ORDER
K.S. Venkataramani, Member (T)
1. The brief facts are that the appellants imported into Kandla, a consignment of DI ISO BUTYLENE uantity covered by the Bill (DIIB) and filed a Bill of Entry in May, 1994. Of the of Entry, the appellants transferred quantity of 24.140 MT. into customs bonded warehouse a Khopoli under the jurisdiction of Asstt. Commissioner, Central Excise and Customs, Panvel Division, Mumbai-III Commissionerate. On 26-9-1995 ex-bond Bill of Entry for clearance of the goods was filed claiming classification under Heading 27.10 CET Act, 1975 as Naphtha at the rate of duty NIL for Customs and @ 10% for additional duty of Customs ( c.v.d.). Scrutiny of the documents submitted by the appellant led the department to take a stand that there was no evidence to substantiate the appellant’s claim that DUB was Naphtha. Sample of the goods warehoused at Khopoli were drawn and sent to Chemical Examiner on 5-10-1995 who reported that the same is in the form of clear colourless volatile liquid composed wholly of unsaturated (olefinic acyclic hydrocarbon having flash point below 25°C and nominal boiling point 104-105°C under atmospheric pressure. The ex-bond Bill of Entry dated 26-9-1995 was assessed to duty by classifying DIIB under CET 2710.19 attracting customs duty at 30% + CVD 20% on 4-12-1995. The appellants contested this by a letter dated 8-12-1995 saying that the Collector of Customs at Kandla had already classified the material as Naphtha under CET Heading 2710.14 and that Khopoli Central Excise authorities will have to necessarily follow suit. They requested that Asstt. Collector to issue a speaking order of assessment giving reasons for amending classification along with copy of the Test report to enable them to file appeal. They were heard by the Asstt. Collector. The appellants further reiterated their request for copy of Dy. Chief Chemist’s report. The Asstt. Collector thereafter passed a detailed order classifying the DIIB under Heading 27.10 Customs Tariff Act attracting duty at 30% as per S.No. 9 of the Notification 19/94, dated 1-3-1994 and classification of the goods under sub-heading 2710.19 of CETA attracting c.v.d. 20%. Notification 19/94 exempted goods in the table annexed thereto to the extent indicated in the table against each item. Sr. No. 8 of the table covered Naphtha under Heading 27.10 at NIL duty exemption. Sr. No. 9 of the table covered all goods other than Kerosene and Naphtha falling under the same sub-heading and exemption was in excess of 30% ad valorem. Against this order of assessment passed by the Asstt. Collector of Customs & Central Excise, Panvel II Dn., an appeal was filed and the Commissioner of Customs and Central Excise (Appeals), Mumbai, by the impugned order upheld the Asstt. Collector’s order. The Commissioner (Appeals) held that Naphtha and DIIB are two different products commercially and technically; their appeal was rejected.
2. The ld. Counsel Dr. Nitin Kantawalla appearing for the appellant contended that the lower authorities have not considered the evidence led by the appellants by way of expert’s opinion from the Mumbai University ITT and the supplier’s letter to say that DIIB is Naphtha. The appellants were also not given a copy of the Dy. Chief Chemist report relied upon by the Asstt. Collector in spite of request. The ld. Counsel submitted that even now goods can be re-tested by the Chief Chemist as they are not yet cleared. The ld. counsel also pointed out that there was a tariff advise by the Board in Public Notice No. 01/93 (Tariff), dated 1-6-1993 being Public Notice issued by the Kandla Custom House in which Heptene and Nonene had been classified under 2710.00 Customs Tariff Act and under Heading 2710.14 Central Excise Tariff Act, exemption under the Notification was also granted. DIIB is of the same category, the ld. Counsel urged. The jurisdiction of the Asstt. Collector of Central Excise at Panvel to change the classification already made by the Kandla Custom House was also questioned by the ld. Counsel who argued that assessment is completed at Kandla Custom House and the Asstt. Collector at Panvel has no authority to modify it. Citing case law on the subject reported in 1992 (61) E.L.T. 689 (Tribunal) – Collector v. Ferro Alloys, the ld. Counsel contended that the Central Excise authorities have no jurisdiction in the matter for warehoused goods and duty can be demanded on such goods only by the Customs authorities.
