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TMI Blog1985 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of India and the Esso Eastern Inc. in September 1965. According to the terms of the agreement the Esso Standard Refining Company of India Ltd., (hereinafter referred to as ESRC) was to supply certain hydrocarbon streams to the Lube Refinery for use as feed stocks/raw materials in the manufacture of lube base stocks and transformer oil base stocks. After processing the feed stocks the Lube Refinery was to return to ESRC surplus hydro-carbon streams. The Wash Oil was intended to be used by the Lube Refinery for the purpose of washing filters in the Dewaxing units during the course of the manufacturing operations. A clause has been incorporated in the Lube Refinery agreement to the effect that Lube Refinery would not be placed at a disadvantage in the matter of imposition or levy of excise duty on products manufactured by it as compared to like products manufactured in the country by other Refineries. Before the Lube Refinery went on stream during August 1969, certain meetings were held with the Excise Collector, Bombay, as also the officials of the Central Board of Excise and Customs, New Delhi. During the course of the discussions the Collector of Central Excise had confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice issued prior to the levy refers to 54.63 kls. at 15oC of wash oil received by the appellants from Hindustan Petroleum Corporation Limited (Fuels Refinery) and consumed during the period from 1-4-1978 to 30-6-1978. In their reply dated 16-8-1978, the appellants have submitted that out of 546.327 kls. of wash oil, 491.694 kls. were returned to the Fuels Refinery as dirty wash oil and 54.63 kls. were used in the process of manufacture at the Lube Refinery. Even this quantity was utilised in the manufacturing process having been mixed with wax slurry, and after washing the filters, was sent back to the Fuels Refinery for re-processing. It is common case that duty was paid on the re-processed product. The Technical Note submitted by the appellants in respect of the used wash oil in the Propane Dewaxing unit indicates that wash oil is untreated raw distillate obtained from distillation of crude in the Fuels Refinery. The oil is mixed with Dewaxing Aids and Solvent Propane. As a result wax precipitates out of the solution and is then separated from the oil in rotary drum filters. Wash Oil is absolutely essential to maintain production in the Propane Dewaxing Unit. The filterin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and use the duty liability will not be attracted. From the facts of the case, it is clear that wash oil is an intermediate product used in the course of the manufacture in the Propane Dewaxing Unit. The Appellate Collector has observed that the goods manufactured by the appellants satisfy the specifications of excisable item mentioned at Item 8 of the First Schedule of the Central Excises and Salt Act. The Collector has observed that this fact was mentioned in the impugned order and was not refuted by the appellants. Shri Badkar argued that if the fundamental test of marketability was not proved answering specifications would not be relevant. In our view wash oil would be liable to excise duty because the test of marketability is established. The levy of duty arises on the production or manufacture of the goods as laid down in 1982 E.L.T. 447 (supra). If the intermediate product which comes into existence is a complete product known to the market it is excisable. Even the ruling reported in 1983 E.L.T. 2184 (supra) confirms the view that in order to attract excise duty the goods, manufactured, must be goods, which are ordinarily bought and sold in the market and are known as such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Mfg. Co. Ltd., Ahmedabad and others v. Union of India and others) it was held that an intermediate product which is by itself an excisable article is liable to excise duty even though it is not removed from the factory. 11. We also notice clause 10 of the Lube Refinery Agreement dated 15-9-1965 which reads as follows : 10.(a) The Government will use its good offices with the Maharashtra Government for according to the Company the same treatment in regard to exemption from sales tax on their intercompany transfers and/or sales between the company and ESRC and/or ESE and/or other oil companies for so long as any of the oil companies enjoy exemption from sales tax on their intercompany sales of transfers of their products ; (b) Government will use its good offices to ensure that ESRC and Lube Company are not placed at a disadvantage (i) in the imposition or in the method of levy of customs duty on their products as compared to any like products imported from abroad ; or (ii) in the imposition or in the method of levy of excise duty on products manufactured or processed by them as compared to any like products manufactured or processed in the country. From the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im that they use the wash oil for manufacturing other petroleum products liable to excise duty. The department contends that wash oil has been used for the purpose of washing filters in the Dewaxing Unit and hence it shall not be deemed to have been used for the purpose of manufacture. The Collector of Central Excise (Appeals) while dealing with this aspect has observed that the goods themselves, that is to say, wash oil in question, shall be subjected to the process of blending, treatment, alteration. etc. 14. We are of the view that the appellants are entitled to the benefit of Rule 143-A as it is a special provision intended for the Refinery. The object of the rule is to enable the Refinery to utilise the intermediate products for further manufacturing processes. The words manufacturing in a refinery cannot be given a restricted interpretation suggesting that the blending, treating or other alterations should take place in the identical refinery. Though Lube Refinery and ESRC are two different legal entities and have been declared as two separate refineries in the absence of any words in Rule 143-A holding that the further manufacturing processes should be carried out in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eum products, from the whole of the duty of excise leviable thereon. The above extract indicates that the Government was particular that utilisation as fuel should be within the same premises. The appellants would be entitled to the benefit of the rule and no duty should be levied on the wash oil used in the refinery. 17. The concept of manufacture and the import of the term very goods had been considered in 16 STC 259 (Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar and Others) and 16 STC 563 (J.K. Cotton Spinning Weaving Mills Co. Ltd. v. The Sales Tax Officer, Kanpur and another) it was held that the expression in the manufacture of goods in Section 8(3) (b) should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression in the manufacture of goods . Applying these principles to the present facts, the role of the wash oil in the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Uttar Pradesh (AIR 1979 S.C. 621) the plea of estoppel could be raised if equivocal and repeated assurances had been given. But estoppel is a rule of evidence by which a party who has led another to act to his detriment cannot resile therefrom. In other words, the plea of estoppel cannot be raised for a demand of duty because there can be no estoppel against statutory demands. In 1981 E.L.T. 328 (Del.)(J.K. Synthetics Ltd. and another v. Union of India and others) it was held that the doctrine of res judicata will not apply to matters of taxation. In 1983 E.L.T. 292 (Khandelwal Metal and Engg. v. Union of India and others) it has been specifically held that doctrine of promissory estoppel cannot be invoked for preventing the government in the discharge of the duties under the law. There can be no promissory estoppel against the action of the legislature and the individual be precluded from the legislative functions by resorting to the doctrine of promissory estoppel . In view of the above pronouncement we are of the view that the plea of promissory estoppel cannot be sustained. 23. In the light of our findings that the appellants are entitled to the benefit of Rule 143-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be argued that since the officer had the power to demand duty, a rule number should not invalidate the demand. This principle is true when a power, like the power to demand duty in a given circumstance, is invoked but the officer quotes a rule that is not correct. In those conditions, the incorrect rule will not invalidate the officer s right to exercise that power. 27. Here the officer sought to exercise the power of recovering duty, under Rule 160, and this was the rule he had in mind. All the authorities below had only Rule 160 before them. All had the same reason for the demand proposal and they all operated in the frame of Rule 160. They never regarded the wash oil as having gone into home consumption, and cleared under Rule 157. Rule 160 was correct if the reasons were the right ones for thinking the oil had become dutiable. But those were not the right reasons. Hence the quotation and the proceedings under Rule 160 were both wrong. They are not in accordance with the facts and hence are contrary to the law. Duty on the wash oil was not leviable under Rule 160 and the demands are invalid and liable to be set aside. I set aside the 15 demands and all the proceedings th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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