2006(11)LCX0050

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. II]

Ms. Archana Wadhwa, Member (J) and Shri K.K. Agarwal, Member (T)

Schenectady Herdillia Ltd.

Versus

Commissioner of Central Excise, Raigad

Final Order Nos. A/2185-2187/2006-WZB/C-II/(EB), dated 15-11-2006 in Appeal Nos. E/2455, 2456 & 2457/06-Mum.

Cases Quoted -

Commissioner v. Tuftween Petrochemical Ltd. - 2004(10)LCX0190 Eq 2005 (179) ELT 0409 (Tribunal) - Noted .[Para 3,7]

Indu Nissan Oxo Chemical Industries Ltd. v. Commissioner - 1998(03)LCX0137 Eq 1998 (101) ELT 0201 (Tribunal) - Noted .[Paras 3,7]

Jagdamba Petroleum Pvt. Ltd. v. Commissioner - 2003(10)LCX0371 Eq 2004 (163) ELT 0088 (Tribunal) - Noted .[Para 3,7]

Silverchem Industries Pvt. Ltd. v. Commissioner - 2003(04)LCX0059 Eq 2003 (155) ELT 0204 (Tribunal) - Noted .[Paras 3, 7]

DEPARTMENTAL CLARIFICATION CITED
C.B.E. & C. Circular F. No. 528/157/93-(TU), dated l5|-9-1994.[Para 3]

Advocated By -

Shri D.B. Shroff, Sr. Advocate, for the Appellant.
Shri Ajay Saxena, S.D.R., for the Respondent.

[Order per : K.K. Agarwal, Member (T)]. -

These are three appeals against order of Commissioner (Appeals) demanding Special Excise Duty of Rs. 72,19,146/- and imposing a penalty of equivalent amount on M/s. Schenectady Herdillia Ltd. and imposition of penalty amount to Rs. 2 Lakh on Shri Joshi, Deputy Manager and Rs. 2 Lakhs on Shri Parab, Manager (Import) of the above company.


2. The facts of the case are that the appellants have been importing consignments of propylene tetramer and propylene trimmer which were classified by them under Chapter Heading 2710.14. The goods were initially cleared on provisional basis and after finalization of assessment was held to be classifiable under Chapter Heading 2710.19 which was liable to Special Excise Duty at the rate of 16%. The appellants brought the aforesaid goods into their factory and took Cenvat credit in respect of CVD paid by them. The appellants cleared some of these goods as such by paying the same amount of duty that has been paid by them at the time of import and in respect of which they have taken Cenvat credit as per the Cenvat provision. As no Special Excise Duty has been paid in respect of the goods imported, no Special Excise Duty was paid when the goods were cleared as such from the factory. They were however issued a show cause notice alleging that propylene trimmer by virtue of its flash point being below 25°C was correctly classifiable under sub-heading 2710.19 and that propylene tetramer had been classified by Customs authority under sub-heading 2710.19 while finalizing the provisional assessment vide order dated 8-4-2005, they were required to pay Special Excise Duty while clearing goods as such after bringing them into their factory. The show cause notice also invoked extended period on the ground that the goods were deliberately mis-declared to the custom authority to trade Special Excise Duty. The show cause notice was confirmed by the Commissioner who demanded the duty and imposed penalties as stated above.


3. The learned advocate for the appellant submits that for the goods to be classifiable under Chapter Heading 2710.11 to 2710.19 there are two essential criteria that have to be satisfied and both have to be satisfied together namely :

(i) that the flash point should be below 25°C and

(ii) that it should be suitable for use as fuel in spark ignition engines.

In their case neither of the criteria was satisfied in case of propylene tetramer as it has a flash point of 60°C to 100°C and the same is not suitable for use as fuel in spark ignition engine. It is not even commonly understood in common parlance or in trade as motor spirit. They purchase the said product for using in detergent, lubricants, additives and plasticizers. No evidence has been brought by the department to show that the products meet any of this criteria. As regards the product propylene tetramer it was submitted that the show cause notice itself accepts that the propylene trimmer is known as Nonene. In respect of nonene CBEC has issued a Circular vide F. No. 528/157/93-(TU) dated 15-9-1994 which specifically states that nonene cannot be classified under subheading 2710.11 to 2710.19 as it does not satisfy the test laid down in heading 27.10 namely that it is suitable for use as fuel in spark ignition engine. The Commissioner has merely gone by the flash point of nonene /propylene trimmer which is totally erroneous being against CBEC Board's own Circular and no evidence has been produced by the department to show that the goods either by itself or in admixture with any others substances are suitable for use as fuel for spark ignition engine. Even though the classification has been claimed by them under Chapter Heading 2710.14 as naphtha, naphtha itself is not chargeable to special excise duty and hence no duty can be demanded from them. Reliance was placed on the decision of the Tribunal in the case of Commissioner of Central Excise, Meerut-II v. Tuftween Petrochemical Ltd. - 2004(10)LCX0190 Eq 2005 (179) ELT 0409 (Tri.-Del.), Jag-damba Petroleum Ltd. v. Commissioner of Central. Excise., Noida - 2003(10)LCX0371 Eq 2004 (163) ELT 0088 (Tri.-Del.), Silverchem Industries Pvt. Ltd. v. Commissioner of Central Excise, Mumbai -2003(04)LCX0059 Eq 2003 (155) ELT 0204 (Tri.-Mumbai), Indu Nissan Oxo Chemical Inds. Ltd. v. C.C.E. -1998(03)LCX0137 Eq 1998 (101) ELT 0201 (T) in which it was held that the product cannot be classified under Chapter Heading 2710.11 to 2710.19 unless both the criteria of flash point being less than 25°C and the use of the product as fuel either by itself or in admixture of any other substances in spark ignition engines is satisfied and on the ground that even though the flash point was below 25°C, no evidence was produced by the department that such products are suitable for use as fuel in spark ignition engine.


