TMI Blog1989 (2) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... an Iyer, for the respondents. 3. M/s. Indian Petrochemicals Corporation Ltd. (the respondents) filed a classification list on 20-3-1982 for their products including Heavy Normal Paraffins (HNPs). This classification list was filed pursuant to the changes made in the tariff nomenclature by the amendments brought about by the Finance Bill of 1982. On the basis of the respondents declaration that HNPs were derived from refining of crude petroleum or shale, the classification was approved by the proper officer on 31-3-1982 directing classification of HNPs under Item 11A(4) of the CET. It appears that the excise authorities felt later on that the classification was not correct since HNPs were obtained by processing of kerosene and not by refining of crude petrolem or shale. The Asstt. Collector of Central Excise, Baroda, therefore, issued a show cause notice dated 17-6-1982 to the respondents intimating reclassification of the product from Item 11A(4) to Item 68 of the CET. They were also advised that the reclassification took effect immediately from the date of the show cause notice and that the modification of the approved classification was done under Rule 173B(5) of the Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xciting the molex chambers are two streams in the extract and the Raf-finate. These streams enter their respective columns for recovery of the desorbent components from the feed range material. Extract column bottoms are sent to a splitter column which separates the heavier paraffins from the light paraffins. The overhead stream of product splitter column is the normal paraffin stream used for further processing in Pacol and is sent to storage tanks. The bottom stream is heavy normal paraffin (HNP) which is also sent to storage for dispatching to product transfer department." 5. There is no dispute on the results obtained on test of samples drawn from HNPs on different dates. The test reports read as follows :- The Sample is in the form of colourless mineral oil having following characteristics : (1) Flash point is above 25 C. (2) Smoke point is above 18 mm. (3) It has final boiling point not exceeding 300oC." 6. Item 7, CET, relating to Kerosene , as it stood prior, and subsequent, to the Finance Act, 1982, read as follows :- Prior to the Finance Act, 1982 Kerosene, that is to say, any mineral oil (excluding mineral colza oil and turpentine substitute) which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in S.C.A. No. 1175 of 1970 in the case of Mehta Bros. v. Superintendent of 1.0. C. Range, Division No. II, C. Ex. Office, Ahmedabad. The goods in that case were the result of heating of a mixture of mineral oil (spindle oil, lubricating oils) with sulphuric acid, sodium carbonate and Fuller s earth when the base mineral oil became colourless and odorless. The question was whether the resultant oil would fall under Item 11A, CET. Item 11A, as it stood at the material time, covered all products derived from refining of crude petroleum or shale (whether gaseous, liquid, semi-solid or solid in form), not otherwise specified. The H.C. held that only the base mineral oil would be a product derived from refining of crude petroleum and that the processed oil would not be such a product. The latter was not derived from refining of crude petroleum. It has derived from processing of mineral oil which, in its turn, was derived from refining of crude petroleum. The Court ruled that a product, to be excisable under Item 11A, must be the immediate result of refining of crude petroleum and not one containing, as its ingredient, a product derived from refining of crude petroleum. 10. Shri Sunda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department, Shri Raghavan Iyer, for the respondent, submitted that it was well settled that the commercial parlance test would not apply to the determination of the scope of a tariff entry if the statute contained a definition of the terms used in the entry. In this connection, he relied on the Supreme Court s judgment of Asian Paints India Ltd. v. Collector of Central Excise 1988 (35) E.L.T. 3 (SC) to the effect inter alia that where a word has not been defined, it must be construed in, its popular sense. Reliance was placed also on the observations of the Patna High Court I.T.C Ltd. Am. v. Collector of Central Excise Ors. 1988 (35) E.L.T. 69 (Pat.) to the effect that the entries in the Schedule of a taxing statute, in the absence of a definition, must be understood as in common or commercial parlance. Yet another authority cited was the Tribunal s order in Collector of Central Excise, Bolpur v. Eastern Chemofarb Limited 1988 (34) E.L.T. 173 (Tribunal) (para 13) which reads as follows :- As the notification itself gives meaning of maleic resin what is to be seen is whether the respondents products come within the definition. If they do, any other consideration like technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 7 CET was comprised of two sub-items. (1) A.T.F., (2) Others (in plural). The latter sub-item took within its scope not only kerosene as commonly understood but other mineral oils also, so long as they conformed to the definition contained in the entry. If this were not so, the two sub-items would have been (1) A.T.F. (2) Kerosene. 16. The Department itself had understood Item Nos. 6 to 11A of the Central Excise Tariff Schedule as including not only straight products of refining of petroleum but also those produced out of feed stock. Central Excise Notification No. 276/77, dated 21-12-1977 was cited in this connection. As laid down in the Supreme Court s judgment in the case of J.K. Steel v. Union of India 1978 (2) E.L.T (J 355) followed by the Tribunal in PIB Co. v. C.C.E., Calcutta 1988 (35) E.L.T. 130, notifications could be looked into for ascertaining the scope of entries in the excise tariff schedule. 