3. Ld. DR Shri S.V. Singh contended that an extract of the Dy. Chief Chemist report is already available in the Asstt. Collector’s order. It was also argued that it would be to the authority acting under Section 47 of the Customs Act to check whether the goods sought for clearance are prohibited and the authority has also power to re-assess the goods. The assessment of the B/E allowing clearance for Home consumption in this case has been done by the Asstt. Collector, Panvel. The ld. DR also relied upon Notification 58/92 issued under Section 4 of the Customs Act by which the Asstt. Collector of Central Excise is empowered to act under the Customs Act within his jurisdiction. The ld. DR further argued that in this case DIIB is being supplied and invoiced as such and not as Naphtha. It is separate chemical distinct from Naphtha and has separate end use. Naphtha the DR submitted is a mixture of various hydrocarbons; DIIB is a product extracted from Naphtha by a process of a distillation. It is not itself Naphtha.
4. In reply the ld. Counsel contended that there is no specific heading for Naphtha in the Customs Tariff Act. It is a generic entry in the Notification at Sr. No. 8 of the table. DIIB is a part of Naphtha and will therefore be covered by the entry at Sr. No. 8 of the Notification covering Naphtha.
5. Submissions made have been carefully considered. The question is whether the DIIB imported by the appellant will be covered by the entry against Sr. No. 8 of Notification 19/94 which is Naphtha falling under Heading 27.10. It may also be noted that Sr. No. 9 of the table of the Notification covers all goods other than Naphtha and Kerosene falling under Heading 27.10 CTA. The lower authority has held that DIIB imported in this case to be classifiable under Heading 27.10 CTA and the question is only of the exemption under the Notification. When it is seen that there is a separate entry for Naphtha with NIL duty exemption, and a separate entry for all goods other than Naphtha and Kerosene against Sr. No. 9 both falling under the same Heading 27.10, it becomes clear that it is imperative for the importer to establish that the material is Naphtha in order to be eligible for the NIL duty exemption against Sr. No. 8 of the table to the Notification. The appellants have agitated the fact that the copy of the Dy. Chief Chemist test report had not been given to them. It would appear that the extract of the test report appears only in A.C.’s order and the appellant prior to that stage do not seem to have been supplied with the copy. To that extent, there is substance in their grievance. However, they have also led evidence in support of their case which may now be examined. This evidence consists of the following :-
A letter from Prof. V.C. Malshe of University of Mumbai, Department of Chemical Technology dated 1-4-1996 in which the Professor has stated that the main criteria in respect of Naphtha are the boiling range and specific gravity. The Professor has concluded from the characteristics of Naphtha and DIIB, in his opinion DEB is similar to products which are broadly classified as Naphtha.
The other opinion is of Prof. M.C. Dwivedi from the Department of Chemical Engineering, ITT, Mumbai dated 3-4-1996. He has mentioned significantly that the DIIB is generally known as Trimethyl Pentene and the commercial products imported by the appellant in this case as per the supplier’s marketing literature has certain specification noted by the Professor. The Professor has concluded that physically as well as constitutionally, DIIB is part of Naphtha.
The supplier Texas Petrochemicals Corpn. has also given a specification report of the product. It does not contain information whether on such specification, the imported material is Naphtha or not.
In the opinion of Dr. G.R. Venkitakrishnan, National Chemical Laboratory, he has opined that DIIB are often mixture of Cs Olefinic Hydrocarbon, part of the Olefinic Naphtha fractions obtained from catalytic cracker and coker operations in refineries. There is also a certificate from a private laboratory, addressed to the appellant which says that it is similar to Naphtha.
