ORDER
D.C. Mandal, Member (T)
1. By the impugned order the Collector of Central Excise (Appeals) has disposed of five Orders-in-original in which Assistant Collector of Central Excise, Nadiad confirmed demands for differential duty of Central Excise. The dates of the show cause notices, periods covered by the show cause notices, Tariff Item under which the goods were cleared, Tariff Items under which the differential duty was demanded in the show cause notices and the Tariff Items under which the demands were confirmed by the Assistant Collector are given in the following table :-
————————————————————————
PERIOD DATE OF GOODS CLEARED DUTY DEMANDED DEMANDS FOR
S.C.N. UNDER TARIFF IN S.C.N. UNDER DUTY CON-
ITEM TARIFF ITEM FIRMED UNDER
TARIFF ITEM
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(1)15.9.72 14.2.1974 Inferior Motor Spirit Tl Refined Diesel
to 5.10.72 Kerosene Tl No. 7 No. 6 Oil T.I. 8.
(2)12.12.72 14.2.1974 -do- -do- Diesel Oil T.I.
to 17.1.73. No. 9.
(3)18.1.73 16.1.1974 -do- -do- -do-
to 11.2.73
(4)17.3.73 16.3.1974 -do- Refined Diesel Refined Diesel
to 16.4.73 Oil T.I. 8. Oil T.I. 8.
(5)25.9.73 24.5.1974 -do- Motor Spirit T.I. -do-
to 9.10.73 No. 6.
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Collector (Appeals) has rejected the appeals filed before him by the appellants against the Orders-in-original of the Assistant Collector on the ground that the demands were confirmed on the basis of the test results of the samples drawn from the goods manufactured by the appellants and as such, there was no merit in the appeals.
2. The appellants prayed for introduction of certain additional documents to which no objection was raised by the learned J.D.R. for the respondent. Additional documents were, therefore, allowed to be introduced as evidence.
3. Arguing for the appellants Shri A. F. Patel, learned Advocate has stated that Oil and Natural Gas Commission obtained natural gas from the wells in Bombay High. Pure gas is sold to Electric Supply Companies. Liquid residue was sold as Condensate by Open Tender. One buyer of Condensate was M/s. Petrogena. The said condensate was processed and two products, viz. special boiling point spirit falling under Tariff Item 6 of the Central Excise Tariff and mineral turpentine oil falling under Tariff Item 11 were ob-tained. Further residue which remains in the course of manufacture of the above-mentioned two products is called residue oil. The present appellants are the Successor to M/s. Petrogena. Appellants obtained Central Excise licence for special boiling point spirit and mineral turpentine. For the residue oil, no licence was obtained by Petrogena as well as by the present appellants. The Central Excise authorities did not ask the appellants or their predecessor to obtain any Central Excise licence. M/s. Petrogena worked for two years and present appellants started working with effect from 31.7.1971. For residue oil appellants maintained register. They accumulated this residue oil and wrote to the Assistant Collector of Central Excise on 10.10.1971 to permit them to use the said oil in Boiler as fuel. No permission or any clarification was received from the Assistant Collector. Appellants used 10,000 litres of residue oil without permission of the Central Excise authorities before 20.10.71. They also sold 10,000 Litres of residue oil on 13.11.71,10,000 Litres on 14.11.71 and 7,500 Litres on 17.11.1971. In all the appellants used/sold 37,500 Litres of residue oil. The learned Advocate has further stated that a sample was drawn from the residue oil on 4.9.1971, but no test result was communicated to the appellants. Department’s view was that residue oil was kerosene oil falling under Tariff Item 7 of Central Excise Tariff. Appellants paid duty under this Tariff Item under protest from December, 1971 onwards. The learned Advocate has further argued that residue oil is not mineral product. It was obtained from gas. According to him, the goods are not excisable. He has also contended that if it is held that residue oil is excisable, then it will fall under Tariff Item 10 of the Central Excise Tariff as furnace oil. Appellants are willing to pay duty under this Tariff Item subject to exemption and limitation. It has, further, been stated by the learned advocate that the Department did not declare the factory of the appellants as Refinery under Rule 140 of the Central Excise Rules, although they applied for the same.
4. The next contention of the learned advocate is that samples were drawn on different dates and the same were tested, but complete test reports were not furnished to the appellants. Only extracts from the test reports were forwarded to them. Samples were also retested by the Chief Chemist. There was wide variation between the results found on the original test and the retest by the Chief Chemist. The test reports are not, therefore, reliable and classification cannot be done on the basis of the same. He has relied on the decision of Bombay High Court repotted in 1983 ELT 2200 in which it was held that when the sample showed two results it was not permissible for the Department to select the one which suits the Department. In this connection, the learned advocate has drawn our attention to the test results at pages 25,30,42,53,54,67,68,89 and 98 of the Paper Book filed by the appellants.
