ORDER
S.S. Kang, Member (J)
1. The appellant filed this appeal against the Order-in-Original No. 55/Commissioner/95, dated 15-9-1995 passed by the Commissioner of Central Excise, Meerut.
2. The Commissioner, Central Excise in the impugned order held that the product engine treatment and manual gear box and differential treatment oils manufactured by the appellant merit classification under sub-heading No. 3811.00 of the Central Excise Tariff as prepared additives for mineral oils and these products are not eligible for the benefit of Notification No. 120/84-C.E., dated 11-5-1984. The Commissioner confirmed the demand for the period of six months from the issue of show cause notice.
3. In respect of product engine coolant, the Commissioner held that this product merit classification under sub-heading 3820.00 of the Central Excise Tariff as anti-freezing preparations and also held that this product is not eligible for the benefit of Small Scale Industries Notification No. 175/86-C.E., dated 28-2-1986 and 1/93-C.E., dated 1-3-1993. The demand of duty was confirmed on the engine coolant for a period of 5 years from the date of issue of show cause notice.
4. In respect of the goods taken into possession redemption fine of Rs. 1,94,700.00 was imposed. A penalty of Rs. 2 lakhs was also imposed on the appellant under Rule 173Q of Central Excise Rules, 1944.
5. Brief facts of the case are that the factory of the appellant was visited by the officers of Central Excise on 9-8-1994 and it was found that appellants were engaged in manufacture of Nulon branded Polytetraflourroethylene (hereinafter mention as PTFE) lubricating oil additives, PTFE grease and coolant and they are not registered with the Central Excise Department. It was found that the appellant were filing a declaration under Rule 174 of Central Excise Rules, 1944 since 1990 and claiming exemption under Notification No. 120/84, dated 11-5-1984. In the declaration the appellant declared following products :
1. PTFE blended lubricating oil.
2. PTFE blended grease.
6. The appellants claimed classification for these products under sub-heading No. 2710.70 and 2710.80 respectively of Central Excise Tariff and claimed benefit of Notification No. 120/84-C.E., dated 11-5-1984.
7. During investigation it was found that the appellants were engaged in manufacture of following goods :
(i) Engine oil additive with PTFE.
(ii) Multipurpose grease with PTFE.
(iii) R-45 Cooling system-conversive inhibitor.
(iv) Manual gear box and differential additive.
(v) Coolant.
8. Therefore, it was found that appellant misdeclared the goods manufactured by them. A show cause notice was issued on 4-10-1994 to the appellant and after adjudication impugned order was passed.
9. The adjudicating officers accepted the plea of appellant in respect of PTFE blended grease and dropped proceedings in this respect.
10. Ld. Counsel appearing on behalf of the appellant submitted that appellant had entered into memorandum of understanding in the year 1985 with an Australian Company M/s. Nulon Products Pvt. Ltd., Australia for purchase of PTFE resin of various grades and for the manufacture of lubricating oils, grease and coolant. The memorandum of understanding entitled the appellant to use the brand name “Nulon” on its products and to have this brand name registered in its own name in India : The PTFE, imported from Australia, is added/blended and mixed with mineral lubricating oils. The appellants filed necessary declarations in terms of Rules 174 of Central Excise Rules, 1944 and they also informed the respondents for availment of benefit under Notification No. 120/84, dated 11-5-1984. In the declaration they had declared their products under Chapter sub-heading No. 2710.60 and 2710.80 of the Tariff. He further submits that the adjudicating authority wrongly held that the product of appellant is not covered under sub-heading No. 2710.60 of the Tariff. The sub-heading No. 2710.60 under the heading Lubricating oils which have clearly been defined as any oil ordinarily used for lubrication excluding any hydro carbon oil which has its flush point below 94 Celsius therefore the product qualifies the criteria laid down in sub-heading No. 2710.60 of the Tariff. Their product cannot be classified under sub-heading No. 3811.00 of the Central Excise Tariff as prepared additives for mineral oil.
11. He relied upon the decision of Hon’ble Supreme Court in the case of Siddheswarian Cotton Mills v. Union of India reported in 1989 (39) E.L.T. 498 and submitted that the Commissioner has classified the goods vis. Nulon Lubricating Oil under Item 3811.00 as prepared additive for mineral oils. His ground is that Nulon Lubricating Oil is added to the ordinary Lubricating Oil and therefore it is an additive. The Commissioner says that it falls in the category of ‘other prepared additives’ occurring in 3811.00 of the Tariff.
12. He submitted that Item 3811.00 of the tariff provides as under :
” Anti knock preparations, oxidation inhibitors, gum inhibitors, viscosity improvers, anti-corrosive preparations and other prepared additives for mineral oils (including gasoline) or for other liquids used for the same purposes as mineral oils”.
