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TMI Blog1986 (10) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 7.2.1979 was issued to appellants disputing the stand taken by them and desiring them to show cause as to why Central Excise duty at the appropriate rate should not be recovered on the Transformer Oil (T.I.8) manufactured by them out of duty paid base oils falling under a different tariff item viz. 11A4(a). The appellant had replied to the show cause notice vide their letter dated 18.4.1979 and a personal hearing was granted by the Assistant Collector and at the time of hearing the appellant reiterated the contentions made in the reply to the show cause notice and had argued that the goods Transformer Oil is converted from Transformer Oil Base Stock which is already duty paid. The conversion of Transformer Oil Base Stock to Transformer Oil does not amount to manufacture, and a new product does not come in existence. The appellant had relied upon the Supreme Court's judgment in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. and had argued that 'manufacture implied a change but every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Excise duty is not charged on a commodity until and unless it has been mentioned by the Legislature itself. The physical and chemical properties and the specification of technical requirements may be the same for the Transformer Oil Base Stock and Transformer Oil but Transformer Oil Base Stock has been specifically excluded from the purview of T.I.8 by virtue of Explanation II to the said Tariff item. Thus Transformer Oil classifiable under T.I.8 and the Transformer Oil Base Stock falling under T.I.11A are two separate and distinct commodities under the Central Excise Law. As to the earlier findings of the Central Excise authority in 1971 that the goods Transformer Oil Base Stock and Transformer Oil are the same and no new product comes into being as a result of the processing so Transformer Oil is not duitiable product and the Assistant Collector could not review the earlier decision, does not help the appellants. Transformer Oil Base Stock and Transformer Oil both were classified under T.I.,8 only but from 1st March,1978 the Transformer Oil Base Stock has been included in T.I.No. 11A(4) by specific mention in the tariff itself. Hence the previous classification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the appellant had applied for L4 Manufacturing Licence in the prescribed form and had agreed to clear Transformer Oil on payment of provisional duty at 5% ad valorem under protest and without prejudice to their rights to represent their case further and claim refund of such amounts paid by them under that provisional assessment. Shri Lodha states that in his letter dated 3rd March, 1971 the Superintendent of Central Excise had informed the appellant that production of Transformer Oil from duty paid Transformer Oil Base Stock does not amount to manufacture so as to attract levy of Excise Duty. It was further mentioned in that letter that the Transformer Oil produced by the appellant out of duty paid Transformer Oil Base Stock does not attract levy of Excise duty. Shri Lodha also referred to a letter dated 3rd March, 1975 which appears on pages 70 and 71 of the Paper Book. In the said letter the appellant had filed an application for the issue of Excise Licence and PLA under Tariff Item 68 provisionally and the respondent vide letter dated 14th March, 1975 had informed the appellant that the Transformer Oil as manufactured by the appellant was excisable under T.I.8 but no du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production is not lost. He has referred to the judgment of the Hon'ble Supreme Court reported in AIR^ 1976, Supreme Court 182 in the case of A.B. Abdul Kadir and others v. State of Kerala wherein the Hon'ble Supreme Court had held that "The fact that the levy of excise duty is in the form of licence fee would not detract from the fact that the levy relates to excise duty. It is, however, essential that such levy should be linked with production or manufacture of the excisable article. The recovery of licence fee in such an event would be one of the modes of levy of the excise duty. Where, however the levy imposed or tax has no nexus with the manufacture or production of an article the impost or tax cannot be regarded to be one i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lices have a higher price than the original fruit, is occasioned only because of the labour put into making fruit more readily consumable and because of the can employed to contain it. Shri Lodha states that in the present matter before us the Transformer Oil Base Stock has been processed and impurities have been removed and there is no manufacture and as such no excise duty could be levied. He has referred to another judgement of the Supreme Court in the case of Alladi Venkateswarlu and others etc. v. Government of Andhra Pradesh and another reported in AIR 1978 Supreme Court 945 wherein the Hon'ble Supreme Court had held that "we do not think that it is fair to so interpret a taxing statute so as to impute an intention to the legislation to the Legislature to go on taxing what is virtually the same product in different forms over and over again. Such a result would be contrary to basic axioms of taxation. Unless the language of taxing statute was absolutely clear, it should not be given an obviously unfair interpretation against the assessee. He has referred to a judgement of the Tribunal in the case of Collector of Central