1989 (2) TMI 294 - AT - Central Excise

Summary

Issues Involved:
1. Classification of Heavy Normal Paraffins (HNPs) under the Central Excises & Salt Act, 1944.
2. Applicability of Item 7 versus Item 68 of the First Schedule to the Central Excises & Salt Act, 1944.
3. Interpretation of the term "mineral oil" and its relevance to the classification.
4. Examination of the process of manufacture and its impact on classification.
5. Applicability of Central Excise Notification No. 276/67-CE.

Detailed Analysis:

1. Classification of Heavy Normal Paraffins (HNPs) under the Central Excises & Salt Act, 1944:
The core issue was whether HNPs should be classified under Item 7 or Item 68 of the First Schedule to the Central Excises & Salt Act, 1944. The respondents argued for classification under Item 7, while the appellant-Collector contended for Item 68.

2. Applicability of Item 7 versus Item 68 of the First Schedule to the Central Excises & Salt Act, 1944:
The Tribunal examined whether HNPs, derived from kerosene, fit the definition of "Kerosene" under Item 7, CET. Item 7 covers "Kerosene" and "Aviation Turbine Fuel" (ATF), and any mineral oil conforming to the specifications of smoke point and final boiling point. The Tribunal concluded that HNPs, although not kerosene as commonly understood, met the technical specifications and thus fell under Item 7, CET.

3. Interpretation of the term "mineral oil" and its relevance to the classification:
The Tribunal analyzed the definition of "mineral oil" as provided in Explanation I to Item 6, CET, which also applies to Item 7. The definition includes oils derived from petroleum and similar oils produced by synthesis or otherwise. The Tribunal concluded that HNPs, being derived from kerosene (a petroleum product), fit within this definition.

4. Examination of the process of manufacture and its impact on classification:
The Tribunal detailed the manufacturing process of HNPs, which involves processing kerosene through a U.O.P. Molex process. This process separates normal paraffins from co-boiling hydrocarbons. The Tribunal held that this process constituted "manufacture" and resulted in a product distinct from kerosene, thereby justifying its classification under Item 7, CET.

5. Applicability of Central Excise Notification No. 276/67-CE:
The Tribunal noted the need to examine the applicability of Central Excise Notification No. 276/67-CE, which could potentially exempt the product from duty. The matter was remanded to the Assistant Collector for this examination, ensuring due opportunity for the respondents to present their case.

Conclusion:
The Tribunal concluded that HNPs should be classified under Item 7, CET, as they conform to the technical specifications of kerosene and fall within the definition of "mineral oil." The process of manufacturing HNPs from kerosene was deemed to constitute "manufacture," making the product excisable under Item 7. The case was remanded to the Assistant Collector to examine the applicability of Notification No. 276/67-CE, with due opportunity for the respondents to present their case.