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TMI Blog2019 (6) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... er heading 3823. A plain reading of Chartered Engineer s certificate also does not convince us that CFC is in the nature of a lubricant. Therefore, we find no force in the argument of the appellant and we find that the adjudicating authority was correct in classifying the product under Chapter heading 3823. Therefore, the question of exemption under notification 287/1986-CE does not apply in this case. Scope of SCN - HELD THAT:- The classification was not an issue in the show cause notice and the appellant has also not made out a case to reclassify the goods and claim benefit. Clearances without payment of duty amount to 1,21,892/- - HELD THAT:- The relevant period for this is 01.04.1991 to 31.03.1992. Learned counsel submits that this demand will not be sustainable if the department hold that VIPI is a dummy unit and VIPPL is the only correct unit as alleged in the first show cause notice. We have considered this argument and find that as far as the allegation regarding VIPI being dummy unit is concerned, we have not accepted it and therefore, set aside partly the demand with respect to the first show cause notice. Therefore, the demand to this extent under this show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhar, Advocate Present for the Respondent: Shri N. Bhanu Kiran, Authorized Representative. ORDER PER: P. VENKATA SUBBA RAO. 1. These appeals are filed by the appellants M/s Venkateswara Industrial Products Pvt Ltd (VIPPL), its Director Shri C. Ramdas, M/s Venkateswara Industrial Paint Industry (VIPI), its Proprietrix Smt Meera Ramdas and Shri G. Muthyalu against the same impugned order (Order-in-Original) No. 27/2010 (Denovo) CE (Hyd-III) Commr dated 31.12.2010 and hence are being disposed of together. 2. Heard both sides and perused the records. This is the third round of litigation with respect to these matters. The show cause notices were issued in 1992 and 1994 and after decision vide Order-in-Original No. 22/1998 dated 28.01.1998, the matter was remanded by the Tribunal vide Final Order No.517-524/2003 to reconsider the issue afresh. In the second round of litigation vide Final Order Nos. 1470-1474/2009 the matter was again remanded to the original authority with specific direction to consider the issue of classification which was disputed but not considered despite the direction of CESTAT in the original remand order. In the impugned order, the question of classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the cable / splice filling compound, and finally sealing thermally. 5. As per the specifications laid down by the DOT's Research Unit, there are over 12 type tests which the cable filling compound has to successfully pass through. The whole purpose of these tests is to ensure that no water ingress takes place into the joint irrespective of external weather conditions and the normal hazards associated with cables buried in earth. And also the compound should have electrical insulating and anti aging properties. The material should be easy to handle by technicians at site and should be odourless and non toxic. In effect the cable filling compound has to act as a seal protecting the signal carrying wires at the cable joint from exposure to various hazards." 4. Based on this opinion of the Chartered Engineer the appellants claim that the goods in question deserve to be classified as lubricating preparations/ preparations of a kind used for oil or grease treatment of textile materials etc., under Chapter heading 3403.99. Learned counsel for the appellants submits that the expert opinion of the Chartered Engineer should have been accepted by the Commissioner or he should have coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncludes that CFC is of a consistency like a semiviscous mix or blend product and its use is of a speciality oil for filling in enclosures as a sealant protecting the telephone underground cable joint. It contains basically oils to the extent of 50%. The product may also find application in such uses as anti-rust and anti-corrosive preparations. 17. Thus, I find the essential characteristics of cable filling compound is of sealant or insulation and lubrication is not the essential character. It is an established principle that classification is to be done on the basis of the essential character and not on residual or auxiliary character. 34.03 applies to lubricating materials. Therefore, I hold that CFC does not fall under 34.03. Next question is of appropriate classification? Department's view is that it is classifiable under 38.03 as a residuary product of chemical or allied industries, not elsewhere specified or included. The main contention of the notice against classification under 38.03 is that CFC is not a product of chemical or allied industry. The Chartered Engineer has opined that the product is not a chemical substance but while preparation seasoned for a specific pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86. This notification exempts speciality oils falling under 2710.99 or 3403.00 from the whole of the duty of the excise. Speciality oil has been defined in the explanation as follows: Explanation - For the purposes of the notification, "speciality oil" means any preparation made by blending or compounding of mineral oils falling under Chapter-27 of schedule to the Central Excise Tariff Act, 1985 (5 of 1986) with other oils in any other substance and is intended for industrial uses (other than for use as lubricant and of which the lubrication function, if any, is only secondary in nature. 