Excise, Jaipur v. Fine Marble & Minerals Pvt. Ltd., Makr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the provisions of Section 2(f) of the Central Excises and Salt Act, 1944. In terms of Section 2(f) 'manufacture' includes any process or ancillary to the completion of a manufactured product. Shri Lodha states that in the present case there is just purification and not manufacture and the Parliament has got full authority to amend the section. Since the parliament has not amended the same and a "simple reading of the section shows that there is no express or clear wording of the Section which can lead to the conclusion that the processing is manufacture and that under a specific provision in the Act the Transformer Oil Base Stock can not be treated as manufacture. He has further stated that the Revenue has not been able to establish that in processing Transformer Oil Base Stock to Transformer Oil there had been a process of manufacture. The onus is on the Revenue and the same has not been discharged by it. He has referred to a judgement of the Hon'ble Supreme Court in the case of The Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. M/s. G.S. Pai & Co. reported in AIR 1980 Supreme Court 612. He has also referred to another judgment of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormer did not interpret the provisions of law correctly. This is in spite of the limited power of review inherent in the provisions of Sector 11A of Central Excises and Salt Act, 1944. He has also referred to the judgement of the Supreme Court in the case of Patel Narshi Thakershi and others v. Pradyumansinghji Arjunsinghji reported in AIR 1970 Supreme Court 1273 where the Hon'ble Supreme Court had held that 'The power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication'. Shri Lodha, the learned Advocate has pleaded that in view of his arguments the appeal filed by the appellant may be accepted. 4. Shri A.S. Sundar Rajan, the learned J.D.R. has appeared on behalf of the respondent. He has referred to the Tariff Item 8 as it stood on the 1st day of March, 1978. He has stated that the period involved in the present matter is 1st March, 1978 to 10th May, 1982. He has argued that Transformer Oil is a refined oil and Explanation III in Tariff Item 8 relating to refined diesel oils and vapourising oil was inserted from 1st March, 1978 and as per this explanation this item does not include (a) base mineral oil including min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of oils obtained from bituminous minerals as a basis and that they are not covered by a more specific heading in the nomenclature. Sub-heading (C) (3) relates to Transformer and circuit breaker oil (which are not used for their lubricating properties) are stabilised specially refined oils with added anti-oxidants such as ditertiarybutylparacresol. This heading does not include preparations containing less than 70% by weight of petroleum oils or of oils obtained from bituminous minerals and preparations containing petroleum oils or oils obtained from bituminous minerals in any proportion (even exceeding 70% by weight) covered by a more specific heading in the Nomenclature or based on products other than petroleum oils or oils obtained from bituminous minerals. Shri Sunder Rajan has referred to the Comparative Chart of Physical Properties And Characteristics of TOBS/TOFS and Transformer Oil which appear on page 60 of the Paper Book. He has pleaded that the Electric Strength Breakdown Voltage (rms) of TOBS is less than 10KV whereas in the case of Transformer Oil it is 50KV. He pleaded that TOBS/TOFS in no case can be used as Transformer Oil. He has again referred to the earlier jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has pleaded for the dismissal of the appeal. 5. Shri C.S. Lodha, the learned Advocate has pleaded that the learned Departmental Representative has referred to two earlier judgements of the Tribunal on the issue but the point raised by him in his arguments were not considered by the earlier benches of the Tribunal and has such he has pleaded that the Bench should reconsider the earlier decisions of the Tribunal. He has also argued that in the present matter the Legislature has not exercised its power as to the levy of duty and as such no excise duty could be charged from the appellants. Shri Lodha has lastly referred to a judgment of the Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P) Ltd. Aurangabad, 1985(21) E.L.T. 889 (Tribunal) where the Tribunal had held that mere improving the quality of purity does not amount to manufacture and creation of new and different goods is necessary under the Central Excise Law and there cannot be double taxation. He has pleaded for the acceptance of the appeal. 