2019 (8) TMI 1173 - AT - Central Excise

Process amounting to manufacture - business of collecting used oil which has become unfit for use and hence drained down the engines and equipment from motor workshops of Kerala State Electricity Board Industrial Units, etc. - legal fiction as created by Chapter Note 4 to Chapter 27 of Central Excise Tariff Act, 1985 - HELD THAT - It is not clear as to what extent the appellant has manufactured lubricants and other products as well. It is also not clear if the appellant had manufactured lubricants and whether these were marketable to consumers or whether the same has been sold in bulk form to bulk users only. It is also not clear whether any label has been fixed on the containers / barrels, if lubricants are sold to bulk / industrial users. There is no doubt that the Trade Mark has been obtained by the appellant for JEEZOL as lubricating oil and grease. The factual aspects have to be verified by the Department from the invoices, etc. - it is deemed appropriate to lay down the principles based on which the duty liability has to be determined after the aforesaid factual verification. Penalty u/r 25 of the Central Excise Rules, 2002 - scope of SCN - HELD THAT - While the SCN proposes to impose a penalty under Rule 25 of the Central Excise Rules, 2002, no specific reasons has been given in the show-cause notice for this proposal - there is a case to set aside the penalty imposed under Rule 25 of Central Excise Rules, 2002. The appeal is disposed of by way of remand to the original authority with a direction to re-determine the amount of differential duty and interest, if any, payable after ascertaining the nature of goods which have been cleared as above and their excisability.

Summary

Issues Involved:
1. Whether the appellant's processes amount to manufacture under Chapter Note 4 to Chapter 27 of the Central Excise Tariff Act, 1985.
2. Whether the appellant's products fall under lubricants or other products under Chapter Heading 2710.
3. Whether the appellant affixed their brand name on the containers.
4. Whether the appellant sold goods to bulk and industrial consumers.
5. Whether any products other than lubricants were manufactured by the appellant.

Issue 1:
The appellant's processes of packing, repacking, labeling, or rendering lubricating oils and preparations marketable are contested as manufacturing under Chapter Note 4. The Tribunal initially held these processes do not amount to manufacture, citing precedent. However, the High Court remanded the matter for reevaluation, emphasizing the legal fiction created by Chapter Note 4. The appellant argues they are not always selling goods in retail packs, discontinued branding due to tax implications, and used the brand name for non-lubricant products. The Department asserts the brand name registration for lubricants justifies the applicability of Chapter Note 4.

Issue 2:
The uncertainty regarding the nature of goods manufactured by the appellant arises, as the extent of lubricants produced and other products under Chapter Heading 2710 is unclear. The appellant's use of the brand name 'JEEZOL' for various products complicates the determination. The Tribunal emphasizes the need for factual verification by the Department to ascertain the type of goods manufactured and sold by the appellant.

Issue 3:
The presence of the brand name 'JEEZOL' on containers and barrels sold by the appellant is crucial in determining the applicability of Chapter Note 4. The appellant claims to have stopped labeling their products due to tax implications, selling lubricants in bulk to industrial users without branding. The Tribunal stresses the importance of verifying whether labeling was done for products sold to bulk or industrial consumers.

Issue 4:
The appellant's sales to bulk and industrial consumers raise questions about the processes undertaken to make the products marketable to consumers. The Tribunal emphasizes the distinction between goods sold in bulk form and those intended for individual consumers, highlighting the need for clarity on the marketability of the products.

Issue 5:
The ambiguity surrounding the appellant's manufacturing activities extends to the classification of products as lubricants or other goods under Chapter Heading 2710. The Tribunal clarifies that products not classified as lubricating oils or preparations are not covered by Chapter Note 4, emphasizing the need for accurate classification and excisability determination.

In conclusion, the Tribunal remands the case for further verification by the Department to determine the nature of goods manufactured and sold by the appellant. The judgment emphasizes the importance of accurately classifying products, verifying labeling practices, and assessing marketability to consumers to ascertain the applicability of Chapter Note 4 and duty liability. The penalty imposed under Rule 25 of the Central Excise Rules, 2002 is set aside due to lack of specific reasons cited in the show-cause notice.