9911796707
TMI Blog2024 (12) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... rganic compounds, other than pure methane and propane, are not covered under chapter 27 and are to be classified under chapter 29. Further, separate chemically defined organic compounds, whether or not containing impurities remain classified under Chapter 29. Moreover, it is only pure methane and propane of chapter 27 which are excluded from the scope of coverage of chapter 29 and not propene (propylene). Thus, the distinguishing factor for classification of the impugned product i.e., propylene/propene is to determine whether these are separate chemically defined compounds and further its purity, as per standards such as BIS or other laid down norms by Indian Institute of Petroleum, which is one of the constituent laboratories under the umbrella of Council of Scientific Industrial Research (CSIR), which has facilities for testing ASTM/IP/UOP/BIS standards for analyzing and evaluating of petroleum products. The impugned order has not examined all the aforesaid aspects for arriving at a proper classification of the impugned goods. It is not the case of the Revenue, that Propene/propylene is a new product that was manufactured by the appellants and as such its classification as per se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme for Central Excise classification, and all possible assistance to trade industry may be provided by the Department for switching over to such new 8-digit tariff. Hence, the invocation of extended period for confirmation of demand on the ground of willful suppression or mis-statement is not legally sustainable. The impugned order dated 30.06.2014 classifying imported goods under heading 2711 1400 does not stand the scrutiny of law and therefore it is not legally sustainable. In order to determine the proper classification of the impugned goods as per law, it is considered necessary that the matter should be remanded back to the original authority - the impugned order set aside - appeal allowed by way of remand. - HON BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) AND HON BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) APPEARANCE : For the Appellants: Shri Bharat Raichandani, Advocate. For the Respondent: Shri Arvind K Singh, Special Counsel. PER : M.M. PARTHIBAN These appeals have been filed by M/s Bharat Petroleum Corporation Limited (BPCL), Mumbai Refinery, Mahul, Mumbai and S/Shri H.S. Paranjape, General Manager (Finance), M. Venugopal, Deputy General Manager (Finance-Taxation) and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these non-hydrocarbon substances are removed and the oil is broken down into its various components, and blended into useful products. 3.3 Every petroleum refinery begins with the separation of crude oil into different fractions by distillation. The fractions are further treated to convert them into mixtures of more useful saleable products by various methods such as cracking, reforming, alkylation, polymerisation and isomerisation. These mixtures of new compounds are then separated using methods such as fractionation and solvent extraction. Impurities are removed by various methods, e.g. dehydration, desalting, sulphur removal and hydrotreating. As crude oil is a mixture of hydrocarbons with different boiling temperatures, it can be separated by distillation into groups of hydrocarbons that boil between two specified boiling points. Atmospheric distillation takes place in a distilling column at or near atmospheric pressure. The crude oil is heated to 350 - 400˚C and the vapour and liquid are piped into the distilling column. To recover additional heavy distillates from the residue from atmospheric distillation, it may be piped to a second distillation column where the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2014, the appellants have filed these appeals before the Tribunal. 4. We have heard both sides and perused the case records and additional paper books submitted in this case by both sides. 5.1 The issue involved herein is to decide the classification of Propylene/Propene-PP feed stock manufactured by the appellants as to (i) whether, the same merits classification under CETI 2902 9090 as claimed by the appellants; or, is it classifiable under CETI 2711 1400 as determined by the learned Commissioner in the impugned order, for deciding on the appropriate levy of Central Excise duty, in respect of such goods cleared during the disputed period; and (ii) whether demand of duty by invoking extended period under Section 11A of the Central Excise Act, 1944 and imposition of penalty under Section 11AC ibid is legally sustainable? 5.2 In order to address the above issue of classification of manufactured goods, we would like to refer the relevant legal provisions contained in Section 3 of the Central Excise Act, 1944; the Central Excise Tariff Act, 1975 and rules framed thereunder for consideration of proper and appropriate classification of the subject goods under dispute. CENTRAL EXCISE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows : (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the appropriate sub-heading. In the event of the goods cannot be classified solely on the basis of GIR 1, and if the headings and legal notes do not otherwise require, the remaining Rules 2 to 6 may then be applied in sequential order. Further, while classifying goods, the foremost consideration is the 'statutory definition', if any, provided in the Act of 1985. In the absence of any statutory definition, or any guideline provided by HS explanatory notes, the trade parlance theory is to be adopted for ascertaining as to how the goods are known in the common trade parlance for the purpose of dealing between the parties. 