6. Before expressing our opinion on Transformer Oil Base Stock and Transformer Oil we feel that for the proper appreciation of the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of potassium(a) hydroxide (KOH) per gram of the oil), Max 0.05 Appendix F Inorganic(b) Nil vii) Viscosity at 27oC in centistokes, Max 27 Appendix G viii) Pour point, Max -10oC P:10 of IS: 1448 (Part I) - 1960 ix) Flash Point, Min 145oC P:21 of IS: 1448 (Part I) - 1960 x) Copper strip corrosion (at 100oC for 3 hours) Not worse than classification No.1 of Table 1 of P:15 of IS: 1448 (Part I) - 1960 Procedure B of P:15 of IS:1448 (Part I) - 1960 NOTE 1 - Oil shipped from overseas in bulk may on arrival have an electric strength below the specified levels. In such cases, therefore, it may be considered necessary to improve its electric strength to 40 KV for one minute by filtration or other suitable treatment before the oil is filled in drums or supplied in any other manner. Owing to the quality and type of drums at present available, it may be difficult to obtain the specified electric strength of 40 KV for one minute on oil delivered in drums. Therefore an electric strength of not less than 30 KV for one minute is permissible for oil received in drums. It may be considered necessary to increase the electric strength to 40 KV for one minute by filt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able treatment, before transferring the oil to electrical equipment. The appellant in his Paper Book at page 60 has filed a Comparative Chart of Physical Properties and Characteristics of TOBS/TOFS and Transformer Oil. In that chart it is mentioned that the Electric Strength Breakdown Voltage (rms) of TOBS/ TOFS is less than 10 KV whereas the Electric Strength Breakdown Voltage (rms) of Transformer Oil is 50 KV. This shows that by no stretch of imagination TOBS can be used without processing or manufacturing. We would further like to observe that in purifying the TOBS/TOFS processing is involved. It may be by filtration or other suitable treatment which involves manufacturing activity. The learned Advocate had referred to various judgments of the Hon'ble Supreme Court and other Courts as to the definition of manufacture. We do not agree with the arguments of the learned advocate that no manufacturing activity is involved. The intention of the legislature prior to 1978 was not to charge separate Excise Duty for removing the impurities from TOBS as the same were falling under the same Tariff Item 8. We further observe that TOBS with impurities cannot be used as insulating oil. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is to say, any mineral oil (excluding mineral colza oil and turpentine substitute), which has its flashing point at or above seventy six degrees of Fahrenheit's thermometer, and satisfied either of the following requirements:- (i) the oil has a flame height of 10 millimeters or more but less than 18 millimeters; or (ii) the oil has a flame height of less than 10 millimeters but has a viscosity of less than one hundred seconds by Redwood-I Viscometer at one hundred degrees of Fahrenheit's thermometer and contains less than one quarter of 1% by weight of any bituminous substance: (a) Refined Diesel Oils 1000.00 2000.00 (b) Vapourising oil 500.00 2000.00 Explanation I - The expressions 'mineral oil', 'flashing point' and 'flame height' have the meanings respectively assigned to them in Explanations I and II to Item No. 6 and in Explanation II to Item No. 7. Explanation II - This item does not include- (a) Base mineral oils (suitable for use in the manufacture of lubricating oils greases) including mineral oils commonly known as Transformer Oil Base Stock or Transformer Oil feed Stock; and (b) Lubricating oils including spindle oils, flushing oils and jute batch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... getable oil continued to be an oil under the same item. He said that the transformer oil had all the specifications of TOFS/TOBS and only certain impurities were removed. It was like a dirty engine oil, inspite of its dirt, it was still an engine oil and, often, car owners run their cars on dirty engine oils. It cannot be said that the engine had no engine oil. The process of obtaining transformer oil from TOFS/TOBS did not amount to manufacture and this would be in accordance with the famous D.C.M. judgment of the Supreme Court which laid down how to determine if a new product had emerged. The new product must have a new character, name, use. The transformer oil did not materially differ from the raw material TOFS/TOBS from which it was made". "Para No. 6. When the Finance Bill excluded TOFS/TOBS from item 8 from 1-3-1978, it moved to item 11A. Transformer oil used to be assessed under item 68 before this Bill. This is a bit puzzling because if the oil had the specification of item 8 we cannot understand why the oil was ever assessed under item 68." "Para No. 7. However, that may have been, the issue before us is that from 1-3-1978 TOFS and transformer oil became assessable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion may then be asked would not TOFS be assessable under item 8 if it has the specifications of this item? Our answer would have been in the affirmative but this would be overruled and supplanted by the fact that the law excludes base mineral oils known as transformer oil base stock and transformer oil feed stock. This can be verified by a reading of item 8 and its explanatory notes". "Para No. 11. We need not labour the matter further. As the law stands, the transformer oil must be assessed under item 8 and so the action to assess it under this head is correct and we rectify it. All orders to the contrary are void and shall have no effect." "Para No. 12. The above discussion and finding will apply to the Appellate Collector's order No.l545/Cal/81 dated 16-11-1981 dealt with in the Tribunal appeal No-206/82-C. This appeal relates to the period 9-6-1978 to 21-9-1978. In this appeal too, M/s. Indian Petro Products obtained TOFS/TOBS which paid duty under item 11 A and used it to manufacture transformer oil. But the Appellate Collector decided that with effect from 9-6-1978, transformer oil was classifiable under item 8 CET, a view quite the reverse of his earlier one of 30-4-1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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