6. From the above material, the clear indication is that DIIB is a commercially known product which is similar to Naphtha. But the exemption, as we have noted above, is for Naphtha simplicitor and does not include products similar to it; nor does it include parts thereof. All other goods other than Naphtha simplicitor are else-where covered under the same Notification at Sr. No. 9. In such a situation, the principles of strict interpretation of an exemption notification comes into play as observed by the Supreme Court in the case of Novopan India Ltd. reported in 1994 (73) E.L.T. 769, “the principle that in case of ambiguity the basic statute should be construed in favour of assessee – assuming that the said principle is good and sound – does not apply to the construction of exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State”. Even though the appellant had suffered the disadvantage of not being given copy of the Dy. Chief Chemist test report, yet even going by their own evidence, their case for exemption does not get advanced, because all their certificates only indicate that DIIB is similar to or is part of Naphtha. But the certificates do indicate that DIIB is a distinct commercial product. In such a situation, the DIIB cannot be said to be covered by entry against Sr. No. 8 of table to Notification 19/94 as Naphtha. The denial of that exemption is therefore sustainable.
7. The appellants have also questioned the jurisdiction of the Asstt. Collector at Panvel for modifying the classification done at the time of into-bond clearances of the goods by Kandla Custom House. It is their contention that such modification can be done only by Custom House and the Asstt. Collector at Panvel has no jurisdiction. We find that the very issue has been gone into by a Larger Bench of the Tribunal in the case of Ferro Alloy Corpn. v. Collector reported in 1995 (77) E.L.T. 302 (T). In that case the very decision of Ferro Alloys now relied upon by the present appellant was considered by a Larger Bench on a reference about the correctness of that decision. The Larger Bench held that the Ferro alloys ‘case decision reported in 1992 (61) E.L.T. 689 (T) was not correctly decided. In coming to this decision, the Larger Bench relied upon a Madras High Court decision in the case of Collector v. Tungabadra Fibres reported in 1994 (71) E.L.T. 655. The High Court had held that the assessment done on an into-bond bill of entry is only for the purpose of determining the amount of duty for execution of warehousing bond as per Section 59 of the Customs Act. The purpose of such assessment at the time of clearance into-bond, the High Court held, is only to secure the duty payable by the importer on the clearance of the goods later, and the High Court further held that it cannot be accepted such a valuation made for the purpose of execution of a warehousing bond is conclusive. At best it can be regarded only as a tentative estimate of the liability to pay duty which is secured under the terms of the warehousing bond. The High Court further observed in that case, “In view of this, the claim of the company that even at the time when the bill of entry for warehousing had been filed, an assessment had been made and that cannot be gone back upon, cannot be accepted”. The Larger Bench also found that another decision of the Tribunal in the case of Sandeep Woollen Mills v. Collector was also in consonance with the Madras High Court judgment. There the into-bond assessment was made at Bombay Custom House and Ex-bond clearances were effected at Ludhiana Central Excise and Customs Collectorate. The Tribunal held that the assessment at Bombay was only for the purpose of knowing the amount of duty so that a bond twice the amount to be executed by the importer under Section 59 of the Customs Act. Since no duty was paid at Bombay, there was no clearance under Section 47 of the Customs Act at that place. The effective clearances took place only at Ludhiana. We also refer to a decision by this Bench in this context in the case of Dipen Enterprises v. Collector reported in 1990 (49) E.L.T. 481. In that case it was argued that re-assessment at the place of ex-bond clearance would amount to review of the earlier into-bond assessment. The Bench held that notwithstanding entry of the goods for warehousing under Section 46 of the Customs Act, it is open to the jurisdictional authority who orders clearance for home consumption under Section 47 of the Customs to look into the aspect as to whether the goods are prohibited or not because at this stage of clearance for home consumption, the process as laid down under Section 47 of the Customs Act comes into play, and the officer so ordering clearance for home consumption gets the jurisdiction. In this view of the matter, the arguments of the appellants on jurisdiction are unacceptable. The appeal is accordingly rejected.