4. As regards limitation it was submitted that the department has alleged that the goods were mis-declared to the customs in order to evade special excise duty whereas the customs while finalizing the provisional assessment has no where alleged in the show cause notices issued to them that there was a suppression or mis-declaration of facts. It was therefore submitted that the demand is hit by limitation.


5. As regards penalty it was submitted that a penalty of Rs. 72,19,146/-has been imposed on M/s. Ispat Metalic Industries Ltd. who has no relation with them and they have no clue as to how the name of this unit has suddenly cropped up. Further a penalty of Rs. 2 Lakhs has been imposed on Shri A.L. Farab, Manager (Imports) while he has not been made party to the show cause notice at all. The appellants also submitted that since they have not taken Cenvat credit of the Special Excise Duty on the goods and since the inputs have been cleared as such all that was required of them was to reverse the credit actually taken by them and since that has been done by them no further duty is payable.


6. The learned D.R. however submits that in case of propylene trimmer the goods essentially have a flash point below 25°C and have been claimed by the appellants themselves to be classifiable under Chapter Heading 2710.14 as naphtha which means that they are suitable for use as fuel either by itself or in admixture with any other substance and therefore the products are correctly classifiable under Chapter Heading 2710.19.


7. We have considered the submissions. We find that from a plain reading of the tariff Heading 2710.10 is a single (-) entry, which entries 2710.11 to 2710.19 are double (-) entry. In view of this the specification laid down under Heading 2710 (-) are to be satisfied for goods to merit classification under Chapter Heading 2710.11 to 2710.19. The specifications laid down under Chapter Heading 2710.10 are that product should have a flash point below 25°C and it should be suitable for use as fuel in spark ignition engine. This is also the view taken by the Tribunal consistently in Silverchem Industries Pvt. Ltd. v. C.C.E., C.C.E. v. Tuftween Petrochemical Ltd., Jagdamba Petroleum Pvt. Ltd. v. C.C.E, Indu Nissan Oxo Chemical lnds. Ltd. v. C.C.E. (cited supra). In the present case so far as propylene tetramer is concerned the product does not meet any of the above two criterias as it has a flash point 60°C to 100°C and no evidence has been brought by the revenue to establish that the goods are suitable for use either by itself or in admixture with any other substance as fuel in spark ignition engine. This cannot therefore classified under Chapter Heading 2710.19. As regards propylene trimmer the same is known as nonene and bore also though the flash point is below 25°C, no evidence has been brought on record by the revenue to establish that it is suitable for use as fuel in spark ignition engine. On the other hand product being known as here has been specifically considered by the circular issued by the Board in 1994 wherein it has been held that the same is not classifiable under Chapter Heading 2710.19. Even though the appellants have claimed the same as Naphtha under Chapter Heading 2710.14 which now they contend was a mistake on their part, the product even if it is considered to be Naphtha falling under Chapter Heading 2710.14, the same is exempt from a special excise duty. There is no evidence brought out by the Commissioner to show that the product is not Naphtha but motor spirit only. We further note that the goods have been properly described and there is no suppression on the parts of appellant and neither it has alleged by the Customs authorities who have finalized the provisional assessment and therefore it does not lie in the mouth of the excise authority to alleged suppression of facts with the customs authorities at the time of import when there is no such allegation by the customs authorities themselves. The order also suffers from non-application of mind as penalty has been imposed on Shri Parab who has not been made a party to the show cause notice and even mandatory penalty under Section 11 AC has been imposed on M/s. Ispat Metal-lies Industries instead of the appellants and even though it appears to be typographical mistake, no corrigendum has been issued till date.


8. In view of above, we set aside the order of the Commissioner and allow the appeals.

(Pronounced in Court on 15-11-2006)

Equivalent 2007 (208) ELT 0110 (Tri. - Mumbai)

Equivalent 2007 (078) RLT 0886 (CESTAT-Mumbai)

Equivalent 2007 (115) ECC 0360

Equivalent 2007 (141) ECR 0360 (Tri.-Mumbai)