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TMI Blog2014 (12) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Each individual component such as ethylene and other gases mentioned earlier can be separated from the mixture and used for a specific purpose. - liquefied petroleum gases (LPG) is a term which is generic in nature and covers a wide range of petroleum gases which are in the liquefied form. Propane is one of such gas. Scope of the exemption notification - Held that:- it is clear that the term ‘liquefied petroleum gases’ though not defined in the Notification but is a term used in the Tariff as also other entries in the Notification. Since the Notification does not define the scope of the said term, the scope of the term as envisaged in the Tariff will be applicable. As per our analysis, in the Tariff “liquefied petroleum gases” would cover propane and therefore propane would be chargeable to concessional rate of duty as per the entry in the Notification. In the ISI Specification, in the beginning it is stated that the term applies to a mixture of certain light hydrocarbons derived from petroleum. Clause 3.1.1 further clarifies that LP gases mainly consist of one or more of the specified hydrocarbons. Propane is one of the specified hydrocarbons. Para 3.1.2 also states tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is within February, 2011 to January, 2012. 2. The issue to be decided in all the four appeals is whether commercial propane imported by the respondents and cleared as liquefied petroleum gases falls within the scope of Notification 4/2006-C.E., dated 1-3-2006 - Entry at serial No. 27. There is no dispute about the classification of the imported goods or the description given in the bill of entry. The goods i.e. commercial propane is classifiable in Tariff Entry 2711 12 00. The scope of the term liquefied petroleum gases (LPG) used in the said Notification/entry is not defined in the Notification. 3. Before we go into the details and rival contentions, we may look at the corresponding tariff entries and the exemption Notifications. Before 28-2-2005, the Central Excise Tariff used to have six digit and from 28-2-2005 onwards it became eight digit. The relevant entries in the six digit were as under :- 27.11 Petroleum gases and other gaseous hydrocarbons - Liquefied : 2711.11 -- Natural gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is available to liquefied petroleum gases (LPG) whereas the goods imported were commercial propane and as per the information available on internet/website, the LPG are the mixtures of various hydrocarbon gases and the chief constituents of LPG are propane, propylene, butane and isobutene. Further, as per the Indian Standard IS 4576-1578, the term liquefied petroleum gas applies to a mixture of certain light hydrocarbons derived from petroleum which are gaseous at normal ambient temperature and atmospheric pressure but may be condensed to the liquid state at normal ambient temperature by the application of moderate pressure. Further, butane and propane have number of uses while LPG has only one i.e. fuel. Thus, in essence, the demand notice was based upon the fact that the goods imported are not what is generally understood as LPG. In the impugned order, the Commissioner has gone through the scheme of classification under the Tariff and has come to the conclusion that the goods imported viz. commercial propane are liquefied petroleum gases as per the Tariff Heading 2611 12 00 which is nothing but a sub-classification of liquefied petroleum gases and hence would be chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute, would attribute to it. Resort to rigid interpretation in terms of scientific and technical meaning should be avoided in such circumstances. 6.2 Commercial propane is not known as LPG in the common/commercial/trade parlance or understanding and therefore rate applicable to LPG cannot be extended to commercial propane. 6.3 The Revenue also stated that an exemption Notification must be construed strictly as held by the Hon ble Supreme Court in the case of Uttam Industries v. CCE, Haryana reported in 2011 (265) E.L.T. 14 (S.C.) and in view of this position, the exemption has to be limited to the commercially understood meaning of the term liquefied petroleum gases (LPG). 6.4 Another argument taken by the Revenue is that in the Customs Notification 21/2001, dated 1-3-2001, S. No. 594 covers all goods falling under CTH 2711 12 00, 2711 13 00 and 2711 21 00. However, in the same Notification against S. No. 595, liquefied petroleum gases are classifiable under CTH 2711 19 00. Thus, a clear distinction is being made between liquefied propane and butane mixture, liquefied propane, liquefied butane and liquefied petroleum gases (LPG). In view of this position, the term LPG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate for the respondent s main contention was that the Heading 2711 covers petroleum gases and other gaseous hydrocarbons. These goods when in liquefied form are covered under five Tariff items, namely 2711 11 00, 2711 12 00, 2711 13 00, 2711 14 00 and 2711 19 00. Tariff item 2711 12 00 specifically covers propane. All the five entries cover liquefied petroleum gases. Thus the propane in liquefied form is a petroleum gas and therefore has to be considered as liquefied petroleum gas or LPG. Their main contention was that serial No. 27 of Notification 4/2006-C.E., dated 1-3-2006 covers all the three Tariff items namely 2711 12 00, 2711 13 00 and 2711 19 00. Further, in