5. The learned Advocate has argued that the demands for differential duty were issued under Rule 10 of the Central Excise Rules. He has stated that demands at serial Nos. 1 & 2 were barred by limitation as the show cause notices were issued after the expiry of one year from the relevant dates. He has also stated that demand show cause notices were issued for duty under Tariff Item 6 except in one case whereas in the case of show cause notices at serial Nos. 1,4 & 5 demands for differential duty were confirmed under T.I. 8 and in respect of show cause notices at Serial Nos. 2 & 3 demands were confirmed under T.I. 9. In other words, only in respect of show cause notice at Serial No. 4 demand was confirmed under the same Head as alleged in the show cause notice.
6. Arguing for the Revenue, learned J.D.R. Smt. Chander has stated that the learned advocate has not given any reason as to why the goods should not be excisable. According to her, the residue oil is mineral oil. She has also argued that assessment in all cases were provisional and not final. Appellants executed B-13 bond under Rule 9B of the Central Excise Rules. They pleaded it in their stay petition. Show cause notices say that the assessment was subject to chemical test and not final. So, there is no question of time bar of the demands.
7. We have considered the case records and the submissions of both sides. The goods were cleared under Central Excise Tariff Item 7 as kerosene. Show cause notices were issued for differential duty under Tariff Item 6 in four cases and under T.I. 8 in one case. The demands in two cases were confirmed by the Assistant Collector classifying the goods under Tariff Item 9, and the remaining three demands were confirmed under Tariff Item 8 of the Central Excise Tariff. The appellants’ contention is that the goods do not fall under any of the above four Tariff Items. According to them, if the goods are really excisable then the same should be assessed under Tariff Item 10 of the C.E.T. Classification depends on the specification of the goods. For proper appreciation of the dispute involved In these cases, we reproduce below Central Excise Tariff Items 6, 7,8,9,10 and 11 -A. We are also reproducing below the test results of the samples drawn from Residue oil on various dates :-
Tariff Items :-
“6. MOTOR SPIRIT –
Motor Spirit, that is to say –
(i) any mineral oil excluding crude mineral oil which has its flashing point below seventy-six degrees of Fahrenheit’s thermometer, and which, either by itself or in admixture with any other substance, is suitable for use as fuel for internal combustion engines; and
(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.
Explanation I. – “Mineral Oil” means an oil consisting of a single liquid hydrocarbon or a liquid mixture of hydrocarbons (except for associated impurities) derived from petroleum, coal, shale, peat or any other bituminous substance, and includes any similar oil produced by synthesis or otherwise.
Explanation II. – “Flashing point” shall be determined in accordance with the tests specified in this behalf in the rules made under the Petroleum Act, 1934 (30 Of 1934).”
“7. KEROSENE –
Kerosene, that is to say, any mineral oil (excluding mineral colza oil and turpentine substitute) which has a flame height of eighteen millimetres or more and is ordinarily used as illuminant in oil burning lamps.
Explanation I. – The expression “mineral oil” has the meaning assigned to it in Explanation I to Item No. 6.
Explanation II. – “Flame height” shall be determined in the apparatus known as the smoke point lamp in the manner prescribed in this behalf by the Central Government by notification in the Official Gazette.”
“8. REFINED DIESEL OILS AND VAPORIZING OIL –
that is to say, any mineral oil (excluding mineral colza oil and turpentine substitute), which has its flashing point at or above seventy-six degrees of Fahrenheit’s thermometer, and satisfies either of the following requirements –
(i) the oil has a flame height of ten millimetres or more but less than eighteen millimetres, or
(ii) the oil has a flame height of less than ten millimetres but has a viscosity of less than one hundred seconds by Redwood I Viscometer at one hundred degrees of Fahrenheit’s thermometer, and contains less than one quarter of one percent by weight of any bituminous substance.
(a) Refined diesel oil….
(b) Vaporizing oil….
Explanation. – The expressions “mineral oil”, “Flashing point” and “flame height’ have the meanings respectively assigned to them in Explanations I and II to Item No. 6 and in Explanation II to Item No. 7.”
“9. DIESEL OIL, NOT OTHERWISE SPECIFIED, that is to say, any mineral oil which –
(i) has a flame height of less than ten millimetres;
(ii) contains one quarter of one percent or more by weight of any bituminous substances; and
(iii) possesses a viscosity of less than one hundred seconds by Redwood I Viscometer at one hundred degrees of Fahrenheit’s thermometer.
Explanation. – The expressions “mineral oil” and “flame height” have the meanings respectively assigned to them in Explanation I to Item No. 6 and in Explanation II to Item No. 7.”
