2019 (10) TMI 1036 - AT - Central Excise

Classification of goods - Coal Tar Partially Distilled (CTPD) - whether classifiable under Tariff Heading 27060090 or under Tariff Heading 27081010 of the Central Excise Tariff? - HELD THAT - The Tar is distilled from coal and from coal or from other minerals while pitch is obtained by blending with creosote oil or other coal tar distillates and both the goods are distinct and different in nature. Coal Tar Pitch is a residue product when the solvent has been completely extracted out of Tar whereas Pitch is the last residue in the process of destructive distillation of coal and in this process the distilled products like High and Low Naphtha, High Creosote Oils are obtained. Once a product is Pitch, it is no longer Tar. The Hon ble Apex Court in the case of the COMMISSIONER OF C. EX., BOLPUR VERSUS STEEL AUTHORITY OF INDIA LTD. 2004 (1) TMI 399 - SUPREME COURT has held that Pitch Creosote Mixture is a pitch and not a partially distilled tar , hence it is classifiable under sub-heading 2708.11 of the Central Excise Tariff and not under Heading 27.06. Tar and Pitch are covered under separate tariff headings after 1.3.1986, Tar is classifiable under Heading 27.06 and Pitch under heading 27.08. Pitch is derived by distillation of Tar wherein the oils Light oil, Naphthalene oil, Creosote oil and other residual oils are removed. Depending on the extent of oil removed Pitch may be soft pitch or medium soft pitch or medium hard pitch or hard pitch . Once pitch is obtained, it is a completely different product from Tar . Once a product is Pitch , it is no longer Tar . Pitch can, under no circumstances, fall under the Tariff Item 27.06. SAIL, DSP has contended that they are not having pitch plant and have submitted photographs to prove this. It is also their contention that they never manufactured pitch of any type since 1987 nor had any facility to manufacture pitch. - The facts need to be verified. It is also found that no independent evidence has been disclosed in the adjudication orders to discharge the onus cast upon the Revenue to establish the correct classification of the impugned goods, as contended by them, and is covered by the Apex Court s decision in CCE Vs. SAIL (supra). The matters need to be remanded back to the Adjudicating Authority for fresh de novo decision upon due consideration of the evidences produced and to be further produced by SAIL, DSP and upon following the principles abovestated laid down by the Apex Court and observing the principles of natural justice and affording SAIL, DSP a personal hearing - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Correct classification of the product Coal Tar Partially Distilled (CTPD) under the Central Excise Tariff.
2. Validity of the penalties imposed on SAIL.
3. Whether the extended period of limitation and penalties under Section 11AC of the Central Excise Act can be invoked.

Issue-Wise Detailed Analysis:

1. Correct Classification of CTPD:
The primary issue in all seven appeals filed by SAIL is the correct classification of CTPD manufactured at its Durgapur Steel Plant. SAIL contends that CTPD should be classified under Tariff Heading 27060090 of the Central Excise Tariff, which covers "Tar Distilled From Coal, From Lignite Or From Peat And Other Mineral Tars, Whether Or Not Dehydrated Or Partially Distilled, including Reconstituted Tars." However, the Commissioner of Central Excise classified CTPD under Tariff Heading 27081010, which pertains to "Pitch obtained by blending with creosote oil or other coal tar distillates."

SAIL argued that CTPD is produced by distilling coal tar up to a temperature of about 280°C, resulting in a product that retains significant oil content and is not pitch. SAIL presented evidence including test reports, marketing documents, and end-user certificates to support its classification. The Revenue, on the other hand, relied on a Supreme Court decision in CCE vs. SAIL, which classified Pitch Creosote Mixture (PCM) under Heading 27081010, arguing that CTPD and PCM are similar products.

The tribunal noted that the Commissioner did not adequately address SAIL's evidence and contentions, including the test report from the Chemical Examiner and the end-user certificates. The tribunal also observed that the decision in CCE vs. SAIL pertained to PCM, not CTPD, and that the two products have distinct chemical compositions and commercial uses.

2. Validity of Penalties Imposed on SAIL:
SAIL challenged the penalties imposed by the Commissioner, arguing that there was no nonpayment or short payment of duty as CTPD was correctly classified under Tariff Heading 27060090. SAIL contended that the Commissioner ignored crucial evidence and relied on incorrect facts to impose penalties.

The tribunal found that the Commissioner did not provide sufficient reasoning for rejecting SAIL's classification and imposing penalties. The tribunal emphasized that the burden of proof lies with the Revenue to establish that the goods are taxable as claimed. The tribunal also noted that the test report from the Chemical Examiner supported SAIL's classification, and the Commissioner failed to address this evidence.

3. Invocation of Extended Period of Limitation and Penalties under Section 11AC:
SAIL argued that there was no suppression of facts or willful misstatement to evade duty, and therefore, the extended period of limitation and penalties under Section 11AC of the Central Excise Act could not be invoked. SAIL cited the Supreme Court's decision in Nizam Sugar Factory vs. CCE, which held that repeated issuance of show cause notices on the same issue does not constitute suppression of facts.

The tribunal agreed with SAIL, finding that the Commissioner proceeded on the same facts and allegations in all the show cause notices, and there was no evidence of suppression or willful misstatement. The tribunal concluded that the extended period of limitation and penalties under Section 11AC were not applicable.

Conclusion:
The tribunal remanded the matters back to the Adjudicating Authority for fresh de novo decision, directing the authority to consider all evidence produced by SAIL and to follow the principles laid down by the Supreme Court. The tribunal also instructed the authority to observe the principles of natural justice and provide SAIL with a personal hearing. If necessary, the authority should send fresh samples of the impugned goods for testing to determine the correct classification. All appeals by SAIL and the Revenue were allowed by way of remand, with all issues kept open for reconsideration.