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Indian Oil Corporation Ltd. Versus Commissioner of Central Excise, Chennai

Classification of goods - "process oil / speciality oil" cleared by the appellant - appellants classified the said goods under Heading 2710.50 during the material time and cleared the same on payment of duty. The Revenue entertained a view that the said product would merit classification under heading 2707.90 - whether or not the appellants are engaged in an activity which will amount to "manufacture" of a new excisable product in terms of Section 2 (f) of the Central Excise Act, 1944? - Held th .....

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satisfy the criteria for "manufacture" attracting excise duty. - Classification of goods - circular dt. 13.2.1989 - Held that: - The appellant's claim that Heading 2713 is not applicable to the impugned goods as the product is not oils obtained of distillation of high temperature coal tar, we note that said tariff heading covers similar products in which weight of aromatic constituents exceeds that of non-aromatic constituents. We are in agreement with the reasons elaborated in the circula .....

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inal authority should re-quantify the duty liability after consideration of the demands which are issued within normal period - matter on remand. - Interest on differential duty - Held that: - Board vide master circular dated 10.3.2017 also states that the interest needs to be demanded and recovered following due process of demand and adjudication. As such interest liability without due notice and adjudication is not sustainable. - Regarding the claim of appellant for MODVAT credit on in .....

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of Commissioner (Appeals), Chennai. The said order was passed on remand directions given by the Tribunal vide Final Order No.1135/2006 dt. 29.11.2006. 2. The appellants are engaged in the manufacture of lubricating oils falling under Chapters 27 & 34 of Central Excise Tariff Act, 1985. The issue involved in the present proceedings is regarding classification of "process oil / speciality oil" cleared by the appellant. The appellants classified the said goods under Heading 2710.50 du .....

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d a differential duty demand of ₹ 12,35,01,433/-. The appellants preferred appeal which was rejected for non-compliance of predeposit of ₹ 9 crores to hear the appeal. The said appellate order dt. 20.12.2002 was contested before the Tribunal. The Tribunal vide Final Order No.1031/2004 dt. 08.12.2004 granted waiver of predeposit and set aside the orders of the lower authority. The Tribunal directed the adjudicating authority to pass a fresh order of adjudication in respect of 24 SCNs. .....

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the following points: i. Board circular based on Deputy Chemist opinion against the view of whole conference of collectors ii. Process not amounting to manufacture iii. No Deemed manufacture prior to 2000 period of dispute being 1989 to 1999 iv. Onus is on revenue to establish manufacture v. Classification under 2713.30 is correct as against the classification against 2707 proposed by the revenue Ld. counsel elaborated on each one of the above points along with supporting case laws. These are d .....

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ious processes undertaken by the appellant cannot be contested. He submitted that the speciality oil is industry-specific and is a distinct marketable product different from the inputs used by the appellants to prepare such specific oil for a specific industry. 6. We have heard both the sides and perused appeal records. In order to appreciate the facts and the issues contested, in correct perspective, it is necessary to extract the finding of the original authority as follows : "25. I find .....

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down under Chapter Heading 2713.30. The assessee had quoted various case laws in support of their claim under chapter heading 2713.30 contending that no manufacturing activity takes place by blending the extracts. 26. In the case of Chowgule & company P. Limited Vs. Union of India 1993 (67) ELT 34 (SC) the apex court had held blending of different qualities of ores possessing different physical and chemical compositions, so as to produce ore of contractual specification, does not amount to m .....

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d for the required specifications by their laboratory to suit the customers needs. 27. The assessee had relied on Judgement passed on M/s. Moti Laminates Pvt. Ltd. contending that their product is not a manufactured item. In the judgement it is said that the assessee had to prove that their product is either not produced or manufactured or if they had been produced or manufactured they were not marketed or capable of being marketed. The judgement is based on Sections 2 (d), 2(f) and 3 of Central .....

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is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. In this case the extracts received from M/s.MRL are blended to form process oil, which is a new product, emerging with different viscosity suitable for its ultimate use in the tyre industry. 28. The judgments on which the assessee had relied on Viz. Suprajith chemical Private Limited Vs. Commissioner of CE, Bangalore, Nestle India Lit. Vs .....

