Continental Petroleum vs Commissioner of Customs, Ahmedabad>1999(12)LCX0050

1999(12)LCX0050

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri S.S. Kang, Member (J) and V.K. Agrawal, Member (T)

CONTINENTAL PETROLEUM

Versus

COMMISSIONER OF CUS., AHMEDABAD

Final Order Nos. 56-57/2000-C, dated 9-12-1999 in Appeal Nos. C/40-41/95-C

Cases Quoted

Atila Traders v. Commissioner — 1998(03)LCX0033 Eq 1998 (101) ELT 0321 (Tribunal) — Referred.................. [Para 5]

Collector v. Indian Metal Industries — 1992(01)LCX0069 Eq 1993 (066) ELT 0134 (Tribunal) — Referred............. [Para 2]

Continental Petroleum Ltd. v. Collector — 1999(09)LCX0203 Eq 2000 (115) ELT 0458 (Tribunal) — Followed... [Para 6]

Ganesh Oil Industries v. Collector — 1993(04)LCX0075 Eq 1994 (069) ELT 0490 (Tribunal) — Referred................ [Para 2]

Hyderabad Industries Ltd. v. Union of India — 1999(05)LCX0119 Eq 1999 (108) ELT 0321 (S.C.) — Followed [Paras 3, 6, 7]

Khandelwal Metal & Engineering Works v. U.O.I. — 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (S.C.) — Distinguished [Paras 3, 6]

Advocated By : Shri V. Lakshmikumaran, Advocate, for the Appellant.

Shri H.K. Jain, SDR, for the Respondent.

[Order per : V.K. Agrawal, Member (T)]. - In these two appeals, filed by M/s. Continental Petroleums Ltd, issue involved is whether the waste oil imported by them is classifiable under Heading 38.23 of the First Schedule to the Customs Tariff Act or under Heading 34.03 as waste lubricating oil.

2. Briefly stated the facts are that M/s. Continental Petroleum Ltd. imported waste oil which was classified by them under Heading 38.23 of C.T.A. The Assistant Collector classified the product under sub-heading 3403.19 of C.T.A. and Heading 34.03 of the Schedule to the Central Excise Tariff Act and directed them to pay appropriate duty holding that the impugned product was primarily a product containing petroleum Oil or Oils obtained from Bituminous material and the product has the basic characteristics of a lubricating oil; that according to test report, the product was mainly consisting of Hydrocarbon Oil and other Carbonaceous matter wherein the Hydrocarbon oil is less than 70% by weight and it had a flash point of above 94°C. The Assistant Collector also held that countervailing duty was leviable on the impugned product and he relied on the decision in the case of Collector of Customs v. Indian Metal Industries - 1992(01)LCX0069 Eq 1993 (066) ELT 0134 (T). On appeal, the Collector (Appeals) upheld the classification under sub-heading 3403.19, holding that the predominant constituent was mineral oil with flash point of 94°C; that after purification by removal of extraneous matters from the “Waste Oil”, the product obtained is sold as lube oil or lube stock to established manufacturers of lubricating oils/preparations. He relied upon the decision in the case of Ganesh Oil Industries v. C.C.E. - 1993(04)LCX0075 Eq 1994 (069) ELT 0490 (T).

3. Shri V. Lakshmikumaran, learned Advocate, mentioned that the Appellate Tribunal has already decided the classification of the impugned product under Heading 34.03 vide Order Nos. 822 to 824/99-C dated 6-9-1999. He then submitted that he reserves his right to challenge the classification of the impugned product. Which, according to him, is classifiable under Heading 38.23 of the Tariff. The learned Counsel, further, submitted that the Para 11 of the impugned Order describes the intrinsic nature and contents of the imported oil; that these oils are in the nature of Waste Oils drained out from industrial systems after the original lubricating preparation/ specifications have outlived their utility. He contended that as the Waste Oils imported by the Appellants are only pooled collections of Waste Oils drained from various systems where mineral oils/mineral oil preparations have been used, these oils are incapable of being manufactured in India and as such no countervailing duty can be imposed on such Waste Oils; that the Constitutional Bench of the Apex Court in the case of Hyderabad Industries Ltd. v. Union of India, 1999(05)LCX0119 Eq 1999 (108) ELT 0321 (S.C.) has held that “The decision in Khandelwal Metal Engineering Works case to the effect that additional duty of Customs is leviable merely on the import of the article even if it is not manufactured or produced in India does not appear to be correct inasmuch as the said conclusion is based on the premise that Section 12 of the Customs Act, and not Section 3(1) of the Tariff Act, is the charging section.... there can be no manner of doubt that additional duty which is levied under Section 3(1) of the Tariff Act is independent of the Customs duty which is levied under Section 12 of the Customs Act. Secondly, it has been held by the three Judges Bench in this case that excise duty is leviable if the article has undergone production or manufacture. The observation in Khandelwal Metal & Engineering Works case which seems to suggest that even if no process of manufacture or production has taken place the imported articles can still be subjected to the levy of additional duty does not appear to be correct inasmuch as the measure for levy of additional duty is the quantum of excise duty leviable on a similar article under the Excise Act. Duty under the Excise Act can be levied, as has been held earlier if the article has come into existence as a result of production or manufacture. In other words when articles which are not produced or manufactured cannot be subjected to levy to excise duty then on the import of like articles no additional duty can be levied under the Customs Tariff Act. “

