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TMI Blog2023 (1) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... iner report is of little avail as the report does not address the queries which was raised apart from the fact that the report was submitted after seven months after the drawl of the samples. On a cursory reading of the paragraph 6.8 of the adjudicating order, one gets the impression that the adjudicating authority recorded a positive finding that the process done by the appellant is manufacture . But on a closer reading, we find it is only a discussion about certain decisions which was referred to by the adjudicating authority and nothing turns out on the facts of the case on hand. The issue in the case on hand relates to classification of a product which requires to be done in a scientific manner and such classification cannot be determined and concluded based on statements given by either the Director of the company or their employees. The adjudication order is thoroughly flawed more particularly on the ground of limitation - Petition allowed. - FMA NO. 683 OF 2018 WITH IA NO. CAN 01 OF 2017 (OLD CAN 3163 OF 2017) - - - Dated:- 9-1-2023 - HON BLE MR. JUSTICE T.S. SIVAGNANAM AND HON BLE MR. JUSTICE HIRANMAY BHATTACHARYYA Appearance:- For the Appellants : Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Commissionerate visited the factory premises on 12th June, 2015. After briefly stating about the manufacturing process as culled out during the inspection, during which the officers appear to have examined the documents available in the factory premises and stated that the appellants were submitting their returns showing no production and clearance of finished goods therein. After mentioning about the various registrations, permissions and licenses obtained by the appellants it was stated that the appellants themselves declared their premises as a factory and the activities therein was a manufacturing process but they failed to pay Central Excise Duty by suppressing the fact of production in their monthly returns and thereby, violated Rule 4 of the Rules and also violated Rule 6 as they had mis-classified their finished goods and had not assessed liability of duty on the finished goods correctly, violated Rule 8 as they had not paid duty, violated Rule 10 as they had not shown it in their daily stock account the amount payable and particulars regarding the amount of duty actually paid in respect of the goods cleared from the factory premises and violated Rule 12 inasmuch as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d condensates were sold in the name of condensates (distilled) or industrial solvent or EPC SOL-100, EPC SOL-200, EPC SOL-500 as per the requirement of the customers. It is further stated that the said condensates (distilled) etc. are used as industrial solvent in the paint industry, thinner, adhesives and dry cleaning purpose but it has no use as fuel or as motor spirit. Further, that the condensates are supplied by M/s. Oil India Limited under stringent conditions one of which is to furnish end use certificate though the District Magistrate, Jalpaiguri every month. The process of distillation was explained in the following terms : As to the process of distillation of condensates, we stated and duly verified by the department; that, condensates received from Oil India Limited are kept in the storage Tanks lying in our premises. From there it goes to an apparatus called kettle , where it is heated using hot lubricating oil. At 27 degree Celsius temperature condensates starts distillating. At a temperature between 27 degree Celsius and 45/48 degree Celsius, a portion of condensates vaporizes. The vapour is collected in a chamber, where it is cooled down to form refine co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for confiscation and not seized by the department. With regard to the allegation that the appellants are engaged in the process of manufacture, it was submitted that the said allegation is wholly baseless as the process of distillation does not bring about a new product for the condensate (distilled) etc. to be termed as a product manufactured from the material purchased from M/s. Oil India Limited. Further, with regard to the allegation of suppression/ mis-statement it was stated that they have declared all the particulars in the returns and the allegation has been made mechanically only to invoke the extended period of limitation and for inflating the amount of duty. Further, the officers of the department have been regularly inspecting the factory premises from time to time and have scrutinized the records and at no earlier point of time have raised any issue in this regard, therefore, the charge of suppression/ mis-declaration is not legally sustainable. In this regard, reference was made to the circular issued by the CBEC in Circular No. 1024/12/2016-CX dated 11th April, 2016. Further, the appellants stated that there is no dispute to the fact that they purchased the conden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Further it was pointed out that the chemical examiner has conspicuously avoided mentioning chemical constituent and classification of the two samples of condensate and condensate (distilled) for which purpose only the samples were sent to him. After taking such a stand, the appellants proceeded to discuss the legal issues as to whether the process of distillation, can be treated as a process of manufacture or not. After referring to the various technical details and decisions, it was stated that the goods cannot be classified under tariff sub heading 271012 or 27101213 as