TMI Blog2009 (12) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... about the classification of the product in question - set aside and the appeal is al lowed. - E/2131/2009 - 115/2010-EX(PB) - Dated:- 1-12-2009 - Justice R.M.S;Khandeparkar, President and Shri Rakesh Kumar, Member (T) REPRESENTED BY: S/Shri J. Vellapall),' with R. Krishnan, Advocates, for the Appellant. Shri Sunil Kumar, DR, for the Respondent. [Order per : Justice R.M.S. Khandeparkar, President (Oral)]. - Heard at length the learned Advocate for the appellant arid the learned DR for the respondent. Perused the record placed before us. The appellants challenge the order dt. 27-4-09 passed by the Commissioner, Lucknow whereby the product in question has been held to be classifiable under Chapter heading 2710 11 13 and the duty to the tune of Rs. 2,74,40,128/- including Education Cess and Secondary Higher Education Cess has been confirmed upon the appellants company under Section 11A(1) of the Central Excise Act, 1944 and has directed payment of interest thereon and has also imposed equal amount of penalty. 2. The challenge to the impugned order is on the ground that authority below ignored the basic ingredients of the definition of the term 'motor spirit' as is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity below and the Department has not produced any evidence in relation to these aspects, in spite of the fact that the same was absolutely necessary considering the law laid down by the Tribunal and duly approved by the Apex Court. He further submitted that the authorities have placed reliance in the chemical reports and opinion for arriving at the finding about the classification of the product as claimed by the respondent, without affording an opportunity of testing the correctness of such reports by allowing the appellants to cross-examine the authors of the reports and opinion, ignoring the specific request in that regard by the appellants. The cross examination was rejected without any justifiable ground and the same apparently discloses arbitrary exercise of powers by the authority below while approving the classification as claimed by the Department. Drawing our attention to the copy of the opinion submitted by one Shri K.S. Verma, Consulting Engineering Possessing B.E. Chemical Engineering Degree from Punjab University, the learned Advocate submitted that the authority below totally ignored the opinion of this expert, while giving undue importance to the report and opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etroleum's report he submitted that the same clearly opines the product to be disclosing the properties with necessary contents which would satisfy the specifications of motor gasoline and further that it disclosed higher research octane number of 95.6 and Anti Knock Index (AKI) as determined by CFR engine which report was not available before the Chemical Examiner, who, earlier had noted in his report that the market enquiry could be made for products' actual use. Considering the report of Indian Institute of Petroleum read with Chemical Examiner's report according to learned DR. the product clearly satisfies the ingredients of the term 'motor spirit' under Chapter 27 and therefore, there is no case for interference in the impugned order. As far as the decision in the matter of Jagdamba's case is concerned, according to the learned DR. the same has been correctly distinguished under the impugned order, taking note of difference in the facts between the case in hand and those in the matter of Jagdamba's case. He further submitted that the product by itself may not be suitable for use as fuel in spark ignition engine but in cases of mixture of the same product with any other substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 60 degree C between the temperatures at which 5% and 90% by volume (including losses) distil". Plain reading of the above clause from the supplementary note to Chapter 27 would, therefore, disclose that a product can be said to be 'motor spirit' if it is suitable for use as fuel in spark ignition engine. Whether the product is suitable for the purpose for which it is specified in the definition clause in taxing statute is to be understood not only on the basis of any expert opinion but equally it is necessary to understand such suitability from commercial point of view also. In Indu Nissan Oxo Chemical Indus. Ltd. case while dealing with the similar expression the Tribunal had dealt with in detail as to how such expression should be understood therein. The term 'motor spirit' was defined as any mineral oil (excluding crude mineral oil) which has its flash point below 25 degree C and which, either by itself or in admixture with any other substance, is suitable for use as fuel for internal combustion engines and taking note of chapter heading and description in relation to 'motor spirit' in the Tariff Act, it was observed thus - "The characteristics that the 'Motor Spir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractically or commercially so used, then the claim made by the Appellants that it should fall under sub-heading 2710.21 as Aviation Turbine Fuel which does not prescribe criterion of suitability, has lot of force and has to be accepted". 