4. Countering the arguments, Shri H.K. Jain, Learned S.D.R., submitted that the argument that imported Waste Oils are not manufactured in India and as such Additional Duty of Customs cannot be levied was not taken by the Appellants before the Collector (Appeals) and accordingly such an argument cannot be advanced before the Tribunal; that in earlier Final Order Nos. 822 to 824/99-C in the cases of the Appellants themselves, the Tribunal has also observed similarly. He further submitted that the burden to prove that such Waste Oils cannot be manufactured in India is on the Appellants; that no evidence has been brought on record and as such burden of proof has not been discharged by them. Finally he mentioned that it is not also clear whether the demand was only in respect of the Additional Duty of Customs.

5. In reply the learned Counsel for the Appellants submitted that in their reply to show cause notice, they have clearly mentioned that “the imported waste oil is not at all subject to levy of additional duty equal to excise duty (Countervailing duty) under Section 3 of the Customs Tariff Act, 1975 in view of the admitted fact that no excise duty is leviable on such waste oil in India on the basis of the legal position to the effect that such waste oil is not the result of any manufacturing process and in fact also waste oil cannot be produced by any manufacturing activity but it is emerged under different circumstances.” He also mentioned that no one produces/manufactures waste oils and as such no further materials is required to prove that such waste oils are not being manufactured in India. Finally he submitted that he is raising a question law based on the judgment of the Constitutional Bench of the Supreme Court as the only issue to be decided is whether the countervailing duty is chargeable. Reliance was also placed on the decision in the case of Atila Traders v. C.C.E., Ahmedabad - 1998(03)LCX0033 Eq 1998 (101) ELT 0321 (T) wherein it was held that “Where a question of fact is raised which goes to the very root of the appeal, we are of the view that the Tribunal has a duty to allow the same. It is all the more so when a question of law is raised as there can be no bar to a question of law being raised at any stage, even at the second appeal stage.”

6. We have considered the submissions of both the sides. As far as classification of the imported Waste Oils is concerned, we observe that the Tribunal, vide Final Order Nos. 822 to 824/99-C, dated 6-9-1999 [1999(09)LCX0203 Eq 2000 (115) ELT 0458 (Tri.)], in the case of the Appellants themselves, has held that the Waste Oils will be classifiable under Heading 34.03 of the Tariff. We order so here also. The learned Advocate, relying upon the decision of the Supreme Court in the case of Hyderabad Industries Ltd., Supra, has contended that Additional Duty of Customs is not leviable as the Waste Oils have not emerged on account of any manufacturing activity and that waste oil purchased by them indigenously is not subjected to levy of excise duty. Such a legal plea regarding leviability of duty can be raised at the second appeal stage, more so when the plea is based on a judgment of the Supreme Court which is law of the land. In earlier Order Nos. 822 to 824/99-C [1999(09)LCX0203 Eq 2000 (115) ELT 0458 (Tri.)] the plea was not allowed to be raised as the law laid down in Khandelwal Metal & Engineering Works, 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (S.C.) was in operation. Now in Hyderabad Industries case, the Apex Court has clearly held that the ratio of Khandelwal Metal’s case does not appear to be correct. It has been held by the Supreme Court as under :

“The levy of additional duty being with a view to provide for counter- balancing the excise duty leviable. We are clearly of the opinion that additional duty can be levied only if on a like article excise duty could be levied. The decision in Khandelwal Engineering Works case to the extent it takes a contrary view, does not appear to lay down the correct law.”

7. We observe that the Appellants have contented that waste oils imported by them are drained from industrial system after original lubricating preparation have outlived their utility and their any further use in the system can serve no purpose. The Collector (Appeals) also in the impugned Order has also observed similarly. The Revenue has not challanged the findings of the Collector (Appeals) in respect of the intrinsic nature of the imported oils. No material has also been brought on record to prove that such Waste Oils emerge as a result of any process of manufacture or are being produced or manufactured in India. In view of these facts and circumstances, respectfully following the ratio of the judgment in Hydrabad Industries case, we hold that additional duty of customs cannot be levied on Waste Oils imported into India. We make it clear that appropriate Basic Customs duty, if any specified under Heading 34.03 of the Customs Tariff Act will be leviable on the imported Waste Oils.

8. Both the appeals are disposed of in above terms.

Equivalent 2001 (137) ELT 1437 (Tri. - Del.)