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under sub-heading 2707.90 of the Schedule to the Central Excise Act 1985 classified the Speciality oil (Processed Oil) under Sub-heading no.2707.90. In the circular, it was contended that the speciality oil under dispute contained aromatic constituents predominately over non-aromatic constituents and therefore the said goods cannot be classified under heading no.27.10 in view of the provisions of Chapter note 2 of Chapter 27 of the Central Excise Tariff 1985. In such case, the Conference viewed .....

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7.13 covers extracts derived from the treatment of lubricating oils with certain selective solvents and thus furfural extracts of different grades would squarely fall under sub-heading no.2713.39/2713.30 during the relevant period as other residues of petroleum oils obtained from bituminous materials . The processed oils (speciality oils) in question, are manufactured products obtained by blending the said extracts. These are tailor-made products to meet the specific requirements for a particula .....

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tituents in this case is predominate over non-aromatic constituents. The Deputy Chief Chemist, CRCL, has opined that the more appropriate sub-heading for the goods in question would be 2707.90 as similar products in which the weight of aromatic constituents exceeds that of their non-aromatic constituents. The Board agrees with the views of the Deputy Chief Chemist in the matter. 30. The Commissioner (Appeals) has classified the goods under 2707.90. Apart from the fact that he classified the good .....

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ightly classified the process oil under chapter heading 2707.90. The test report of the Chemical Examiner revealed that aromatic constituents were predominant in process oil which render the same to fall outside the scope of Chapter heading 2713.30 and 2710.50 of the Central Excise Tariff Act, 1985 from which I find no reason to deviate. Though the assessee had stressed that no new product emerges after blending, failed to produce any concrete evidence such as Chemical report or any other expert .....

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quot; 7. The admitted facts of the case are that the appellants were receiving raw materials through pipelines from M/s.MRL. They received 5 types of residual extracts called "Inter-neutral and Heavy-neutral" on payment of duty. The suppliers classified the products under Chapter heading 2710.50 and paid duty on the same. The first point for consideration is whether or not the appellants are engaged in an activity which will amount to "manufacture" of a new excisable product .....

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ting to manufacture. 8. Hence the first issue is to decide the question of manufacture. The appellant sought to support their view on the ground that they were simply mixing different extracts with various viscosities to make a 'process oil' with desired viscosities for use in the tyre industry. We have examined this contention of the appellant. Admittedly, the emphasize of the appellant is on the simple process of physical blending to obtain the product of desired viscosity. We note tha .....

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with steam coils and agitators and was heated up to 500C to 600C to provide better blending and also to remove traces of moisture. Upon checking up quality, parameters of viscosity and other requirements, the product is cleared in bulk by lorry or drums to the clients. These are admittedly special process oils which are industry-specific. In the present case, tyre industry exclusively uses this oil for strengthening and for flexibility of tyres. The possibility that the extracts cleared by M/s. .....

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necessary that to categorise a process as manufacturing process that there should be necessarily a chemical change. Blending or compounding one mineral oil with another mineral oil can certainly result in a new product known in the market for specific use. In the present case, the product is known specifically in the tyre industry and it is a speciality oil known differently than the raw material which is nothing but furfural extracts. We note that the processes undertaking by the appellant sati .....

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assification for trade purpose is arbitrary and is based on predominance of a particular hydro carbon group. For classification under Central Excise Tariff, the tariff entries along with section /chapter notes are to be examined. We note that the classification of the impugned goods have been examined by the Board in consultation with Deputy Chief Chemist and the view of the Board was communicated to the field formations through circular dt. 13.2.1989. The appellants are contesting this. It is t .....

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e said clarification and examining the facts of the present case, we note that the classification as ordered by the lower authorities under tariff heading 2707.90 is proper and correct. The appellant's claim that Heading 2713 is not applicable to the impugned goods as the product is not oils obtained of distillation of high temperature coal tar, we note that said tariff heading covers similar products in which weight of aromatic constituents exceeds that of non-aromatic constituents. We are .....

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appeal, they have identified five such notices. These are 487/94 dt. 3.10.94, 200/95 dt. 5.4.95, 567/95 dt. 4.10.95, 192/96 dt. 1.4.96 and 552/96 dt. 1.10.96. There is no allegation in these notices regarding suppression of fact with reason to invoke extended period. Appellants also pleaded that 2 show cause notices which are included in the original order No.24/2001 dt. 22.10.2001 passed in the first round of litigation were not at all issued to them. Apart from this, the appellants also submi .....

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