2016 (9) TMI 132 - AT - Central Excise

Classification - Residual Crude Petroleum Oil (RCPO)/ Residual Fuel Oil (RFO) / Residual Bottom Oil (RBO) - Whether it is to be classified as RCPO/ RFO / and RCBO under chapter heading 27101950 as per Revenue or as Petroleum Crude Oil under 27090000 as per appellant - Held that - Revenue has completely failed to satisfy the definition and meaning given in supplementary note (g) to Chapter 27. The argument of the Revenue that goods are being used as fuel cannot satisfy the standard meaning given to the item in supplementary note (g). All the pleadings of the department that literature of the assessee indicates the item as fuel; and use of the item by the buyer is as fuel cannot override the definition and meaning given to the item in the Supplementary Note (8) to Chapter Note 27. Further, department has not made any efforts to go beyond the detailed classification 27101950 as fuel oil decided by the impugned order in favour of subject item. After having gone through the facts on record and submissions of both the sides, we find that the item is being used as a fuel but its mere use as fuel, when the parameters of the definition given in supplementary Note (g) to Chapter 27 are not fulfilled, cannot support the stand of the Revenue. Therefore, we are of the considered view that item cannot be held to be classified under Chapter sub-heading 27101950 of the Central Excise Tariff. Further, when the subject item is not fuel oil as per the definition given in note (g) to Chapter 27 and when it is neither Base oil/ nor jute batching oil and textile oil, nor lubricating oil, it may be in the other category, for which detailed classification is 27101990 or it may be further in the category of waste oil. However, from the facts on record, we refuse to confirm its classification under the category 27101990 or as waste oil also unless there is sufficient material and further both the sides are given opportunity to give their submissions on the said classifications. In the case record, there is no reference to any other classification, other than Chapter Heading 27101950 and 2709 0000. Revenue has failed to substantiate its stand for classification of the subject item in Chapter heading 27101950 as fuel oil especially in the face of the definition and meaning given for the item fuel oil in the supplementary note (g) to Chapter 27 as discussed above. In the result, all the demands classifying the item as fuel oil 27101950 are hereby dropped. When the original demands are dropped on this account, the penalties imposed under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 are also hereby set-aside. Demand - Confiscation in lieu of redemption fine - shortage/ excess of goods namely ligroin and RCPO/ RWO - Held that - from the details in the show cause notice, it is clear that the appellant s pleading that it was actually shortage of the goods namely, Parsol, Parsol-20 and not the excess, is factually correct. In the SCN, the duty for said goods has also been mentioned as ₹ 11,833/-We find that the order-in-original has treated these goods as excess, which is factually wrong. Consequently, the impugned order in this regard is not sustainable. - Appeals disposed of

Summary

Issues:
1. Classification of Residual Crude Petroleum Oil (RCPO)/ Residual Fuel Oil (RFO) / Residual Bottom Oil (RBO) under the Central Excise Tariff Act, 1985.
2. Shortage/excess of goods in the cases of M/s Shrirang Petro Industries, M/s Parth Rasayan Pvt. Ltd., and M/s Rudraksha Petrochem Pvt. Limited.

Classification Issue:
The primary issue in the judgment revolves around the classification of RCPO/RFO/RBO under the Central Excise Tariff Act. The Commissioner classified the item under chapter heading 27101950, while the appellants argued for classification under 27090000 as Petroleum Crude Oil. The advocates contended that the residual oil should not be considered Topped crude or fuel oil, citing chemical composition similarities with Crude Oil. The Revenue argued for classification under 27101950 as fuel oil based on usage in boilers and furnaces. The Tribunal ruled that the item did not meet the definition of fuel oil as per the Tariff, thus rejecting its classification under 27101950. The Tribunal emphasized that mere usage as fuel does not override the specific definition provided in the Tariff, leading to the dropping of all demands for classification as fuel oil.

Shortage/Excess Issue:
In addition to the classification matter, discrepancies in goods were noted in the cases of the appellants. M/s Shrirang Petro Industries faced shortages of ligroin and RCPO/RWO, leading to confirmed duties. M/s Parth Rasayan Pvt. Ltd. had unaccounted goods confiscated, which were later found to be a shortage, resulting in the reversal of the order. M/s Rudraksha Petrochem Pvt. Limited also had confirmed duties on shortages of specific goods. The Tribunal intervened based on factual inaccuracies and incorrect treatment of shortages as excess quantities, leading to the setting aside of certain orders. However, in cases where appellants did not contest the confirmed duties, the Tribunal upheld the decisions.

This comprehensive analysis of the judgment highlights the key issues of classification and discrepancies in goods, detailing the arguments presented by both parties, the Tribunal's reasoning, and the final decisions rendered.