1978 (6) TMI 60 - HC - Central Excise

Summary

Issues:
1. Whether the soap base greases manufactured by the appellant Company were excisable goods under Item No. 11B of the 1st Schedule to the Central Excise Act.
2. Validity of the proceeding and show cause notice issued by the Asstt. Collector, Calcutta, II Division.
3. Whether the greases produced by the appellant Company were excisable under Item No. 11B of the 1st Schedule.
4. Interpretation of the term "mineral oil" under Explanation 1 to Item No. 6 in relation to the greases manufactured by the appellant Company.
5. Applicability of Rule 56A of the Central Excise Rules, 1944 regarding credit of duty already paid on materials used in manufacturing the greases.

Analysis:
1. The appellant Company was engaged in the production and sale of lubricating oils and greases. The issue revolved around whether the soap base greases manufactured by the appellant were excisable goods under Item No. 11B of the Central Excise Act. The Asstt. Collector alleged that the greases fell within this category, leading to a show cause notice. The appellant challenged this proceeding through a writ petition, which was dismissed by the court, prompting the appeal.

2. The appellant contended that the lubricating oils purchased by them were excisable goods under the Central Excises and Salt Act, and duty had been paid on them before purchase. They argued that the greases produced by blending these oils should not be subjected to further excise duty. On the other hand, the respondents argued that the greases fell under Item No. 11B and were dutiable. The dispute centered on whether the greases were processed by blending lubricating oils with other ingredients, making them excisable.

3. The court analyzed the definition of "mineral oil" under Explanation 1 to Item No. 6, which encompassed oils derived from petroleum and consisting of liquid hydrocarbons. It was established that the lubricating oils used by the appellant, even if blended with additives, still qualified as mineral oils. Therefore, the greases manufactured by blending these oils with other ingredients were deemed excisable under Item No. 11B.

4. The appellant's argument that duty paid lubricating oils were not mineral oils within the meaning of the law was rejected. The court affirmed that the greases produced by blending lubricating oils with fats and chemicals were covered under Item No. 11B. The appellant's potential entitlement to claim credit under Rule 56A for duty already paid on materials used did not exempt the greases from excise duty liability.

5. Consequently, the court dismissed the appeal, upholding that the greases manufactured by the appellant were excisable under Item No. 11B. The operation of the order was stayed for three weeks as requested.