Full Judgment Text
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CASE NO.:
Appeal (civil) 6289-6290 of 1999
PETITIONER:
M/s. Castrol India Limited
RESPONDENT:
Commissioner of Central Excise, Calcutta-I
DATE OF JUDGMENT: 25/02/2005
BENCH:
RUMA PAL,ARIJIT PASAYAT & C.K. THAKKER
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
Appellant calls in question legality of the judgment rendered by
Customs, Excise & Gold (Control) Appellate Tribunal, Calcutta (in short
the ’CEGAT’). Initially there was a difference of opinion between two
Members i.e. Technical Member and the Judicial Member and the matter
was referred to a third member. The third member agreed with the
Technical Member and by majority the decision went against the
assessee-appellant. The judgment is reported in 2000 (123) ELT 789
Tribunal (Castrol India Ltd. v. Commissioner of Central Excise,
Calcutta-I).
The factual position in a nutshell is as follows:
The appellant is engaged, inter alia, in the manufacture of
blended or compounded lubricating oils. It also processes a product
called ’Super TT’ which the appellant claimed to be a blended
lubricating oil ordinarily used for lubrication. The undisputed
process of manufacture of the said product as stated by the appellant
is as under:
"Base Oils are taken to the blending kettle, heated
to remove moisture. Additives are added and mixed well.
Temperature reduced and MTO and green dye added and mixed
well, to get the final product."
Admittedly, the flash point of the ’Super TT’ is below 94oC
Therefore, assessee appellant claimed that the same is not classifiable
under Heading 2710.60 of the Tariff under Customs Tariff Act, 1985 ( in
short the ’Tariff Act’) as the same covers lubricating oils having
flash point more than 94:C. As such, the product was claimed to be
classifiable as ’others’ under sub-heading 2710.99. Revenue disputed
the position and held that the benefit of the Exemption Notification
No.120/84-CE dated 11.5.1984 is applicable only to the lubricating oils
falling under sub-heading 2710.60, as there is no other heading for
lubricating oil in the Tariff Act. The appellant’s stand was that the
said Exemption Notification extends the benefit to all types of
lubricating oils, irrespective of their classification. As its product
is admittedly a lubricating oil, the scope of the Notification cannot
be restricted to the lubricating oils falling under a particular tariff
entry.
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Two show-cause notices issued related to demand of duty against
the assessee in respect of their blended "Super TT" which was cleared
at "nil" rate of duty during different periods. The said notices
culminated into two different orders whereby proposed amount of duty
and personal penalty were confirmed. The dates of show-cause notices,
the period involved, the duty demanded and the penalty demanded are as
follows:-
Sl.
No.
Date of show
cause notice
Period
involved
Demand of duty
Penalty
1
a)29.1.1992
1.8.1991 to
31.12.1991
Rs.20,46,994.23
Nil
b)3.8.1992
1.1.1992 to
29.2.1992
Rs.10,77,390.00
Nil
c)1.10.1992
1.3.1992
to
31.8.1992
Rs.19,96,362.88
Nil
d)25.2.1993
1.9.1992 to
31.1.1993
Rs.19,83,411.76
Nil
Total
Rs.71,04,159.47
2.
28.1.1994
7.1.1989 to
31.7.1991
Rs.47,59,343.40
Rs.30
lakhs
Assessee preferred two appeals before the CEGAT. It was
submitted that for a long time Exemption Notification dated 16.3.1976
in relation to Item no.11B and the rate of duty was nil was held
applicable to it. The Entry 11B was repealed in the year 1984 and it
became a part of Item 68. Thereafter Notification no.120/84 covered
the field and the same notification continued upto 1994. In between
the Tariff Act was introduced which introduced a new tariff in Chapter
27 w.e.f. 1.3.1986 under the Tariff Act. Section 5A(4) of the Central
Excise Act, 1944 (in short the ’Act’) all along held the field.
Originally Item No.11B was a part of the First Schedule of the Act.
Prior to introduction of Section 5A(4)in the Act w.e.f. 19.5.1988 Rule
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8 of the Central Excise Rules, 1944 (in short the ’Rules’) provided for
exemption. The Notification No. 120/84-CE was issued on 11.5.1984 when
the earlier Excise Tariff was a part of the First Schedule of the Act.
The said notification exempted blended and compounded lubricating oils
i.e. lubricating oils obtained by straight blending of mineral oils or
by blending or compounding of mineral oils with other ingredients. The
said exemption was granted without reference to any tariff item under
which such blended and compounded lubricating oils were classified.