17. If it was held that the subject goods would fall under Item No. 7, CET, Shri Raghavan Iyer submitted, the matter could go back to the authorities for examination of the case with reference to Notification No. 276/77. In this context, he submitted that there could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Item No. 7, CET, as to smoke point and final boiling point. It is also an indisputed position that the goods are not used as illuminant in oil burning lamps. The question is whether, even so, the goods fall under Item No. 7, CET, as contended by the respondents. It they do not, the classification will be under Item No. 68, as contended by the appellant-Collector. 22. It is nobody s case that the subject goods are known as kerosene as the expression is ordinarily understood. But, is Item No. 7, CET, insofar as kerosene is concerned, limited to kerosene as ordinarily understood and ordinarily used as illuminant in oil burning lamps? Or, will it be taken in any mineral oil that conforms to the definition of the terms Kerosene and A.T.F in the entry though not used as illuminant in oil burning lamps? According to the definition, any (which will include every) mineral oil which has a smoke point of 18 mms. or more and has a final boiling point not exceeding 300 C falls within the definition of Kerosene and A.T.F. in the entry. There is, however, an internal clue to the scope of the entry. It is in the explicit exclusion of mineral colza oil and turpentine substitute which but for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the standard white which is the darkest shade, frequently called export white because it conforms generally with the colour or exported kerosene." (The Petroleum Dictionary by David F. Tver and Richard W. Berry published by Van Nostrand Reinhold Company). (Page 187-88) It may be seen from the above, and even otherwise it is a matter of common knowledge, that kerosene is used not only for illumination but also for heating and cooking, as solvent etc. Use for illumination is thus but one of its uses. It is again a matter of common knowledge that kerosene is used at least in urban households not so much for illumination as for heating and cooking. It would therefore be reasonable to presume that the words in parenthesis after Kerosene are only meant to identify the product and not to define its scope and coverage. This view gains strength if we look at the definitions of mineral colza oil and turpentine substitute, the excluded products. They are:- Mineral turpentine (See petroleum spirits") Petroleum spirits A refined petroleum distillate with volatility, flash point and other properties making it suitable as a thinner and solvent in paints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petroleum etc. It does not specify the process. It would not therefore be correct to say that the ratio of the Gujarat High Court s judgment applies to the interpretation of Item 7. So long as a given product s source can be traced back to petroleum it does not appear, in our opinion, that it should be an immediate derivative from petroleum. It could be derived from a derivative of petroleum. That this would be the correct way to interpret the entry, would be borne out if we have a closer look at the Explanation I to Item 6, which is also applicable to Item 7. The definition of mineral oil embraces not only an oil as defined earlier but also includes any similar oil produced by synthesis or otherwise. Evidently, an oil produced by synthesis need not be a derivative from petroleum. The similarity referred to in the Explanation would appear to be not to the source from which the synthetic product is derived but to its being a single liquid hydrocarbon or liquid mixture of hydrocarbons. In the present case, it is an undisputed position that the HNPs are derived from kerosene which is, in turn^ derived from petroleum. In our view, therefore, whether one considers HNPs as a derivative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper) are oil seeds within the meaning of Section 14 of the Central Sales Tax Act, 1956. Section 14(vi) defined oil seeds thus :- Oil seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in industry, or in the manufacture of varnishes, soaps and like, or in lubrication, and volatile oils used chiefly in medicines, perfumes, cosmetics and the like . The High Court differed from the view held by the Andhra Pradesh, Madhya Pradesh, Punjab and Madras High Courts to the effect that notwithstanding the said definition of oil seeds the word should be construed to mean what in common parlance is known as oil seeds, and held that if that was the intention of the Legislature, there was no necessity to elaborate the term further by explaining it to mean seeds yielding certain varieties of volatile and non-volatile oils used for certain specified purposes. The Explanation contained words and expressions which were not in popular usage. They were technical terms and had to be construed accordingly. In the view of the High Court, no question arose as to in what way the term oil seeds was understood in common parlance in view of the definition of the term. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mps. 28. We shall now briefly refer to the other authorities cited before us by one or the other side. 29. In the case of Nav Bharat Enteiprises 1983 E.L.T. 1134 (supra) relied upon by Shri Sundar Rajan, the question before the Tribunal was whether liquid paraffin was liable to duty under Item 8 or 11A or 68, CET. The Tribunal ruled out Item 11A in view of the Gujarat High Court s Judgment in the Mehta Brothers case and the Board s Tariff Advice which established that liquid paraffin was not derived from refining of crude petroleum. This decision has no application to the present case. We have already noted that the Gujarat High Court s Judgment in the Mehta Brothers case does not apply to the facts of the present case. 30. Shri Sundar Rajan also placed reliance on the Supreme Court s Judgment in the case of Krishna Carbon Paper Co. 1988 (37) E.L.T. 480 (SC). The ratio of this judgment has been set out in para 11 of this order. In our view, this judgment does not advance the case of the Revenue. This is because there is a definition of the term Kerosene and A.T.F. in the tariff entry. This definition, as we have seen, is based on scientific criteria. If the intention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as observed that it is true that an artificial definition may include a meaning different from or in excess of the ordinary acceptation of the word which is the subject of definition; but there must then be compelling words to show that such a meaning different from or in excess of the ordinary meaning is intended. Where, within the framework of the ordinary acceptation of the word, every single requirement of the definition clause is fulfilled, it would be wrong to take the definition as destroying the essential meaning of the word defined. 