by a single order of the Collector (Appeals) Bombay. Since the subject matter of the three appeals relates to the same issue disposed of by a single order-in-appeal, therefore, these appeals are also being disposed of by a single order.

2. The case of the appellants is that they imported goods which are described as ‘liquid paraffin’. These have been assessed under Heading 2710.00-CTA read with Notification No. 115/86-Cus., dated 17-2-1986 and under Heading 2710.99-CET.

There is no dispute about the tariff classification on the Customs side. However, it is claimed by the assessee that the goods are covered by Item 27.10(VII) of Notification No. 115/86 attracting Customs duty @ 40% and not by Item 27.10(X) of the Notification, which attracts Customs duty @ 70%. The lower authorities, on the other hand, have held that the goods, being specifically mentioned at 27.10(X) of the Table to Notification No. 115/86, are assessable accordingly, and not under 27.10(VII) ibid as claimed by the appellants. It has also been held that in so far as additional duty is concerned, the goods would be classifiable under Heading 27.10-CET and that since there is no specific heading for liquid paraffin, therefore, it would be covered by the residuary heading 2710.99. The plea of the assessee that the goods should be considered as lubricating oil was rejected. This view was upheld by the Collector of Customs(Appeals) and it is against this order that the appellants are before us.

3. We have heard Shri Jaideep Patel, advocate, on behalf of the appellants and Shri A.S. Sunder Rajan, JDR, for the Department.

4. The learned advocate has stated that the imported goods are liquid paraffin of IP/BP/USP grade. Appellants have claimed the benefit of classification under Item 27.10(VII) of Notification No. 115/86-Cus., dated 17-2-1986 because the goods answer the description which reads “lubricating oil, that is to say, any oil as is ordinarily used for lubrication, excluding any hydro-carbon oil, which has a flash point below 93.03°”.

It is claimed that although described as liquid paraffin, because of its special characteristics and properties, it should classify under Item 27.10 (VII) of the Notification.

It is further submitted on behalf of the appellants that reference to various technical authorities, like condensed Chemical Dictionary, Indian Pharmacopea, Food Grade Lubricants and their Applications, by Witco Chemical, Kirk Othmer’s Chemical Encyclopaedia, White Mineral Oil & Petroleum and their Related Products, by Erich Meyer, would show that the goods are nothing but lubricating oil, actually used for lubrication. White Oil is stated to be synonymous to liquid paraffin of pharmacopeal grade and is claimed to be used for textile lubrication. White Mineral Oil USP, reportedly the same as liquid paraffin, is claimed to be used for lubrication in canning, capping and sealing machines. Meat packing houses are said to utilize liquid paraffin USP as a lubricant for the over-head trolley, which carries the meat from one location of the plant to other locations for processing.

It is added that Kirk Othmer’s Encyclopaedia shows that liquid paraffin is a cathartic, the function of which is to lubricate.

In sum, it is claimed that liquid paraffin IP/BP/USP should have been classified as lubricating oil.

5. Finally, Shri Patel states that as an alternative plea, appellants had contended that liquid paraffin of pharmacopial grade should be considered as medicament and be covered under Heading 3003.20-CET. It is submitted that this alternative plea has not received the consideration of Collector (Appeals) at all.

6. Responding, Shri A.S. Sunder Rajan, JDR, strongly supports the view taken in the orders of the lower authorities. He emphasizes that the product, classification of which is to be decided here, is nothing but pure liquid paraffin of pharmacopial grade. It has no additive. There is a specific entry for liquid paraffin in Notification No. 115/86, it is urged. It is, therefore, not necessary to go into the use to which such liquid paraffin is put. Shri Sunder Rajan emphasizes that the goods imported are described as ‘liquid paraffin’. There is no literature of the manufacturer/supplier of the goods to show that the goods are lubricating oil. It is added that none of the technical authorities cited by the appellants would show that liquid paraffin by itself is a lubricating oil. Strongly opposing the argument that the impugned products should be classifiable under Heading 3003.20-CET, he states that this plea is also entirely un-substantiated. In this connection, he refers to Trade Notice No. 57/General/86 dated 14-8-1986 of Bombay Collectorate relied upon by the appellants and submits that this is not supportable and it would not bind the Tribunal while taking a view in the matter.

7. We have carefully considered the facts of the case and the submissions made before us. There is no dispute here as regards the classification under the Customs Tariff, which has been made under Heading 2710.00. This heading reads as under :

“Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, the oils being the basic constituents of the preparations”,

The dispute is only as regards the claim of the appellants that the impugned goods are covered by Item 27.10(VII) of Notification No. 115/86 as against the department’s contention that they are covered by Item 27.10(X) of the Notification.

8.The two Entries of Notification No. 115/86 are re-produced below:-

(i) Entry 27.10(VII)

“Lubricating oil, that is to say, any oil as is ordinarily used for lubrication, excluding any hydrocarbon oil which has its flash point below 93.3 C”.

(ii) Entry 27.10(X)

“Liquid Paraffin”.