The new Excise tariff contained in the Tariff Act came into force
w.e.f. February 1986. Under that Tariff, blended or compounded
lubricating oils with flash point above 94: C were classifiable under
sub-heading 2710.60 and other lubricating oils along with other
petroleum products were classified under Chapter sub-heading 2710.99
which was a residuary entry. The Exemption Notification No.120/84-CE
continued un-amended till it was rescinded by Notification No.64/94-CE
dated 1.3.1994. Three classification lists were filed by the appellant
which were operative from 1.4.1986, 5.5.1996 and 1.3.1998. All these
classification lists were approved by Assistant Commissioner by
extending the benefit of Notification No.120/84. The classification
list dated 18.3.1988 was operative for the relevant period under
dispute. Since product was having flash point below 94: C, therefore,
there was no question of any suppression as alleged by the Department.
It was further submitted that the notices were issued after prescribed
period of limitation.
The assessee-appellant’s stand was resisted by the Revenue on
the ground that the assessee-appellant had given description of its
product to claim benefit under Notification No.120/84 CE. Its product
was not classifiable under Heading 2710.60. Wrong claiming of benefit
establishes mala fide intention and, therefore, the extended period of
limitation was rightly invoked by the Department. There is specific
and unambiguous definition of lubricating oil under Chapter Heading
2710.60 of Chapter 27. Chapter Heading 27.10 covers a number of
petroleum products and each category is further covered under a
separate sub-heading. Sub-heading 60 covers lubricating oil and there
is no other sub-heading covering lubricating oils. When the exemption
notification granted exemption it necessarily means that lubricating
oil falling under said sub-heading alone was covered.
While the Judicial Member accepted the stand of the assessee-
appellant, the Technical Member took the view that for the purpose of
Exemption Notification No. 120/84-CE lubricating oil for flash point
below 94: C ceases to be lubricating oil as it acquires general
description ’others’ under sub-heading 2710.99. Therefore, the
Department’s view was accepted. With the similar observations the
third member concurred with the member technical and upheld the
Department’s stand.
In support of the appeal, Mr. Joseph Vellapally, learned senior
counsel submitted that the two members constituting the majority lost
sight of the fact that there may be lubricating oils having flash point
94: C which may be classified under Tariff sub-heading 2710.99 as
"others". The view of the majority that "lubricating oil" has been
defined in a particular manner under heading 2710.60 is apparently
erroneous.
In response, Mr. Mohan Parasaran, learned Additional Solicitor
General submitted that the Exemption Notification has to be strictly
construed and the view taken by the majority of the members is on a
proper reading of the various provisions and the Notifications.
It would be relevant to take note of the entries and relevant
Notifications at different points of time. The Notification dated
16.3.1976 read as follows:
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"The Central Government has exempted the
excisable goods of the description in column (3) of
the Table below and falling under the Item of the
First Schedule to the Central Excise and Salt Act,
1944 (1 of 1944), specified in the corresponding
entries in column (2) of the said Table, from so much
of the duty of excise leviable thereon under Section 3
of said Act as is in excess of the duty leviable at
the rates specified in the corresponding entries in
column (4) of the said Table;
TABLE
S.No. Item No. Description Rate of duty
(1) (2) (3) 4)
6 11B Blended or Nil.
compounded
lubricating oils
and greases.
Notification dated 11.5.1984 reads as follows:
"BLENDED OR COMPOUNDED LUBRICATING OILS AND GREASES.
120/84-CE, dt. 11.5.1984.
Blended or compounded lubricating oils and grease
are fully exempt from basic excise duty.
G.S.R. 354(E) \026 In exercise of the powers conferred
by sub-rule (1) of rule 8 of the Central Excise
Rules, 1944, the Central Government hereby exempts
blended or compounded lubricating oils and greases,
that is to say lubricating oils and greases obtained
by straight blending of mineral oils or by blending
or compounding of mineral oils with any other
ingredients, from the whole of the duty of excise
leviable thereon under Section 3 of the Central
Excises and Salt Act, 1944 (1 of 1944).
Explanation - The expression "mineral oil"
has the meaning assigned to it in Explanation 1 to
Item No.6 of the First Schedule to the Central
Excises and Salt Act, 1944 (1 of 1944)."
Entry no. 11B read as follows:
"11B \026 Blended or compounded lubricating oils and
greases:
"Blended or compounded lubricating oils and greases"
means lubricating oils and greases obtained by
straight blending of mineral oils or by blending or
compounding of mineral oils with any other
ingredients.
Explanation \026 The expression "mineral oil" has the
meaning assigned to it in Explanation 1 of Item
No.6."
Chapter 27 so far as relevant for the purpose of present dispute
contains sub-headings 2710.60 and 2710.99 which read as follows:
"2710.60- Lubricating oil, that is to say, any oil
as is ordinarily used for lubrication, excluding any
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hydrocarbon oil which has it s flash point below 94o
C.
2710.99 \026 Others."
