1988 (4) TMI 233 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product as furnace oil under Tariff Item 10.
2. Validity of the demand for differential duty.
3. Applicability of the extended period of limitation under Section 11A.

Issue-wise Detailed Analysis:

1. Classification of the Product as Furnace Oil under Tariff Item 10:

The primary issue was whether the product manufactured by the respondents could be classified as furnace oil under Tariff Item 10. The Assistant Collector had reclassified the product under Tariff Item 11A(4), arguing that it was solid at 30^0C and thus could not be considered a mineral oil or furnace oil. The Collector (Appeals) disagreed, stating that Tariff Item 10 covers furnace oil, which is defined by specific parameters such as smoke point, viscosity, carbon residue, and color. The Collector (Appeals) found no justification for the department's stipulation that the product must be liquid at 30^0C to be classified as furnace oil. The product met all the specified parameters of Tariff Item 10, and there was no finding that it did not meet the definition of mineral oil as per Explanation I to Tariff Item 6. The Tribunal upheld this view, noting that the product was stored and transported in liquid form and marketed as fuel oil, satisfying the requirements of Tariff Item 10.

2. Validity of the Demand for Differential Duty:

The department issued a notice demanding differential duty based on the reclassification of the product. The respondents resisted this demand, and the Collector (Appeals) ruled in their favor, stating that the product met the criteria for furnace oil under Tariff Item 10. The Tribunal noted that the product was accepted in the trade as fuel oil and was sold as such. The pour point test, which the department relied on, was deemed irrelevant for classification purposes as it only indicates the lowest temperature at which the product flows on its own. The Tribunal concluded that the product should not be assessed under the residuary item when it squarely fits under Tariff Item 10, and there was no suppression of facts by the respondents.

3. Applicability of the Extended Period of Limitation under Section 11A:

The Collector (Appeals) also addressed the issue of limitation, holding that the extended period of five years under Section 11A could not be invoked. The respondents had not withheld any relevant information and had furnished test reports to the department. The Tribunal agreed, noting that there was no evidence of suppression of facts or misstatement with intent to evade duty. The show cause notice did not allege any such intent, and the longer period of limitation was not warranted. Therefore, the demand for differential duty was time-barred.

Conclusion:

The Tribunal found no infirmity in the order of the Collector (Appeals) and upheld the classification of the product as furnace oil under Tariff Item 10. The demand for differential duty was dismissed as the product met all the specified parameters and there was no suppression of facts. The extended period of limitation under Section 11A was not applicable, and the appeals of the revenue were dismissed.