2011 (5) TMI 756 - HC - Central Excise

Pre-deposit classification - submission on behalf of the appellants is that even after distillation, the product does not cease to be Commingled Crude Oil and will continue to be classified under Tariff entry no. 2709 00 00 of the Central Excise Tariff, for which tariff rate of central excise duty is nil - Tribunal itself in its order has recorded that in the present case, the Commingled Crude Oil is subjected to distillation at 200 degree centigrade and by the process of distillation, the lighter component constituting about 30% of the total weight of the crude oil is separated and is sold as composite organic solvent Held that - appellants have made a strong prima facie case and considering that they have continuously been treating the same as subject to nil tariff, to meet the ends of justice, the learned Tribunal is directed to dispose of the appeal at the earliest. The appellants to secure the amount of Rs. 50,00,000/- by security other than cash or bank guarantee, appeal stands disposed of

Summary

Issues:
- Whether the appellants were rightly directed to deposit Rs. 50,00,000 as pre-deposit.
- Whether the product, even after distillation, continues to be classified as Commingled Crude Oil under Tariff entry no. 2709 00 00 of the Central Excise Tariff.
- Whether the Tribunal erred in its decision regarding the classification of the product and the necessity of a pre-deposit.

Analysis:
1. The appeal challenged the order of pre-deposit requiring the appellants to deposit Rs. 50,00,000 within eight weeks. The appellants argued that the product, even after distillation, remains Commingled Crude Oil classified under a specific Tariff entry with nil central excise duty.

2. The key issue was whether the Tribunal was correct in ordering the pre-deposit considering the classification of the product. The appellants contended that the appellate authority had previously classified the product under the same heading even after distillation, indicating a prima facie case in their favor.

3. The High Court examined whether the Tribunal's decision was justified. It noted that the Tribunal did not establish whether the distillation process altered the essential character of the product, leading to a different Tariff entry. This lack of finding was crucial in determining the classification and the necessity of the pre-deposit.

4. Upon review, the High Court found that the appellants had presented a strong prima facie case, especially as they consistently treated the product under nil tariff. The Court directed the Tribunal to expedite the appeal process and ordered the appellants to secure the pre-deposit amount through means other than cash or bank guarantee within three weeks.

5. The Court emphasized that its observations were preliminary, and the appeal was disposed of with the directive for the Tribunal to promptly address the classification issue. Ultimately, the judgment favored the appellants' argument for a strong prima facie case and emphasized the need for a thorough examination of the product's classification post-distillation.