“10. FURNACE OIL, that is to say, any mineral oil which –
(i) has a flame height of less than ten millimetres;
(ii) contains one quarter of one percent or more by weight of any bituminous substance; and
(iii) possesses a viscosity of one hundred seconds or more by Redwood I Viscometer at one hundred degrees of Fahrenheit’s thermometer.
Explanation. -. The expressions “mineral oil” and “flame height” have the meanings respectively assigned to them in Explanation I to Item No. 6 and in Explanation II to Item No. 7.”
“11A ALL PRODUCTS DERIVED FROM REFINING OF CRUDE PETROLEUM OR SHALE (WHETHER GASEOUS, LIQUID, SEMISOLID OR SOUD IN FORM), NOT OTHERWISE SPECIFIED INCLUDING REFINERY GASES, LUBRICATING OIL AND GREASES, WAXES AND COKE.”
Test results of samples :-
Date of show cause notice Period Sample drawn
on
(1)14.2.74 15.9.72 to 5.10.72 15.9.72
Test results:
(i) As per Chemical Examiner, Central Excise, Baroda :- Mineral oil of dark brown colour having flash point below 76°F and boiling point range of 138°C to 242°C (communicated to appellants on 13.2.1973 vide page 25 of paper book).
(ii) As per Chief Chemist, Central Revenues Control Laboratory, New Delhi, on re-test of sample :-
Dark brown coloured mineral oil:
Flash point = 101°F
Viscosity by RW.1, Viscometer at 100°F = 27.5 sec.
Flame height = 14 mm Bituminous substance % by weight = 0.24% Distillation Range = 141°C to286°C (communicated to appellants on 22nd February, 1980 vide page 30 of Paper Book) (ii)14.2.74 12.12.72 to 17.1.73 12.12.72 Test results:
(i) As per Chemical Examiner, Central Excise, Baroda :- Mineral oil of dark brown colour having flash point below 76°F and boiling point range from 12O°C to 317°C (communicated to appellants on 29.8.73 vide page 39 of the Paper Book).
(ii) As per Chief Chemist, Central Revenues Control Laboratory, New Delhi:
Flashing point = 150°F
Flame height = 7mm
Viscosity by RW1, Viscometer at 100°F = 29.5 sec.
Distillation Range = 163 – 275°C
% Carbon residue by rams bottom apparatus = 0.29%
(communicated to the appellants on 15.11.79 vide page 42 of the Paper Book).
(iii)16.1.74 18.1.73 to 11.2.73 18.1.73 Test results: (i) As per Chemical Examiner, Central Excise, Baroda :- Flash point below 76°F (ii) As per Chief Chemist on re-test of samples :- (a) on re-test of remnant sample: Dark brown coloured mineral oil Flash point = 98°F Flame height = 10 mm Viscosity by R.W.1, Viscometer at 100°F = 28.5 sec. Distillation Range = 148to272°C % Carbon residue by rams bottom apparatus - 0.33 (b) on re-test of duplicate sample: Dark brown coloured mineral oil Flash point = 140°F Flame height = 9 mm Viscosity by R.W. 1, Viscometer at 100°F = 30.5 sec. Distillation Range = 160 to 297°C % Carbon residue by rams bottom apparatus = 0.38 (vide page No. 53 of Paper Book)
(communicated to the appellants on 2.6.79 as stand in the appellants’ letter dated 25.6.79 – Page 56 of Paper Book)
Sample drawn on 31.1.73
Test results:
As per Chief Chemist on re-test of samples:
(a) Test result of remnant sample :
Dark brown coloured mineral oil
Flash point 66°F
Flame height = –
Viscosity = –
Distillation Range = 80 to 268°C
% Carbon residue by weight by rams bottom apparatus = –
(b) Test-result of duplicate sample :
Flash point = 132°F
Flame height = 9.3 mm
Viscosity by R.W. 1, Viscometerat 100°F = 29 sec.
Distillation Range = 160 to 290°C
% Carbon residue by weight by rams
bottom apparatus = 0.34
(vide page No. 54 of Paper Book)
(communicated to the appellants on 2.6.79)
(IV) 6.3.74 17.3.73 to 15.4.73 17.3.73 and 31.3.73
Test results:
(a) As per Chemical Examiner, Central Excise, Baroda :-
Conforming to the specification in Tariff Item No. 8 (communicated to the appellants on 6.3.74 vide page 65 of Paper Book).
(b) (i) As per Chief Chemist on re-test of sample drawn on 17.3.73 :-
Dark brown coloured mineral oil.
Flashing point = 101°F
Flame height = 15mm
Viscosity by R.W.1, Viscometer at 100°F = 28.3 sec.
