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TMI Blog1990 (5) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... Department from time to time. In November, 1984, the Central Excise Collectorate, Thane issued a Trade Notice to the effect that petroleum gases, viz., ethylene, propylene and butadiene, manufactured from raw naptha in a petrochemical refinery and stored under pressure in liquid condition were classifiable under Tariff Item 68. By a letter dated 14-12-1984, the Superintendent of Central Excise, Range III, Thane Dn. IV asked the respondents to file a classification list for these products under Tariff Item 68. They sent a reply dated 26-12-1984 intimating to the Superintendent of Central Excise that an approved classification list could not be revised on the basis of a Trade Notice which was not binding on the assessee. However, they filed a revised classification list for these three products under Tariff Item 68 under protest without prejudice to their right to classify them under Tariff Item 11-AA and not under Tariff Item 68. From 1-1-1985 they started clearing these products on payment of duty under Tariff Item 68 under protest. On 19-3-1985, the Superintendent of Central Excise issued a show cause notice-cum-demand for duty amounting to Rs. 1,27,08,533.40 on the quantity of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents protest, changed the classification to Tariff Item 68 and confirmed the demand for duty of Rs. 1,27,08,533.40. On an appeal filed against the Assistant Collector s decision, the Collector (Appeals) upheld the classification under Tariff Item 68, but he held that the classification could be changed only prospectively and on this ground he confirmed the demand for duty for the period from 14-12-1984. Against the Collector (Appeals) s order, the Revenue has filed this appeal so far as the rejection of the demand for the period prior to 14-12-1984 is concerned. The respondents have filed the cross-objection challenging that part of impugned order of the Collector (Appeals) which relates to classification of the products under Item 68 and demand for duty from 14-12-1984 onward. 2. For the Revenue, Shri Sunder Rajan has argued that the show cause notice under Section 11-A of the Central Excises Salt Act, 1944 was issued on 19-3-1985 for the period from 1-9-1984 to 31-12-1984. Therefore, the period from 1-9-1984 to 18-9-1984 is beyond the period of six months. A demand for duty could be raised under Section 11-A of the Act ibid for a period of six months even after the clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers. The learned advocate has argued that the classification could be changed from 1-1-1985 as the revised classification list was filed by the respondent under protest on 26-12-1984 -effective from 1-1-1985. 3. The law on the point whether demand for duty can be raised under Section 11-A of the Central Excises Salt Act, 1944 is now well-settled in view of the following judgments of Supreme Court :- (i) 1988 (35) E.L.T. 605 (S.C.) - Tata Iron Steel Co. Pvt. Ltd. v. Union of India (Decided on 6-5-1988) In this case, right from 1982 the appellant was filing classification list containing the description of the items manufactured by them and showing them liable to payment of excise duty only under Item 26AA (ia) of the CET and these lists were accepted and approved by the excise authorities. The Hon ble Supreme Court held that it could not be said that the appellant was guilty of any suppression or mis-statement of facts, fraud, collusion or contravention of provisions of Excise Act. In view of this, it was held that the period of limitation would clearly be only six months and the extended period of five years was inapplicable. In this connection paragraph-7 of the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruck down. (ii) 1988 (38) E.L.T. 573 (S.C.) - Collector of Central Excise, Baroda v. Kosan Metal Products Ltd. (Decided on 26-10-1988) In this case, classification list filed by the assessee was approved. Central Excise duty was paid according to the approved classification list availing of the benefit of set-off of duty paid on the inputs as stipulated under Notification No. 178/77-C.E. dated 18-6-1977. The range Superintendent pointed out short payment of duty of Rs. 38,460.12 on RT-12 returns for the months of April, 1979 and August, 1979. A show cause notice dated 19-1-1980 was issued to the assessee by the range Superintendent requiring it to explain why duty amounting to Rs. 51,261.88 for the period from 24-7-1978 to 31-3-1979 should not be recovered from it under Rule 10 of the Central Excise Rules and why penalty should not be imposed under Rule 173Q. The Hon ble Supreme Court held that as proper notice was not issued, merely on the ground of short entry in RT-12 return. Section 11-A of the Central Excises Salt Act would not be attracted and that when in such circumstances a demand is made under the Act for recovery then such demand must be under Section 11-A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal did. 3.1 In view of the ratio of the aforesaid four judgments of the Hon ble Supreme Court, we hold that even in cases where duty has been paid in terms of approved classification, demand for duty can be raised under Section 11-A of the Central Excises and Salt Act, 1944 for a period of six months, or for a period of five years where there is fraud, collusion, wilful mis-statement or suppression of facts on the part of the assessee. In this case, the Department has not made out a case for application of longer time-limit. The demand for duty should, therefore, be limited to a period of six months prior to the issue of the show cause notice. Accordingly, the impugned order is modified to this effect. 3.2 In view of the Supreme Court judgments discussed above, the decisions of the Tribunal relied on by the learned advocate do not hold good. The distinction sought to be made by him cannot also affect the ratio laid down in the judgments of the Supreme Court. 4. On the classification of the disputed products, the learned Departmental Representative has argued that these products are not derived directly from refining crude petroleum. Refining of crude petroleum means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification from Tariff Item 11-AA(2) to Item 68 on the ground that the impugned products were not derived directly from crude petroleum and hence these were not classifiable under Tariff Item 11-AA(2). Relying on the dictionary meaning of the expression derived from he has argued that this expression cannot be equated to manufactured from as has been done by the Department. He has argued that the hydrocarbon gases cannot be derived directly from crude petroleum. These cannot be obtained by one stage process. At least there should be two processes, viz., first, the process of deriving raw naptha from the crude petroleum by fractional distillation process and then obtain hydrocarbon gas from the raw naptha by the process of cracking the raw naptha. He has argued that as per page 787 of the Dictionary of Science and Technology by W.R. Chambers, the source of naptha is crude petroleum, coal tar or shale. If hydrocarbon gas is obtained from coal tar or alcohol, then that gas will not fall under Tariff Item 11-AA(2). The original source should be crude petroleum and this is the guiding factor for classification under Item 11-AA(2). He has argued that the Notification No. 276/67-CE spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others in the Special Civil Application No. 1175 of 1970, which has been cited by the learned DR. This judgment was followed by this Tribunal in the case of Nav Bharat Enterprises which has also been relied on by the learned DR. In the case of Mehta Brothers, the Hon ble High Court examined the scope of Item 11-A of the Central Excise Tariff as it existed during the relevant period. The said Tariff Item read, all products derived from refining of crude petroleum or shale (whether gaseous, liquid, semi-solid or solid in form) not otherwise specified including refinery gases, lubricating oil and greases, waxes and coke . The tariff Item 11-AA(2) which is in dispute before us says other petroleum gases and gaseous hydrocarbons derived from refining of crude petroleum or shale . Both these tariff items say derived from refining of crude petroleum . While interpreting Tariff Item 11-A (supra), the Hon ble Gujarat High Court has categorically held that A product to be excisable under Item 11-A must be the immediate result of refining of crude petroleum . This is the ratio laid down by the High Court in that case. It is not an obitor. This ratio has been followed by this Tribunal in t ..... 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