the description column the term used is liquefied petroleum gases (LPG). Since Tariff item 2711 12 00 specifically mentions propane and 2711 13 00 specifically mentions butane and 2711 19 00 mentions other , it is evident that the Notification covers different types of liquefied petroleum gases viz. propane, butane and others. Revenue s contention that the said entry covers liquefied petroleum gases (LPG) which is mixture of propane, butane and other hydrocarbons and used as fuel is incorrect. If an interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a view to regulate the distribution of LPG. 7.4 Another contention of the learned advocate was that the reliance placed by the Revenue on serial No. 594 of the Customs Notification 21/2002, dated 1-3-2002 is incorrect, as each Notification has to be examined with reference to the description and the Tariff heading used therein. 7.5 The learned advocate relied upon the following four decisions of the Hon ble Supreme Court and Hon ble High Court to support various contentions :- (i) CCE, Trichy v. Rukmani Pakkwell Traders reported in 2004 (165) E.L.T. 481 (S.C.); (ii) Citric India Ltd. v. UOI reported in 1993 (66) E.L.T. 566 (Bom.); (iii) Novopan India Ltd. v. CCE, Hyderabad reported in 1994 (73) E.L.T. 769 (S.C.); (iv) Mangalore Chemicals Fertilisers Ltd. v. Deputy Commissioner of Commercial Taxes reported in 1991 (55) E.L.T. 437 (S.C.). 7.6 Another contention of the learned advocate was that the whole exercise is a revenue neutral exercise as the respondents were eligible to take credit of the countervailing duty paid. They have taken the credit of CVD @ 8% which was actually paid by them. If the department would have charged 14% at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tadiene, butane, propane are some of the petroleum gases. Each individual component such as ethylene and other gases mentioned earlier can be separated from the mixture and used for a specific purpose. For example, ethylene has large number of uses and is taken out from the mixture of petroleum gases and used in the manufacture of various items like polyethylene etc. The same is true in respect of other gases also. In fact in refinery or petrochemical complexes, a number of such gases are extracted and used for the manufacture of specified items such as polymers etc. and generally what is left out is used as a fuel. This does not mean that the petroleum gases even before extraction of individual components cannot be used as a fuel but for commercial reasons, the left out mixture of gases is generally used as fuel. In fact many of these gases can also be used individually as fuel. Even commercial propane which is the item under dispute is being used by one of the respondents, M/s. Essar Steel Ltd., as fuel and they are importing the commercial propane to be used as fuel and has used it as fuel. Other respondent, namely M/s. Reliance Industries Ltd., has imported commercial propane f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers propane, which is a type of liquefied petroleum gas, the rate applicable to propane will be the concessional rate i.e. 8%. Similar will be the position in respect of butane which is covered by 2711 13 00 as also by the description liquefied petroleum gases . Tariff item 2711 19 00 is a residuary item and therefore the liquefied petroleum gases which are not covered by 2711 11 00, 2711 12 00, 2711 13 00 and 2711 14 00 will get covered under the said entry. If Revenue s contention is accepted, then, only the liquefied petroleum gases falling under Heading 2711 19 00 would be chargeable to 8% duty. Such an interpretation cannot be permitted for the simple reason that other two Tariff items are mentioned in the said entry and the other two Tariff items do cover liquefied petroleum gases (LPG) . 12. From the above analysis, it is clear that the term liquefied petroleum gases though not defined in the Notification but is a term used in the Tariff as also other entries in the Notification. Since the Notification does not define the scope of the said term, the scope of the term as envisaged in the Tariff will be applicable. As per our analysis, in the Tariff liquefied petro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be adopted. As mentioned earlier, the term petroleum gases is used in the Tariff and has certain implications (even though it is not defined). Similar is the position in the relevant Notification. Even in the trade and commercial understanding, propane is LPG. We are therefore of the view that in such a situation the meaning of LPG so as to limit to the understanding by a layman that also as fuel will not be correct. In the case of Connaught Plaza Restaurant (supra), the dispute was relating to soft serve and whether the same should be considered as ice-cream or under Chapter 4. It is in that circumstances that the Hon ble Supreme Court took a view that in common parlance soft serve is understood as ice-cream and therefore directed the classification accordingly. In the present situation, the dispute is relating to commercial propane which is not an item which is generally understood in the public but is an item which is dealt with in refinery petrochemical complex and other industrial establishments and as mentioned earlier, the term is also used in the Tariff, the Notifications use the term for both as fuel or as input for manufacturing. The scope of the term in the Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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