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2007 (9) TMI 3 - SC - Central ExciseMere by referring some information on the label, reclassification of product is not allowed. CRC 2-26 is a lubricant oil. Where facts were known to the department, extended period of limitation for issuing demand notice is not applicable. If there is no mutuality between the companies, it is not possible to hold them relative companies.
Issues Involved:
1. Classification and exemption of 'CRC 2-26' under Notification No. 120/84. 2. Entitlement to SSI exemption for 'CRC Acryform' under Notification No. 175/86. 3. Alleged willful misstatement or suppression of facts to evade duty and the applicability of the extended period under Section 11A(1) of the Act. 4. Imposition of penalty. 5. Whether the respondent was a facade or dummy of BBL and/or if the respondent and BBL are related persons under Section 4(a) and 4(3)(b) of the Act. Detailed Analysis: Issue No. 1: Classification and Exemption of 'CRC 2-26' The product 'CRC 2-26' contains 25% petroleum base oil, 72% mineral oil, and 3% rust preventives, blended together and used primarily as a lubricating oil. The product is used in various industries, including government sectors, for lubricating mechanical parts. The Department's own chemical analyses from 1984, 1990, and 1993 confirmed that 'CRC 2-26' is composed mainly of mineral oil and additives, with a primary function of lubrication. The Tribunal found no evidence to rebut these test reports or the expert opinion provided by Prof. M.C. Dwivedi. The HSN explanatory notes support the classification of the product as a lubricating oil if it contains 70% or more petroleum oil. The Tribunal's findings were upheld, confirming that 'CRC 2-26' is a blended lubricating oil entitled to exemption under Notification No. 120/84. Issue No. 2: Entitlement to SSI Exemption for 'CRC Acryform' The Department contended that 'CRC Acryform' carried logos of BBL and CRC Chemicals Europe, which are not entitled to the exemption. However, the respondent had been using the trademark 'CRC Acryform' since 1987, registered in 1992 with retrospective effect. CRC Chemicals Europe confirmed that they did not manufacture or claim any rights to 'CRC Acryform'. The Tribunal found no evidence of any connection between 'CRC Acryform' and CRC Chemicals Europe or any other company. The respondent discontinued the use of the logo from 1990, and the product bore the registered trademark 'CRC Acryform'. The Tribunal concluded that the respondent was entitled to the benefit of Notification No. 175/86. Issue No. 3: Alleged Willful Misstatement or Suppression of Facts The respondent consistently declared the manufacturing process and composition of 'CRC 2-26' in their classification lists. The Department's own chemical analyses confirmed the product's composition. The Tribunal found no evidence of willful misstatement or suppression of facts by the respondent. The Tribunal cited the Supreme Court's ruling in Anand Nishikawa Co. Ltd. vs. CCE, emphasizing that mere failure to declare does not amount to willful suppression. The Tribunal concluded that the extended period of limitation under Section 11A(1) was not applicable, making the demand time-barred. Issue No. 4: Imposition of Penalty The penalty was based on the alleged suppression of facts and evasion of duty. However, the Tribunal found no evidence of suppression or intent to evade duty. Consequently, the imposition of penalty was deemed untenable and unsustainable. Issue No. 5: Relationship Between Respondent and BBL The Department alleged that the respondent was a dummy or facade of BBL and that they were related persons. The respondent is an independent company, incorporated in 1983, with no financial ties to BBL. The Tribunal found no evidence of mutual interest or financial transactions beyond normal trade practices. The Supreme Court's ruling in Union of India vs. Atic Industries was cited, emphasizing the need for mutual interest in each other's business to establish a related person relationship. The Tribunal concluded that the respondent and BBL were not related persons. Conclusion: The appeals were dismissed, upholding the Tribunal's findings on all issues. The respondent was entitled to the exemptions under Notifications No. 120/84 and 175/86, and there was no willful suppression of facts. The imposition of penalties was unwarranted, and the respondent and BBL were not related persons.
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