9. At the very outset, it seems obvious enough to us that a clear distinction is made by the relevant notification between “liquid paraffin”, as such, and “lubricating oil”. Appellant has himself submitted not only before the lower authorities but also before us that all liquid paraffins are not lubricating oils. In this connection, it was pointed out that Isopentane, Pentane, Hexane and Heptane are Paraffins which are not lubricating oils.

Apart from this factual position, which is admitted by the appellants, the basic fact which is to be kept in view is that in the Notification itself, a clear distinction is made between lubricating oils and liquid paraffins as such. If the goods which are imported are described as liquid paraffins, then straightaway, they would fall for classification under Entry 27.10(X) of the Table to Notification No. 115/86. We agree with the contention of the learned Departmental Representative that in such a situation, it is not necessary for the department of investigate as to what is the end use of such liquid paraffins. The Notification should not be given an interpretation which renders its different provisions redundant or meaning-less unless it can be shown that such redundancy is inherent as a result of some drafting or conceptual mistake. It is not argued before us that there is any such mistake.

10. Lubricating Oils are used to provide a film between the moving parts of machines and engines to prevent wear with little or no loss of power. Lubricating oil manufacture requires crude to be processed strictly with lubricating oil as the objective. Such lubricating oils are not mere by-products of gasoline and other petroleum fractions. For this reason, many refiners consider the manufacture of lubricating oil much more complex than that of fuels. The chemical composition of lubricating oils is exceedingly complex. The compounds contained in lubricating oils include paraffins, cycloparaffins (also multi-ring or condensed compounds) and aromatics. Lubricating oils may be bleached with acid, and they may be mixed with vegetable or animal oils. The ideal of lubrication is to obtain a full fluid film with little clearance between the moving surfaces so that the shaft rotates on a film of oil. Hydrodynamic lubrication with pressure gives this condition.

11. A lot of stress is laid by the appellants on the uses of white oil. However, Technical white oils, which are employed for cosmetics, textile lubrication, insecticide vehicle, paper impregnation etc., and pharmaceutical white oils, which may be employed as laxatives or for the lubrication of food handling machinery, are petroleum products in a category distinct from lubricating oils as such.

12. In this connection, we may refer to the extracts from the Publication “Lubrication Engineering” - Food Grade Lubricants and their Applications, distributed through the courtesy of Witco Chemicals, which has been furnished by the appellants in support of their case. This discusses the characteristics of food grade lubricants which are described as highly refined petroleum products which find application in a variety of industries. The basic principle of such white oil refining is to remove by either acid treatment or hydrogenation, unsaturates and aromatics from the feed-stock from which the oils are made. The extent to which this objective is accomplished is generally measured by two tests, i.e. Readily Carbonizable Substances and UV Absorbance. It is only when properly refined that white mineral oils become free of odour and taste, which is a necessary property for lubricants that come in contact with food.

13. As rightly stated on behalf of the department, it was essential for appellants to produce literature from the manufacturer of the impugned products to show that the goods are in fact lubricating oil grade.

On this point, it is stated before us that appellants had placed before the lower authorities, extracts from various technical authorities. Such extracts, however, are no proof that the impugned goods themselves answer the specifications.

14. We, therefore, hold that the goods are correctly classifiable under Heading 2710.00-CTA, read with Notification No. 115/86-Cus., dated 17-2-1986.

15. We also hold that for reasons discussed in the orders of the lower authorities as well as in our orders supra, the appellant’s claim to classification of these goods under Heading 2710.60-CET has to be rejected.

16. What survives for our consideration is the alternative plea that the goods should be considered for classification under Heading 3003.20 of the Central Excise Tariff. This Heading reads as follows :

“Medicaments (other than patent or proprietary) other than those which are exclusively used in Ayurvedic, Unani, Siddha, Homoeopathic or Biochemic systems”.

As the lower authorities have themselves found, the goods are nothing but liquid paraffin IP/BP/USP. These are admittedly purified specially for uses as drugs and pharmacopeal grade. The Collector(Appeals) has not at all dealt with this plea of the appellants. On the other hand, the Assistant Collector has dealt with and rejected the plea on grounds which are hardly understandable. He states in his orders that Chapter Note 2 to Chapter 30 of the CET excludes the item imported, but he does not say how.

17. We find that there is a Trade Notice issued by the Collector of Central Excise Bombay, No. 57/General/86 dated 14-8-86, which clearly informs the trade that liquid paraffin IP would be medicament which would attract classification under sub-heading No. 3003.20 provided these are un-mixed products suitable for such use as medicaments and also provided that such medicaments are other than Patent or Proprietary medicaments. Shri Sunder Rajan, the learned representative from the department submits that the Trade Notice does not bind the Tribunal, but there is no answer to the point that there is a clear understanding in the Trade Notice given to the trade as regards the correct classification of the goods. What is more, no fault is found with the reasons given in the Trade Notice for holding that liquid paraffin IP would attract classification as medicament under Heading 3003.20. It is not the department’s case that the goods imported are mixed products or that they are Patent or Proprietary medicines.

18. In the circumstances, we hold that the correct classification under the Central Excise Tariff would be under Heading No. 3003.20.

Appeal partly allowed in these terms.

Equivalent 1990 (045) ELT 0651 (Tribunal)