9. In Jagdamba Petroleum (P) Ltd. case, the adjudicating authority had classified the goods under sub-heading 2710.13 on the ground that the flash points of the liquids were below 25 degree C and the goods were suitable for use as fuel either by themselves or in admixture with any other substance in spark ignition engine. The Tribunal noted that the Chemical Examiner's report disclosed that the flash points of the samples were below 25 degree C. But the report also stated that "however, at present, it is not possible for this lab to say whether each of the products under reference by itself or in admixture with any other substance is suitable for use as fuel in spark ignition engine or otherwise". The Tribunal, therefore, observed that the said report could not have been the basis for finding record by the Commissioner that the admixture of the subject goods with any other substance may be suitable for use as fuel in spark ignition engine, the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 796 : 2005. Higher octane number is due to the presence of higher aromatics of (43.2% by wt.) in OCS. The high olefin con tent of 32.5% by wt. is responsible for the higher potential and existent gum of 33181.0 g/m3 and of 52 g/m3 respectively". 12. It cannot be disputed that the decision in Jagdamba's case clearly referred to the observation by the Chemical Examiner in its report to the fact that it was not possible for the laboratory to say whether each of the products under reference by themselves or in admixture with other substance were suitable for use as fuel in spark ignition engine or otherwise: At the same time, it cannot be disputed that similar such doubt had been referred to in the report submitted by the Chemical Examiner in the case in hand. But at the same time, the report obtained from Indian Institute of Petroleum, there is observation to the effect that the product is within the specified limits of the motor gasoline. Learned Advocate for the appellant has further drawn our attention to the conclusions re corded in the report submitted by the Indian Institute of Petroleum and there is thus - "The physicochemical characteristics of Organic Composite solvent (O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same being not useful as fuel in spark ignition engine cannot be understood by mere reading from para 4 of the opinion. At the same time, it cannot be disputed that the decision in Jagdamba's case was squarely on the basis of Chemical Examiner's observations which revealed the report to be inconclusive. Though the appellants would be justified in contending that the Chemical Examiner's report in case in hand is also inconclusive, it is difficult to accept the similar contention in relation to the report by Indian Institute of Petroleum. However, at the same time, it is also difficult to accept that the report of Shri Verma to be the gospel truth. As rightly pointed out by the learned Advocate for the appellant before relying upon such reports, it is necessary to test the veracity of such reports by subjecting the authors of such report to cross- examine. Undoubtedly in the case in hand, the appellants had requested for cross-examination of the experts who had submitted the reports and opinion on behalf of the Department. Learned Commissioner, however, rejected the request by observing that the appellants did not disclose the reasons for cross examination and that the cross-examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to cross-examine him nothing could have prevented the Department from doing so. 17. As already stated above, it is also necessary for learned Commissioner to ascertain the use of the product in question as fuel in spark ignition engine not only on the basis of technical reports but also from the practical and commercial points of view. The decision of the Tribunal in Indu Nissan Oxo Chemical Indus. Ltd's case is absolutely clear in that regard and certainly applies to the facts of the case. However, the impugned order nowhere disclosesany excise in that regard having been done by the adjudicating authority. 18. It was also sought to be argued on behalf of the Department that the product in question is sought to be utilized for adulteration of petroleum. How ever, it was candidly admitted that there is no material on record in support of such contention. 19. As regards the decision in the matter of Reliance Cellulose Products Ltd. v. CCE, Hydera bad, 1997 (93) E.L.T. 646 (S.C.) the Apex Court held that "It may be that in a given case, the report of the Chief Chemist may be demonstrated to be palpably wrong. In such a case, the Court may direct re examination of the whole i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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