In Collector of Customs, Bangalore v. Maestro Motors Ltd. (2004
(174) ELT 289 (SC), this Court held as follows:
"It is settled law that to avail the benefit of a
notification a party must comply with all the
conditions of the Notification. Further, a
Notification has to be interpreted in terms of its
language. If in the Notification exemption is
granted with reference to tariff items in the First
Schedule to the Customs Tariff Act, 1975, then the
same Rules of Interpretation must apply. In that
case the goods will be classified, even for the
purposes of the Notification, as they are classified
for purposes of payment of duty. But where the
language is plain and clear effect must be given to
it. In this Notification what is exempted is
components, including components of fuel efficient
motor cars in semi-knocked down packs and completely
knocked down packs. Undoubtedly, for purposes of
levy of custom duty, by virtue of Interpretative
Rule 2(a), the components in a completely knocked
down pack would be considered to be cars. But in
view of the clear language of the Notification the
components including components in completely
knocked down packs are exempted. Effect must be
given to the wording of the Notification. Thus
components in completely knocked down packs would
get the exemption under this Notification, even
though for purposes of classification they may be
considered to be cars."
Section 5A(4)of the Act reads as under:
"Every notification issued under sub-rule (1), and
every order made under sub-rule (2) of Rule 8 of the
Central Excise Rules, 1944, and in force immediately
before the commencement of the Customs and Central
Excise Laws (Amendment) Act, 1987 shall be deemed to
have been issued or made under the provisions of
this Section and shall continue to have the same
force and effect after such commencement until it
is amended, varied, rescinded or superseded under
the provisions of this Section."
Undisputedly in the present case there was no reference to any
tariff entry in the Notification. Therefore, the majority view is
clearly unsustainable. Additionally, we find that CEGAT had in some
other cases taken the same view as the minority view. It is fairly
accepted by learned Additional Solicitor General that there has been no
challenge to the said decisions one of which is Bharat Petroleum
Corporation Ltd. v. Commissioner of Central Excise, Kolkata-I (2003
(154) ELT 698 (Tri-Kolkata) decided on 30.10.2002.
Exemption Notification 120/84-CE dated 11.5.1984,in view of what
is prescribed in Section 5A(4) of the Act, continued to be operative
and effective as it was not amended, varied, rescinded or superseded
under the provisions of Section 5A of the Act.
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In Stroud’s Judicial Dictionary, 4th Edition, Vol.5, at page 2753,
we find: "That is to say" is the commencement of an ancillary clause,
which explains the meaning of the principal clause. It has the
following properties: (1) it must not be contrary to the principal
clause; (2) it must neither increase nor diminish it; (3) but where the
physical clause is general in terms it may restrict it; see this
explained with many examples,
Stukeley v. Butler Hob, 1971". The quotation, given above, from
Stroud’s Judicial Dictionary shows that, ordinarily, the expression
"that is to say" is employed to make clear and fix the meaning of what
is to be explained or defined. Such words are not used as a rule, to
amplify a meaning while removing a possible doubt for which purpose the
word "includes" is generally employed. In unusual cases, depending upon
the context of the words "that is to say", this expression may be
followed by illustrative instances. (See State of T.N. v. Pyare Lal
Malhotra (1976 (1) SCC 834), Mahindra Engineering and Chemical Products
Ltd. v. Union of India (1992 (1) SCC 727); Sait Rikhaji Furtarnal v.
State of A.P. (1991 Supp (1) SCC 202); and R. Dalmia v. C.I.T. (1977
(2) SCC 467).
The expression "that is to say" is descriptive, enumerative and
exhaustive and circumscribes to a great extent the scope of the entry.
(See Commissioner of Sales Tax, M.P. v. Popular Trading Company, Ujjain
(2000 (5) SCC 511).
The expression "that is to say" in sub-heading 2710.60 has to be
interpreted to be words of limitation. The fact that sub-heading
2710.60 contains an exclusion clause goes to show that there may be
other lubricating oils which may fall in the residuary heading
"others".
The sub-heading 2710.60 significantly uses two expressions. They
are (i) "that is to say" and (ii) "excluding". The first expression is
used in description, enumerative and exhaustive sense and to a great
extent circumscribes the scope of the entry. But the second expression
dilutes the pervasiveness by carving out an exception for the purpose
of the particular sub-heading a particular type of lubricating oil.
All other types of lubricating oil are covered by the residuary entry
i.e. 2710.99.
Under the Notification 120/84CE lubricating oil was exempted
without reference to any tariff heading/sub-heading. Consequently, the
criteria specified in the Notification were satisfied. That being so,
majority view contained in the order of the CEGAT is not sustainable
and is set aside. The minority view as expressed is confirmed.
The appeals are allowed with no order as to costs.