13. These preparations listed in this tariff have common features, that is to say, they form a ‘genus’. The ‘genus’ is that they are unifunctional. Their functions are to prevent knocking or to prevent oxidation or to improve viscosity etc. Here we come to the principle of interpretation called Ejusdem Generis. The principle is well known. When the same class of goods is mentioned and thereafter a general term is used, then the general term takes the character of the genus of the goods and in the present case Ejusdem Generis is that the type of preparation mentioned under Item 3811.00 of the tariff have the genus in which category the products in question does not fall.
He further submitted that base oil for the manufacture of Nulon engine, greese and differential oil is a lubricating Hydro Carbon Oil having a flash point above 94 degree Celsius and as such satisfies the criteria laid down under sub-heading No. 2710.60.
He further submitted that Heading No. 27.10(b) of the Tariff clearly makes a reference to ‘preparation not elsewhere specified or included containing by weight 70% or more of petroleum oil or of oils obtained from Bituminous minerals, these oils being the basic constituents of the preparation’. Because the Commissioner has failed to appreciate that keeping in view the classification made under sub-heading No. 2710 the appellants products in question i.e. Nulon Engine, gear and differential oil clearly falls under this heading and has further erred in observing without any reason or basis as such that there are strong reasons to hold that the product in question would not merit classification under sub-heading No. 2710.60 as ‘lubricating oil’ on the basis of Test of Predominance or Common Commercial Parlance. He also submitted that even if the aforesaid oils cannot be classified under sub-heading 2710.60 on the ground that they are not ordinarily used as lubricating oil, the said oils being preparations containing by weight 70% or more of petroleum oils or oils obtained from bituminous minerals, they have to be classified under any one of the other sub-headings of Chapter Heading 2710. His submission is that products in question can be substituted for ordinarily used ‘lubricating oil’ and the price cannot be the deciding factor so far as the basic characteristics of the products in question are concerned.
Regarding denial of benefit of Notification 175/86-C.E., dated 1-3-1986, ld. Counsel svibmits that in the impugned order it was held that Australian Company was not eligible for exemption under the notification. He submits that in fact the Brand name Nulon is registered in the name of the appellant in India, hence they are entitled for the benefit. He relied upon the judgment of Calcutta High Court in the case of Collector of Central Excise v. ESBI Transmission Pvt. Ltd. reported in 1997 (91) E.L.T. 292.
14. Regarding invoking the extended period in respect of Collector, he submits that the respondent were aware of the manufacturing of this product as the appellant filed necessary declarations time to time and the adjudicating authority accepted the plea of time bar caused by the appellant in respect of other products.
15. Shri A.K. Madan, SDR appearing on behalf of the respondents submitted that the appellant admitted the classification in respect of coolant as purposed by the respondents and the appellant has not declared the fact regarding manufacture of coolant to the respondents.
16. In respect of classification of engine treatment oils and differential gear treatment oil, he submits that these oils are used with lubricating oil and not as lubricant. These products are additive to a lubricating oil. He relied upon the description of the product as mentioned on the packing and submits that these products are to be added to the engine oil and gear oil already present in the engine and gear box of a motor vehicle. A similar method of application is prescribed regarding differential oil. He also relied upon the manufacturing process of the products in question and submits that these products are obtained through a process of blending of PTFE with lubricating oil hence the products are other prepared additive for mineral oils as classifiable under sub-heading 3811.00 of the Tariff.
17. Heard both sides and considered the submissions made. In this case show cause notice was issued to the appellant alleging that they wrongly described their product under sub-heading 2710.70 of the tariff and wrongly claimed the benefit of Notification No. 170/84-C.E., dated 11-5-1984. The dispute is now for the following products, as the allegation in respect of multipurpose grease with PTFE is dropped by the adjudicating authority.
(i) Engine Oil additive with PTFE.
(ii) Manual Gear Box and Differential additive,
(iii) Coolant.
The appellant described these products in the declaration as under :
(i) PTFE blended lubricating oil.
(ii) PTFE blended grease.
18. The appellants classified their products under sub-heading No. 2710.60 of the tariff, also claimed the benefit of Notification No. 120/84-C.E., dated 11-5-1984. The notification provides exemption from duty to blended or compounded lubricating oils and greases. The Chapter Heading No. 27.10 of the tariff reads as under.
19. Petroleum oils and oils obtained for bituminous materials, other then crudes, preparation not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals. These oils being the basic constituents of the preparations.