the product does not fulfill the criteria of manufacture . The order of seizure and confiscation was also contested and various submissions were made as to how the said orders are not sustainable. Ultimately it was stated that the product is correctly classifiable under tariff sub heading No. 27090000 as against the proposal of the department and the appellants prayed for dropping the proceedings. By way of the additional reply dated 08.07.2016, the second respondent contested the proposal to levy penalty against him. The adjudicating authority rejected the contention raised by the appellants and confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity to issue the show cause notice by invoking the extended period of limitation. That apart, the appellants had raised the contention that when the dispute is a classification dispute of a product, extended period of limitation cannot be invoked. This contention in our view is well founded in the light of the decision of the Hon ble Supreme Court in Nestle India Limited Versus Commissioner of Central Excise, Chandigarh 2009 (235) ELT 577 (SC) wherein the Hon ble Supreme Court held that in the facts of the said case the extended period of limitation was not invocable for two reasons firstly the assessee therein had been clearing the product for 20 years prior to the issuance of the show cause notice and the assessee offered demonstration to the department and the department did not avail of that opportunity to find out whether there is manufacture in the first instance. 9. Secondly after referring to the decision in Padmini Products Versus Collector of Central Excise 1989 (43) ELT 195 (SC) and Collector of Central Excise, Hyderabad Versus Chemphar Drugs and Liniments, Hyderabad 1989 (40) ELT 276 (SC) it was held that extended period of limitation is applicable only when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication should be effective from the date the department issued the show cause notice and the reasons for its clearance with the knowledge of the department and no intention to evade payment of duty. This decision was referred to and quoted with approval in Collector of Central Excise, Baroda, Versus Cotspun Limited 1999 (113) ELT 353 (SC) and it was held that the levy of the excise duty on the basis of approved classification list is a correct levy at least until such time as to the correctness of the approval of the classification by issuance to the assessee of a show cause notice and levy of excise duty on the basis of a approved classification is not a short levy and difference of duty cannot be recovered on the ground that it is a short levy. 10. Bearing the above legal principles in mind, if we examine the facts of the case on hand, it is evidently clear that the tariff sub heading under which the product was classified was accepted by the department for more than six years and the products were cleared at NIL rate of duty. The monthly returns filed by the appellant was never called in question despite the fact that on several occasions, the officers of the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the values mentioned in the report, it is seen that there is a negligible difference in the density of the condensate and the condensate (distilled) which is dealt with by the appellant. Therefore this is also one more ground to discard the chemical examiners report. The department does not dispute the fact that for nearly seven years the product has been cleared by the appellant by adopting the classification under Chapter sub heading 27090000. If in the opinion of the department there was a wrong classification adopted by the appellant there are ways and means by which the correct classification could be determined. In the process of determination of classification of the product, the role of the appellant is indispensable rather it is not one sided action as the appellant has to be given adequate opportunity to demonstrate as to how the process adopted by them does not amount to manufacture. Such procedure was not adopted by the department prior to issuance of the show cause notice or at least when the show cause notice was adjudicated. No demonstration was called for from the appellant and the adjudicating authority was solely guided by the chemical examiner report which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is partially culled out from the averments in the show cause notice and partially from the reply given by the appellant. Paragraph 6.3 refers to the registration obtained by the appellant from the West Bengal Tax Department which we have already dealt with and held to have no impact on the present proceedings. Paragraph 6.5 deals with the chemical examiners report which we have also considered and held that the chemical examiner report is of little avail as the report does not address the queries which was raised apart from the fact that the report was submitted after seven months after the drawl of the samples. On a cursory reading of the paragraph 6.8 of the adjudicating order, one gets the impression that the adjudicating authority recorded a positive finding that the process done by the appellant is manufacture . But on a closer reading, we find it is only a discussion about certain decisions which was referred to by the adjudicating authority and nothing turns out on the facts of the case on hand. Paragraph 6.9 relates to the statements recorded from the Director of the appellant. The issue in the case on hand relates to classification of a product which requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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