TMI Blog1995 (12) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of duty. The demand of duty was consequent to classification of such goods under Tariff Item 6(ii) of the Central Excise Tariff as it stood till 28-2-1986 and thereafter under Heading 22.04 of the new Tariff. These Tariff descriptions read as follows :- 6. Motor Spirit that is to say, any mineral oil....................... (i) is suitable for use as fuel for internal combustion engines. (ii) Power alcohol, that is to say, ethyl alcohol of any grade (including such alcohol when denatured or otherwise treated) which, either by itself or inadmixture with any other substance, is suitable for being used as aforesaid. 2204.00-Ethyl Alcohol, of any grade (including such alcohol when denatured or otherwise treated) which either by itself or in admixture with any other substance is suitable for being used as fuel for spark ignition engines." It was held in the various orders impugned in these appeals that the Rectified spirits, feint [spirit] etc. manufactured by the respective manufacturers were suitable for use as fuel in admixture with petrol. 3. The appeal filed by M/s. Cellullose Products of India Ltd. was first taken up. The impugned order has been passed by Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cohol has been defined in (the Indian) Power Alcohol Act, 1945 as meaning ethyl Alcohol containing not less than 99.5% per cent by volume of ethanol (ethyl Alcohol) measured at sixty degrees Fahrenheit corresponding to 74.4% over proof strength. Their product is not thus Power Alcohol which is the one grade of alcohol suitable for use in IC engines in admixture with petrol and additives. 4. Shri Desai, learned Senior Advocate then referred to the Technical opinion given by various experts regarding rectified spirit being not power alcohol attracting Central Excise duty as demanded by the department. Some of the opinions referred to by him were from the following persons :- (1)Dr. H.C. Srivastava, Emeritus Scientist, Council of Scientific and Industrial Research, Ahmedabad. (2)Dr. H.B. Mathur, Professor Mechanical Engineering Department, Indian Institute of Technology, New Delhi. (3)J.R. Nanda, Chief Research Manager, Indian Oil Corporation Limited, Faridabad. (4)G.R. Menon, Manager (Tech. Services), Indian Oil Corporation Limited, Ahmedabad. It was contended by Shri Desai that the Collector had wrongly held in paragraphs 40.4 and 41.1 that the opinions of Dr. Mathur and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was under that impression in many Collectorates and Government had also issued the circular dated 18-9-1989. The show cause notice had not disclosed what suppression and wilful misstatement of facts had been committed by them. He pleaded in conclusion that the appeal be allowed. 6. Shri V. Lakshmi Kumaran then took up the appeals of M/s. Maharashtra Distilleries. The demand of duty amounting to Rs. 52,55,328.58 had been confirmed by the Collector of Central Excise, Aurangabad who had also imposed a penalty of Rs. 1 lakh. Feint-Spirit which is a by-product obtained in the course of manufacture of their main product, IMFL (Indian Made Foreign Liquor) had been cleared by them to manufacturers of Chemicals. It could not be and was also not actually used as power alcohol. The order does also not mention anything about its suitability as fuel for being used in spark ignition engines. The Collector has only cited the Supreme Court judgment in Synthetics Chemicals Limited. Shri Lakshmi Kumaran referred to the Budgetary Instructions of 1989 wherein it was stated that as there was no substantial use of Ethyl Alcohol as fuel in spark ignition engines in the country the entry (22.04) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Joshi pleaded that the appeals be allowed, raising the alternative plea of limitation also. 9. Shri Subhash Parikh, learned counsel for Amit Alcohol and Carbon Dioxide adopted the reasoning followed by Shri Ashok Desai. Their product had composition of only 94-96% of ethyl alcohol. Their product found use in pharmaceutical industry and not for use as fuel for I.C. engines. It was not power alcohol. 10. Appearing on behalf of M/s. Alembic Chemical Works, Shri R.C. Saxena, advanced the same pleas regarding the product in question not being suitable for use as fuel for I.C. engines and the notice being barred by limitation were raised. There was no suppression involved, he asserted. They had applied for regular licence and permission from the Central Excise authorities. The learned counsel adopted the arguments advanced by Shri Ashok Desai and pleaded that the appeal be allowed. 11. Shri M.K. Jain, learned Senior Departmental Representative gave his reply on behalf of the concerned Collectors to the arguments advanced by the various counsels for the respective appellants. He supported the impugned orders. He referred to the detained discussion in the order passed by Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is to be accepted, rectified spirit will have to be classified under Heading 22.04. by all the Collectorates in the country and no exemption can be made in the case of Baroda Collectorate. 12. Shri Jain, learned SDR then submitted that the alternative plea of exemption is not admissible as the appellants had not followed Chapter X procedure. He relied upon the Supreme Court decision in Eskayef v. Collector of Central Excise reported in 1990 (49) E.L.T. 649 (SC) = 1990 (31) E.C.R. 1 (SC). 13. Shri Jain then took up his reply with reference to the appeal of M/s. Maharashtra Distilleries. He submitted that in the Tariff, the Heading 22.04 was deleted in 1989 but it was restored in 1990. For the period covered by the show cause notice, the entry was there. He referred to his earlier argument about the scope of the expression suitable for use as fuel..... and requested that the same may be considered for this appeal also. The benefit of exemption is not applicable as Chapter X procedure was not followed by them. 14. He adopted similar arguments for the appeals relating to the appellants M/s. Ashoka Organics, M/s. Chaltan Vibhag Khand Udyog Sahakari Mandals Limited and M/s. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsuperable. Even if it is not insuperable it will require suitable modification of engines to overcome the same. Such modification has not been carried out by the manufacturers of motor vehicles in the country. In this connection, the admission in the Collector s order that power alcohol (with petrol) is not used in India for fuel purposes in I.C. engines is very significant. He also referred to the decision of the Supreme Court in India Cable Co. Limited v. Collector of Central Excise, Calcutta [reported in 1994 (74) E.L.T. 22 (SC)] wherein it had been held that marketability of goods is essential for their dutiability. Their product is not marketable and is not marketed as power alcohol for use as fuel for I.C. engines. He reiterated his plea for the appeals to be allowed. 