2017 (9) TMI 502 - AT - Central Excise

Classification of goods - process oil / speciality oil cleared by the appellant - appellants classified the said goods under Heading 2710.50 during the material time and cleared the same on payment of duty. The Revenue entertained a view that the said product would merit classification under heading 2707.90 - whether or not the appellants are engaged in an activity which will amount to manufacture of a new excisable product in terms of Section 2 (f) of the Central Excise Act, 1944? - Held that - It is not necessary that to categorise a process as manufacturing process that there should be necessarily a chemical change. Blending or compounding one mineral oil with another mineral oil can certainly result in a new product known in the market for specific use - In the present case, the product is known specifically in the tyre industry and it is a speciality oil known differently than the raw material which is nothing but furfural extracts - the processes undertaking by the appellant satisfy the criteria for manufacture attracting excise duty. Classification of goods - circular dt. 13.2.1989 - Held that - The appellant s claim that Heading 2713 is not applicable to the impugned goods as the product is not oils obtained of distillation of high temperature coal tar, we note that said tariff heading covers similar products in which weight of aromatic constituents exceeds that of non-aromatic constituents. We are in agreement with the reasons elaborated in the circular dt. 13.2.1989 of the Board and note that appellant did not bring out by way any technical literature/support to contest the said finding. Accordingly, we uphold the classification adopted by the lower authorities - goods classified correctly under CTH 2707.90. Time limitation - Held that - there can be no question of suppression, wilful misstatement etc. for invoking extended period of limitation for demand. In any case, no such allegation or evidence was recorded in the SCNs - the original authority should re-quantify the duty liability after consideration of the demands which are issued within normal period - matter on remand. Interest on differential duty - Held that - Board vide master circular dated 10.3.2017 also states that the interest needs to be demanded and recovered following due process of demand and adjudication. As such interest liability without due notice and adjudication is not sustainable. Regarding the claim of appellant for MODVAT credit on inputs, the present proceedings are for only differential duty and hence this aspect is not for consideration. Appeal dismissed - decided against appellant.

Issues Involved:
1. Classification of "process oil / speciality oil"
2. Determination of whether the process amounts to "manufacture"
3. Limitation period for issuing show cause notices
4. Interest liability on differential duty
5. Claim for MODVAT credit on inputs

Detailed Analysis:

1. Classification of "process oil / speciality oil":
The appellants classified the goods under Heading 2710.50, while the Revenue argued for classification under Heading 2707.90. The jurisdictional Deputy Commissioner initially ordered classification under 2707.90 and confirmed a differential duty demand. The Commissioner (Appeals) affirmed this classification. The Tribunal examined the processes involved and the Board's circular dated 13.2.1989, which clarified that speciality oils with predominant aromatic constituents should be classified under Heading 2707.90. The Tribunal upheld the classification under 2707.90, agreeing with the Board and the Deputy Chief Chemist's opinion.

2. Determination of whether the process amounts to "manufacture":
The appellants argued that their process did not amount to manufacture as it involved only blending different extracts to achieve desired viscosities. However, the Tribunal noted that the processes included heating and blending in reactors, which resulted in a commercially new product known in the tyre industry. The Tribunal referenced the Supreme Court's decision in Chowgule & Company P. Limited Vs. Union of India, which distinguished between processing and manufacturing. The Tribunal concluded that the appellant's process did amount to manufacture as it produced a distinct marketable product.

3. Limitation period for issuing show cause notices:
The appellants contended that some show cause notices were issued beyond the normal period and lacked allegations of suppression of facts to justify invoking the extended period. The Tribunal found that the original authority's dismissal of the limitation issue was untenable. The Tribunal ruled that the original authority should re-quantify the duty liability considering only the demands within the normal period, as there was no evidence of suppression or wilful misstatement.

4. Interest liability on differential duty:
The appellants argued that the demand notices did not refer to any interest liability. The Tribunal reviewed the demand notices and confirmed this claim. Citing the Board's master circular dated 10.3.2017, the Tribunal held that interest liability must follow due process of demand and adjudication. Consequently, the Tribunal ruled that interest liability without due notice and adjudication is not sustainable.

5. Claim for MODVAT credit on inputs:
The Tribunal noted that the present proceedings were solely for differential duty and thus did not consider the appellant's claim for MODVAT credit on inputs.

Conclusion:
The Tribunal upheld the classification of the goods under Heading 2707.90 and confirmed that the appellant's process amounted to manufacture. The Tribunal directed the original authority to re-quantify the duty liability, considering only the demands within the normal period and excluding any interest liability not properly adjudicated. The appeal was rejected, with the modification that the original authority must re-quantify the duty as observed.

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