20. Since CFC falls under 38.23 benefit of 287/86 is not available. I also find that neither CFC nor CCC conform to above description of speciality oils. One of the conditions for specialty oil is that it is intended for industrial use (other than for use as lubricant and of which lubrication function, if any, is only secondary in nature). Even if the classification of CFC is accepted under 34.03, it would mean that its main function is lubrication. In that event it will not be a speciality oil. As regards CCC, the decision is similar i.e., since it is classifiable under 34.03 its main functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bond and bank guarantee. He, further ordered confiscation of plant, machinery, land and buildings under Rule 173Q(2) and gave VIPPL an option to redeem the same on payment of fine of ₹ 1 lakh. He released the vehicle seized unconditionally and imposed no penalty on Shri K. Sailu. As far as this demand is concerned, learned counsel for the appellants submits that of the total amount of ₹ 7,51,833/- which has been confirmed by the learned adjudicating authority, an amount of ₹ 2,05,601/- pertains to demand on CCC which the department itself has classified under Chapter heading 3403 as well as under 2710. Products under both these headings are eligible for exemption under notification 287/1986. Therefore, the demand to that extent does not sustain. As far as the balance demand of ₹ 5,46,232/- is concerned, it is on CFC on account of clubbing together the turnover of VIPPL with the turnover of VIPI, Newton and AEI. Learned counsel would submit that VIPI had a separate SSI registration and they are also registered under Andhra Pradesh Sales Tax during the period. Similarly both Newton and AEI had separate AP Sales Tax registration. Therefore, the clubbing of tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves registered as SSI units and have raised separate invoices, their turnover cannot be different. What is important is who the actual manufacturer was, which in this case, is VIPPL. 10. Countering these arguments learned counsel for the appellants submit that the department themselves have admitted that VIPI is separate entity and had issued second show cause notice No.184/94 to VIPI. He draws the attention of the bench to Para 8 of this show cause notice which reads as follows: "M/s VIPPL is a private limited unit manufacturing cable filling compound and cable cleaning compound located at 60B, IDA, Cherlapally. M/s VIPI is a proprietary concern manufacturing cable filling compound (CFC) located at 60A, IDA, Cherlapally. The Directors of VIPPL include Shri C. Ramdas and Smt Meera Ramdas. Smt Meera Ramdas is proprietrix of M/s VIPI....." 11. He would submit that the department themselves have agreed in a subsequent notice that VIPI is a separate manufacturer and not same as VIPPL, although the former is a proprietary concern and the later is a limited company. He would submit that if the turnover of VIPI is deducted from the show cause notice No.150/92, the demand on appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 46,96,387/- on which the duty of demand after allowing SSI exemption works out to ₹ 1,48,301/-. Similarly, the total clearances during 1992-93 works out to ₹ 32,28,220/- and the duty thereon is ₹ 5,56,868/-. Further it was found that during June, 1993 to November, 1993, VIPI cleared goods worth ₹ 4,62,730/- in excess of value declared in RT-12 returns, the duty on which worked out to ₹ 23,136/-. It was also found that VIPI has been maintaining a second set of invoices and the duty involved on the duplicate invoices worked out to ₹ 4,24,264/ for the period 17.12.92 to 30.04.93. It was also found that VIPI had undervalued their goods and differential duty on this account works out to ₹ 2,13,736/-. There were some invoices without corresponding Central Excise gate passes, the duty on which worked out to ₹ 22,486/-. Thus, the total demand of ₹ 13,88,790/- was made under Rule 9(2) of Central Excise Rules read with section 11A of Central Excise Act on VIPI as above. It was also proposed to impose penalty on them under Rule 9(2), 52A, 173Q and 226 of Central Excise Rules, 1944. It was also proposed to confiscate machinery used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal. The appellant also filed an appeal being aggrieved by the balance confirmation and the appellant's appeal was remanded and the department's appeal was subsequently dismissed vide Final Order No. 21986/2015 dated 23.09.2015. Therefore, the demand needs to be dropped to this extent on this count alone. 17. Learned counsel further submits that with respect to both the units there is a question of interpretation of statutory provisions and classification of goods and therefore, any allegation of suppression with an intent to evade payment of duty cannot be fastened on the appellants and hence extended period of limitation needs to be set aside. Further, if any demand is confirmed they should be given the benefit of cum-duty to the extent it is confirmed. He, further pleads that there is no case for confiscation of machinery or imposition of redemption fine or imposition of penalties either on the firms or on the individuals. Therefore, he pleads that the entire demand may be dropped. 18. Learned departmental representative with respect to this show cause notice reiterates the findings in the impugned order and submits that the demands were, after due considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to confirm the demand to the extent of clubbing the clearances by AEI with VIPI but there is insufficient evidence to substantiate the demands on other grounds. Consequently, we find there is no sufficient ground to substantiate the confiscation, fine and imposition of penalties on VIPI. 21. As far as VIPPL is concerned, the demand in this show cause notice was only on account of the fact that there was a difference between the value of sales shown in Central Excise and the sales income shown in the IT Returns. Such a difference can be a cause for suspicion and investigation but by itself cannot be conclusive evidence that goods were clandestinely removed and sold. Accordingly, the demand on this count and consequential penalties need to be set aside and we do so. 22. In view of the above: a) The demand against VIPPL under show cause notice No. 150/92 dated 08.04.1993 is upheld after deducting the value of clearances in the name of VIPI which, the department, itself has agreed in the subsequent show cause notice, to be a different entity and treating any non-duty paid clearances as cum-duty clearances. b) The demand against VIPI under show cause notice No. 184/94 to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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