2005 (1) TMI 488 - AT - Central Excise

Classification - Demand - Limitation - Exemption - Exclusion from - Evidence - Taxing matters - Interpretation of statutes - Notification

Summary

Issues Involved:
1. Classification of C-4 Raffinate
2. Eligibility for concessional rate of duty under Notification No. 6/2000-C.E. and No. 3/2001-C.E.
3. Invocation of extended period of limitation for duty demand

Issue-wise Detailed Analysis:

1. Classification of C-4 Raffinate:

The appellants classified C-4 Raffinate under sub-heading 2711.19 as "other liquefied petroleum gases," which was approved by the Department since 1988. However, a show cause notice proposed reclassification under sub-heading 2711.12, arguing that C-4 Raffinate, consisting of various butylenes (72-76%), should be classified as such based on Rule 3(a) and Rule 3(b) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act, 1985.

The Tribunal examined the composition of C-4 Raffinate, which included iso-butane, butane-1, iso-butene, trans-2-butene, cis-2-butene, 1-3 butadiene, and 1-2 butadiene, among others. It concluded that C-4 Raffinate is a mixture of several hydrocarbons and not a specific petroleum constituent gas. The Tribunal referred to various technical definitions and concluded that "butylene" (singular) refers to specific isomers like butane-1, cis-butene-2, trans-butene-2, and isobutene, while "butylenes" (plural) refers to a mixture of these isomers.

The Tribunal found that the Commissioner had not appreciated the distinction between "butylene" and "butylenes." The reliance on the analysis report indicating a predominance of butylenes was misplaced. The Tribunal held that C-4 Raffinate, being a mixture of isomers, cannot be classified under sub-heading 2711.12, which covers "butylene" (singular). Instead, it should be classified under sub-heading 2711.19 as "other liquefied petroleum gases."

2. Eligibility for Concessional Rate of Duty:

The appellants argued that C-4 Raffinate qualifies as liquefied petroleum gas (LPG) and is eligible for concessional rates under Notification No. 6/2000-C.E. and No. 3/2001-C.E. They provided evidence, including letters from the Chief Controller of Explosives and test reports from Indian Oil Corporation, confirming that C-4 Raffinate conforms to LPG specifications as per IS 4576-1999.

The Tribunal noted that the Commissioner had misinterpreted the analysis report and failed to appreciate the distinction between "butylene" (singular) and "butylenes" (plural). The Tribunal concluded that C-4 Raffinate, being a mixture of butylenes, is commercially known as LPG and is eligible for the concessional rate of duty under the mentioned notifications. The Tribunal emphasized that the notification should be interpreted based on the plain meaning of words and not the intention behind it.

3. Invocation of Extended Period of Limitation:

The show cause notice invoked the extended period of limitation, alleging that the appellants suppressed the composition of C-4 Raffinate. The Tribunal examined the history of classification and found that the appellants had consistently classified C-4 Raffinate under sub-heading 2711.19, which was approved by the Department since 1988. The Tribunal noted that the Department was aware of the composition of C-4 Raffinate since 1984, as evidenced by test reports and correspondence.

The Tribunal concluded that there was no suppression of facts or misstatement by the appellants. The consistent approval of classification lists and the Department's knowledge of the composition supported the appellants' bona fide belief in their classification. Therefore, the extended period of limitation could not be invoked, and the demand for differential duty was time-barred.

Conclusion:

The Tribunal upheld the classification of C-4 Raffinate under sub-heading 2711.19, granted the benefit of the concessional rate of duty under the relevant notifications, and set aside the invocation of the extended period of limitation. Consequently, no duty demands or penalties were upheld, and the appeals were allowed.