34. These authorities support our view that the subject goods, though not immediately derived from petroleum are covered by the inclusive definition in Explanation I to Item 6 and, therefore, Explanation I to Item 7 and that they fall under Item 7, though they are not Kerosene or ATF. 35. The Supreme Court judgment in State of Tamil Nadu v. Pyarelal Malhotra 1983 E.L.T. 1582 (SC) (para 5 and 6) was cited by Shri Sundar Rajan. The Supreme Court has observed that a definition is expected to the exhaustive. Its very terms may, however, show that it is not meant to be exhaustive. For example, a purported definition may say that the term sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us :- Aluminum - (a)(ii) Wire bars, wire rods, and castings not otherwise specified." The contention for the appellants was that properzi rods (made by the properzi process) were not aluminum wire rods since they were not the conventional wire aluminum rods falling under the said entry. It was the contention that properzi rods were the result of several processes and therefore they were distinct and different from aluminum rods mentioned in the entry. This contention was rejected by the Supreme Court. We do not see relevance of this judgment to the present case. It may be that HNPs do not quite fit in with the general description Kerosene as Commonly understood. But then, unlike Item 27 (a)(ii), which was in issue before the Supreme Court, Item 7 with which we are concerned does not stop with specifying kerosene. It goes on to define the expression and the definition is of a wide amplitude taking within its sweep any mineral oil conforming to the criteria laid down therein. The present case is not analogous to the case before the Supreme Court. 37. Shri Sundar Rajan has cited the Tribunal s decision in the case of Bongaigaon Refinery Petrochemicals Ltd. v. Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if Kerosene is charged to duty twice. Here, the classification of HNPs would be not as Kerosene but as others under sub-item (ii) of Item 7. Applying the principles laid down by the Supreme Court in Empire Industries Ltd. Ors. v. Union of India Ors. 1985 (20) E.L.T. 179 which were affirmed by a 5 - Member Bench of the Court in Ujgar Prints Ors. v. Union of India 1988 (38) E.L.T. 535 (SC). We are of the opinion that the processes applied to Kerosene resulting in the manufacture of HNPs constitute manufacture for the purpose of levy of Central Excise duty and the sub-item (ii) of Item 7, CET, namely, others is wide enough to cover not only Kerosene but also HNPs which constitute a product different from Kerosene though derived from it. Thus, if HNPs are liable to taxation, it is not a case of double taxation. It would be a case of multi-stage taxation which is a common feature of the Central Excise Tariff Scheme. 39. Reference was also made by Shri Iyer to the Supreme Court judgment in Collector of Central Excise, Bombay v. Kiran Spinning Mills Ltd. 1988 (34) E.L.T. (para 4). The question in that case was whether cutting the long fibre (TOW) into short fibre (steple fib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speaks of iron in crude form. When the duty is paid once on this commodity there is no occasion for levy at another stage. Acceptance of the contention of the Revenue would result in levy of excise duty twice on crude iron which is not contemplated by the scheme of the item. The High Court was construing Item 25, CET, which covered iron in any crude form (including pig iron and cast iron). This judgment, in our view, is not applicable to the facts of the present case. When the HNPs are charged to excise duty, it is not charged to duty as Kerosene for the simple reason and it is not Kerosene but a derivative of kerosene, resulting from a process of manufacture applied to Kerosene and sub-item (ii) of Item 7 is wide enough to cover both. 42. Shri Raghavan Iyer has also fairly drawn our attention to para 29 of the Tribunal s decision in Srinivasa Metal Industries, Rajainundry v. Collector of Central Excise, Guntur 1987 (30) E.L.T. 578. In this para, the Tribunal has extracted certain observations of the Supreme Court in the case of Tata Iron Steel Co. Ltd. AIR 1976 SC 599. The observations runs thus :- There is nothing in Article 265 of the Constitution from which one can spin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relevance to the present case where the word similar has not been used in Item 7 or its sub-item (ii). However, the observations do lend indirect support to our view that the goods falling for classification under sub-item (ii) need not be identical with kerosene but need be only similar to it and the similarity is, as we have noted, in conforming to the definition of Kerosene. 45. In the light of the foregoing discussion, our conclusions are :- (a) the subject goods, namely, Heavy Normal Paraffins fell for classification during the material period under Item 7, CET ; (b) the subject goods are the result of a process of manufacture applied to Kerosene and are, therefore, excisable under sub-item (ii) of Item No. 7, CET; (c) however, the question of applicability of Central Excise Notification No. 276/67-CE, dated 21-12-1967, as it stood at the material time, needs be examined by the Asst. Collector after due opportunity being given to the respondents. 46. Accordingly, the appeal is allowed and the matter remanded to the Asst. Collector who shall dispose of the claim of the respondents with reference to Notification No. 276/67-CE, dated 21-12-1967 after giving due op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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