Sub-heading No. 2710.60 of the tariff reads as under :
Lubrication excluding any hydrocarbon oil which has its flash point below 94°C.
The products of the appellant are added to lubricating oil, gear oil. The lubricating oil and gear oil already present in the engine or in the gear box or in the differential box. The description printed on the tin called Nulon describes products as under:
The latest innovation in lubrication technology with ultra-fine activated PTFE (Polytetraflouroethylene and special additives which no engine oil can offer. Direction for use :
1. Change engine oil and filter.
2. Ensure engine is at normal operation temperature.
3. Shake the can well before use.
4. Stop engine and add contents for engine oil.
20. The above mentioned facts shows that products are not used as lubricating oils but added to lubricating oil as additives.
21. The process of manufacturing of the products in dispute is that imported PTFE is added/blended and mixed with mineral lubricating oil. Therefore, the products are not petroleum oils and oils obtained from bituminous as described under Heading 2710 of the Tariff.
22. Entry sub-heading 3811.00 of the Tariff reads as under :
Anti knock preparation, oxidation inhibitors, gum inhibitors, viscosity improvers, anti-corrosive preparation and other prepared additives for mineral oils or for other liquids used for the same purpose as mineral oil.
23. This entry specifically includes other prepared additives and the description of the product given on the tin of the product is the latest innovation in lubrication technology with ultra fine activated PTFE and special additives. The products are used additives to the lubricating oils and we also find that the appellant themselves described their product as additive, hence is covered under this entry. The Notification No. 120/84, dated 11-5-1984 does not cover the items covered under sub-heading No. 3811.00 of the Tariff.
24. In view of above discussion, we find no infirmity in the impugned order in respect of classification of the products namely engine treatment and manual gear box and differential treatment as prepared additive for mineral oil and in respect of eligibility under Notification No. 120/84-C.E., dated 11-5-1984.
25. In respect of engine coolant in the impugned order the Commissioner Central Excise held that ‘on nulon engine coolant the notice has, during the course of personal hearing admitted his liability by stating that there is no difference of opinion about the classification of coolant and they now prepared to pay duty subject to Small Scale Industries benefit being extended to them’.
26. In the impugned order extended period was invoked in respect of demand on engine coolant. We find that this product was not declared by the appellant in the declarations filed by them. They were declaring the products as PTFE blended lubricating oil and PTFE blended grease. The engine coolant is not lubricating oil or grease. Hence we find no infirmity in the impugned order invoking the extended period in respect of engine coolant.
27. The benefit of Notification No. 175/86 or No. 1/93 for SSI exemption was denied on the ground that Australian Company was not eligible for exemption. The Hon’ble High Court of jurisdiction at Calcutta in a case Collector of Central Excise v. ESB1 Transmissioner Pvt. Ltd. (supra) held that brand name belonging to Foreign Company but registered in India for others and the assessee being the owner of the registered trade mark and the provision of Trade and Merchandise Works Act, 1958, acquired exclusive right to use the trade name in India even though it belongs to foreign company who is not eligible for SSI exemption, the assessee having used its own trade mark is eligible for the benefit of Notification No. 175/86-C.E., dated 1-3-1986.
28. In view of the above mentioned decision of the Hon’ble High Court, we remand the matter to the jurisdictional Commissioner of Central Excise to examine the aspect of benefit of SSI exemption notification to the appellant in view of the observations made by the Hon’ble High Court in the above mentioned case of the after affording opportunity of hearing to the appellant.
29. In respect of confiscation of goods the Commissioner in the impugned order held that there is dispute regarding the valuation of goods and also in respect of quantity. The Commissioner Central Excise accepted the plea of the appellant that the respondent has taken the list price in valuating the goods while taking into possession which includes the admissible discount also. He directed the Asstt. Commissioner to determine the value of goods, which is to be subjected to duty at the appropriate rate during the relevant period after giving abatement to the elements like discount etc. When the value and quantity of goods taken into possession is disputed and regarding valuation Asstt. Commissioner is directed to determine the value. The appropriation of cash security is not sustainable. Therefore, we set aside the impugned order in respect of appropriation of cash security and the matter is remanded to the jurisdictional Commissioner. The jurisdictional Commissioner will pass appropriate order after calculating the value and quantity of the goods seized after giving hearing to the appellants.
In respect of penalty, we find that appellants were filing declaration in respect of their products engine, gear box and differential treatment oils and in the impugned order the Commissioner had held that extended period for demand in respect of these products are not invokable. Only in respect of product coolant extended period for demand is invoked hence taking into consideration all these aspects, we held that penalty of Rs. 50,000/- will meet the ends of justice.
30. The appeal is disposed of in above mentioned terms.