TMI Blog2008 (12) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... filed this application under section 23(C) of the Central Excise Act, 1944 (the Act). The applicant states that it is setting up a joint venture with a non-resident company, namely M/s Emerging Asia Clean Energy Fund, Netherlands to carry out, what it calls, jatropha biotech operations in India. The joint venture shall engage itself in jatropha plantation, extraction of jatropha oil from its seeds and production of pure bio-diesel (methyl ester) therefrom. The pure bio-diesel so obtained will then be mixed with petro-diesel (hydrocarbons) to produce a bio-diesel blend which will be a mixture of pure bio-diesel (methyl ester) (60%) and petro-diesel (hydrocarbons) (40%). The applicant initially stated that the finished product, i.e. the blend, would fall under CETH No. 2920 90 58 of the Central Excise Tariff Act, 1985 (CETA). The applicant sought ruling of this Authority on the following question: "What is the duty payable on a product which is a blend of 60% by weight of bio-diesel and 40% by weight of petro-diesel ? As this blend falls under CETH 2920 9058, it should attract the duty applicable on bio-diesel. 2. The Commissioner of Central Excise, Customs Service Tax, Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant has also filed some technical literature in support of its case. 3.2 The applicant further states that the finished product, i.e., bio-diesel blend, will attract 'nil' rate of duty under Notification No. 4/2007-CE dated 1.3.2007. According to it, recognizing the importance of bio-diesel as a renewable source of fuel, the notification is designed to provide incentive to the production and use of bio-diesel. The applicant also submits that if the proposed blending activity is regarded as manufacture, then the applicant will have to pay duty twice over, as it will not get any input credit for the duty paid on diesel; it will first pay duty on petro-diesel and then on the bio-diesel blend(finished product). 4. The jurisdictional Commissioner states that the process of blending of bio-diesel with petro-diesel amounts to manufacture, and the blend would meet the requirements of IS1460 'Automotive diesel fuel - Specification'. He also states that the benefit of the exemption notification No. 4/2007-CE dated 1.3.2007 cannot be extended to the finished product of the applicant, inasmuch as the exemption is meant for pure bio-diesel which is distinct from the blended mixture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Delhi Cloth and General Mills Ltd. (supra) held that manufacture means bringing into existence a new substance and does not mean merely to produce some change in a substance. The court observed - "The word 'manufacture' used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance, however minor in consequence the change may be." The above decision of the Apex Court has held the field ever since and has been followed in the subsequent decisions. This is evident from the following observation of another Constitution Bench of the Supreme Court in Ujagar Prints Etc. vs. UOI and Others 1988 (38) ELT 535(SC) : " The prevalent and generally accepted test to ascertain that there is 'manufacture' is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the processes" The Court also observed in Delhi Cloth and General Mills Ltd. case (supra) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fuel, a few salient features of which are that: bio-diesel will be produced from non-edible seeds which will be grown in waste/degraded land. It is also a stated policy of the Government that no taxes and duties should be levied on bio-diesel. 7. According to the expert opinions of the Indian Oil Corporation (Research and Development Centre), Indian Institute of Petroleum, Indian Institute of Technology, Delhi and Indian Institute of Technology, Mumbai, blending of pure bio-diesel with petrol-diesel results in a physical mixture, that is to say, no chemical reaction is involved in this process. The blend contains alkyl esters of long chain fatty acids as also hydrocarbon compounds, such as paraffins, naphthenes, aromatics and olefins. It can no longer be called either pure alkyl long chain fatty acids or pure hydrocarbons. Though it is a physical mixture, but it is different from pure bio-diesel and petrol-diesel. According to IIT, Mumbai, the blending is done to improve the physical properties to take advantage of the properties of the bio-diesel without having to modify the engine. Bharat Petroleum Corporation has stated that blending of bio-diesel with diesel is not allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. Except where the context otherwise requires, the headings of this Chapter apply only to: (a) separate chemically defined organic compounds, whether or not containing impurities; (b) mixtures of two or more isomers of the same organic compounds, whether or not containing impurities; except mixtures of acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (chapter 27), " As we have already seen, the bio-diesel blend is not a separate organic compound, but a physical mixture of different organic compounds, namely methyl ester and hydrocarbons which have different chemical compositions. As such, this blend cannot be called 'separate chemically defined organic compound' as contemplated in (a) above. Now, coming to (b) above, it refers to mixtures of two or more isomers of the same organic compound. As per Wikipedia, 'isomers are compounds with the same molecular formula but different structural formulae'. The New Encyclopedia Britannica, Vol.6, 15 th Edition states - 'isomerism, the existence of sets of two or more substances that have identical chemical compositions and molecular weight but different properties. The different substances that make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat items are covered under the residuary entry 'others' of CETH 3824 90 90. On this aspect the following observation of the Supreme Court in Collector of Central Excise vs. Wood Craft Products Ltd. 1995(77) ELT 23(SC), may be referred to- "We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there is an express different intention indicated by the Central Excise Tariff Act, 1985 itself." We do not find the Central Excise Tariff Act expressing an intention different from the above HSN Note. As such, bio-diesel blend falls in CETH 3824 90 90. 10. Coming to the issue of exemption, it is seen that Notification No. 4/2007-CE dated 1.3.2007 amends Notification No. 4/2006-CE dated 1.3.2006 issued under section 5A of the Act. This section empowers the Central Government to exempt, in public interest, an excisable goods, wholly or partly, from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts alkyl esters of long chain fatty acids obtained from vegetable oils and falling either in chapter 29 or 38, from the whole of excise duty. The notification refers to the exempted goods as 'commonly known as bio-diesel'. The expression 'biodiesel' has neither been defined in the notification nor in the Act. The Budget Bulletin 2007 with reference to Central Excise and Service-tax published by Directorate of Publicity and Public Relations, Customs, Central Excise and Service-tax, in its explanatory notes states the following in relation to biodiesel-"29.3. Excise duty on bio-diesel (alkyl esters of long chain fatty acid from vegetable oils falling under chapter 29 or 38) has been fully exempted. (S.No. 53A of the Notification No. 4/2006-Central Excise as inserted vide Notification No. 4/2007-Central Excise refers)" 11. At this juncture, it would be apt to refer to the relevant rules of interpretation. The duty of a court is to discover the true intention of the legislature. In the ordinary course, it should be taken for granted that the legislature has said what it meant and meant what it said. But where there is ambiguity in the language of the statute, or its true meaning i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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