Bituminous substance % by weight = 0.27 %
Distillation Range- = 147 to 266°C
(vide page No. 67 of Paper Book)
(communicated to the appellants on 2.6.79)
(ii) As per Chief Chemist on re-test of sample drawn on 31.373 :-
Dark brown coloured mineral oil.
Flashing point = 87°F
Flame height = 16mm
Viscosity by R.W.1, Viscometer at 100°F = 26.8 sec.
Bituminous substance = 0.18% Distillation Range = 138 to 275°C (vide page No. 68 of Paper Book) (communicated to the appellants on 2.6.79) (v) 24.5.74 25.9.73 to 9.10.73 25.9.73 Test results: (i) As per Chemical Examiner, Central Excise, Baroda :- Dark coloured mineral oil. Flashing point below 76°F Distillation Range 130 to 318°C (communicated to appellants on 30.3.74 vide page No. 89 of the Paper Book). (ii) As per Chief Chemist on re-test of sample : Dark brown coloured mineral oil. Flashing point = 99°F Flame height = 14 mm Viscosity by R.W.1, Viscometer at 100°F = 27.9. sec. Bituminous substance % by weight = 0.25% Distillation Range = 140°C to 266°C (communicated to appellants in February, 1980 vide page No. 98 of Paper Book)
8. Samples were re-tested by the Chief Chemist at the request of the appellants. They are, therefore, bound by the results of re-test. Having requested for re-test, they cannot now take the plea that the result of re-test of the samples cannot be relied upon. This plea of the appellants is, therefore, rejected. The classification of the goods will have to be decided on the basis of the result of re-test irrespective of the fact whether the test-results go against the Department or against the appellants. On the basis of the results of tests conducted by the Chief Chemist, Central Revenues Control Laboratory, the classification of the goods covered by the five show cause notices should be decided as follows and we order accordingly: –
(I) Show Cause Notice dated 14.2.1974 relating to the period from 15.9.1972 to 5.10.1972 :- The result of re-test shows Flashing Point = 101°F and Flame Height = 14mm. The goods should, therefore, fall under Tariff Item 8 – Refined Diesel Oil as the test result conformed to the description of this Tariff Item.
(II) Show Cause Notice dated 14.2.1974 relating to the period from 12.12.1972 to 17.1.1973 :- The result of re-test shows Flame Height = 7 mm, Bituminous substance (Carbon residue) = 0.29% and Viscosity = 29.5 seconds. The goods fall within the description of Tariff Item 9 – Diesel Oil, not otherwise specified and as such the same are classifiable under this Tariff Item.
(III) Show Cause Notice dated 16.1.1974 relating to the period from 18.1.1973 to 11.2.1973 : – The re-test of duplicate samples drawn on 18.1.1973 and 31.1.1973 shows the following results :-
Sample drawn Sample drawn
on 18.1.73 on 31.1.73
Flame height 9 mm 9.3 mm
Bituminous substance 0.38% 0.34%
Viscosity 30.5 sec. 29 sec.
On the basis of these results the goods are classifiable under Tariff Item 9 – Diesel Oil, not otherwise specified.
(IV) Show Cause Notice dated 6.3.1974 relating to the period from 17.3.1973 to 16.4.1973 :- The re-test of samples drawn on 17.3.73 and 31.3.1973 shows the following results :-
Sample drawn Sample drawn
on 17.3.73 on 31.3.73
Flashing point 101°F 87
Flame height 15 mm 16 mm
On the basis of this result, the goods covered by this show cause notice are correctly classifiable under Tariff Item 8 – Refined Diesel Oil and vaporising oil.
(V) Show Cause Notice dated 24.5.74 relating to the period from 25.9.1973 to 9.10.1973 :- Re-test of the sample by Chief Chemist shows flashing point = 99°F and Flame height = 14 mm. Accordingly to this test result the goods should be classified under Tariff Item 8 – Refined Diesel Oil and Vaporising Oil. We find that the demands for differential duty were confirmed under the Tariff Items indicated above. The classification has, therefore, been correctly done by the Assistant Collector while confirming the demands.
9. Shri Patel for the appellants has contended that demands in two cases are time-barred. The learned JDR has stated during her arguments that the assessments in all cases were provisional and not final and that the appellants executed B-13 bond under Rule 9-B of the Central Excise Rules. She has also stated that the show cause notices say that the assessment was subject to Chemical Test and not final. The learned advocate has not controverted the arguments of the learned JDR by producing any materials before us. In the circumstances, the plea of time-bar of the demands in two cases is also rejected.
10. In the light of the above discussions, we do not find any infirmity in the orders, of the lower authorities. Accordingly, the orders of the lower authorities are upheld and all the appeals are dismissed.