17. We have considered submissions. We have perused the record and the judgments cited before us. Arguments were advanced by both the sides in respect of the appeal filed by M/s. Cellulose products of India Limited and as the order impugned therein is quite an elaborate one, scanning 66 pages, we are dealing with that appeal in detail. In fact the learned counsels who argued the other appeals adopted the arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttee published in 1956 it had been specified that ethyl Alcohol should have a strength more than 99.5% with less than 0.5% water if its mixture with petrol is to remain homogeneous during its transport and use. They had referred to the reply given by Shri M.C. Fernandes during cross-examination by them before him (Collector) that miscibility is not the only criterion for determining use of mixture as fuel. They had relied upon the opinion of Mr. J.R. Nanda that rectified spirit with 5% water cannot be used for blending with petrol due to phase separation, corrosional and allied problems. They had contested the opinion contained in the letter dated 17-4-1987 addressed by Shri G.S. Bhargava of Indian Institute of Petroleum, Dehradun as no sample of theirs had been tested by them and since neither Shri Bhargava nor any other official of that Institute was made available for cross-examination. They had contended that capability and suitability are two different things, the latter being more than the former. They had also referred to the various Technical Reference Books including Encyclopaedia of Chemical Technology by Kirk Othmer in support of their contentions. 19. The Collector ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esults of experiments. The successful engine operations have been reported to be within certain limits. In this connection, we find that the Collector has rejected the evidence produced by the appellants in the shape of the Handbook published by Vehicle Manufacturers in India to claim that none of them indicate that rectified spirit can be used either by itself or in admixture with any substance as a fuel. He has held that this argument is totally unsustainable because when the use of rectified spirit either by itself or in admixture with any other substance for fuel in spark ignition engine is not permitted by the Government for the time being, the literature of the automobile manufacturers cannot deal with any question regarding suitability for such use. We find that the Collector has admitted in so many words that the Government has not permitted use of rectified spirit as fuel either by itself or in admixture with any other substance. The finding that the Government not permitting use of rectified spirit for fuel purposes does not detract from its suitability for such use cannot be supported, particularly as such suitability itself has been called into question. The submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants have been rejected by him. Thus the statement in Shri J.R. Nanda s letter that Rectified spirit normally containing 5% water cannot be used for blending in petrol due to phase separation and allied problems and that 100% Ethanol (Ethyl alcohol) alone can be used as fuel in Spark ignition engines with major modifications in the present passenger car engines has been dismissed with the observation that this in no way helped the party. The question, in our view, is not whether only 100% Ethanol is the suitable product. We are not concerned with such a product but with rectified spirit which has a concentration of around 95% Ethyl Alcohol and about 5% water. Whether this is suitable for use as required is the crucial question. On this question the discussions so far have established that it is not. This is a factor in the appellants favour. The appellants have obtained statements from several offices, organisations and bodies in support of their stand that their product is not suitable for use in the manner referred to in the Tariff entry in question. These are from the Directorate of Prohibition and Excise, Ahmedabad, Dealers of Petroleum products, Manufacturers of Motor V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Instructions and the Circular 55/89, dated 18-9-1989 of the Central Board of Excise and Customs. These are extracted below :- Budget Instructions dated 28-2-1989 There have been some disputes regarding the scope of Heading 2204 covering ethyl alcohol suitable for use in spark ignition engines. Since there is no substantial use of ethyl alcohol as fuel in spark ignition engines in the country this entry is being deleted. The deletion will take effect from the date on which the Finance Bill becomes an Act. However, a separate exemption for goods falling under goods Heading 2204.00 is issued so that these goods are exempted from Central Excise duty from 1-3-1989 (see Notfn. 1-3-1989). As and when the usage of alcohol for this purpose increases and potential for revenue collection develops, the Collectors may bring the matter to the notice of the Board. Circular dated 18-9-1989 Central Excise - Excisability of ethyl alcohol - Rectified spirit/special denatured spirit/ordinary denatured spirit - Issue of show cause notices for the period prior to 1-3-1989 - Classification regarding. Certain doubt have been expressed about the excisability of ethyl alcohol commonly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been treating the product as falling under the item/Heading in question has come out in the note. Copies of orders passed in this regard in the Pune and Chandigarh Collectorates have been submitted while any such decisions elsewhere may not be conclusive of the classification question, as rightly held by the Collector on the authority of decisions and judgments to that effect, the fact that such possibilities existed did point to the entertainment of a bona fide belief on the part of the appellants that their product did not attract duty under that Heading. They had contested the directions from the Departmental authorities to take licence and follow the required formalities. This cannot be taken to amount to wilful misstatement or suppression. The appellants do succeed on the question of time bar. For the reasons considered by us in the preceding paragraphs, we are of the view that the appellants contention on merits regarding the non-applicability of the respective Tariff entries to their product also deserves to be upheld. We order accordingly. 24. An alternative plea was taken by the counsel that even if it is held that the goods in question do fall under the relevant tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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