6.1 In order to determine the proper excise duty payable on the manufactured goods, the goods so manufactured are required to have correct classification for the purpose of application of appropriate rate of duty to the particular goods. First Schedule to the Act of 1985 aligned with the Customs Tariff based on the Harmonized System of Nomenclature HSN (at 6 digit level), enlists all excisable goods with unique 8 digit codes. Normally, there is no difficulty in classifying any goods which are being manufactured/produced by assessees since many years, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 2901 22 00 specifically mention the product propylene . The question is what distinguishes 'propylene' classifiable in Chapter 27 from the one classifiable in Chapter 29. xxx xxx xxx xxx 44 I find that Shri Prabhune has stated that: the structural formula of Propylene/propene is CH3-CH-CH2-i.e. C3H6; that Propylene/Propene is a straight chain hydrocarbon containing a single, 'double bond' and as it does not contain a cyclical ring in its molecular structure [as in case of cyclical hydrocarbons] it is an acyclic hydrocarbon. He further stated that Propylene/Propene obtained from crude oil refining processes at their BPCL refinery plant at Mumbai is a refinery grade propylene [RGP]; that the purity of the RGP obtained at its Mumbai BPCL refinery plant is in the range of 50% and 75% thereabout as the Mumbai refinery, with the present facilities available, the Propylene /Propene manufactured cannot have purity of above 75%; that, though the said product, as per their production records is referred to as Propylene, the product Propylene in their marketing/sale records is referred to as 'PPF' (Polypropylene Feedstock). xxx xxx xxx xxx 46. I have also gone thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially pure state fall under heading 29.01; there are specific purity criteria for deciding the classification; for propylene to fall under 29.01, it must have a purity of 90% or more; propylene of lower purity is excluded from 29.01. xxx xxx xxx xxx 55. In their defence, the noticee have submitted that they were under a bonafide belief that the classification advised by the department since 1994 is correct. As discussed in the para above, there is no evidence of noticee having filed classification for the product PPF [5009], hence the question of department having advised the noticee does not arise at all. Moreover, no evidence of approval of the classification list said to have been filed has been given by the noticee. As regards bona fide belief, Hon'ble CESTAT, in the case of Shilpa Printing Press 2013 (297)ELT 417, at para 26 has observed whether there was a bona fide belief for the assessee for non-payment of duty on a particular product, is essentially a question of fact to be decided on the basis of materials placed on record in this regard. Undisputedly, once the department disclosed suppression of facts, the same can be countered by the assessee with the plea of bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44. 81. I impose penalty of Rs. 23,24,90,025/- for period March, 2009 to 7-4-2011, under Section 11AC of the Central Excise Act, 1944 and penalty of Rs. 17,21,25,943/- for period 8-4-2011 to Jan, 2014, under Section 11AC (1)(b) of Central Excise Act, 1944 on M/s. BPCL. Total penalty imposed is Rs. 40,46,15,968/- (Rupees Forty crores forty six lakhs fifteen thousand nine hundred sixty eight only). 82. I hold that the goods that is 'Propylene/Propene' valued at Rs. 1770.78 crore cleared without payment of the due Central Excise duty under Tariff item No. 2902 9090, are liable for confiscation. However, as the goods are not available for confiscation, the same cannot be confiscated and accordingly I do not impose any redemption fine. 83. I hold that the revised and enhanced CE duty @14% adv, under ch 2711 14 00, paid by the assessee w.e.f 01.02.2014 'Under Protest', should be considered as the normal, regular and appropriate CE duty paid on all clearances of Propylene made from 01.02.2014 to 31.03.2014 and the 'Protest' lodged under its letter dated 04.03.2014, stands vacated. 84. I impose penalty of Rs. 5000/- each, on Shri M.S. Iyer, Shri H.S. Paranjape and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower purity is excluded from heading 29.01 and is covered under heading 27.11. If we carefully see the testing method adopted and test report, it only provides for computation of the product being tested in terms of percentage to total weight i.e., quantification part alone, and no specific purity percentage has been given. Hence, we do not find the presence of any basic fact regarding the purity of propylene/propene determined or provided in such test report, more so when such test method exclude high-purity propene, for determining the classification of the impugned goods on that basis. It is also of importance to note that chemical purity is the measurement of the amount of impurities found in a sample; it is the quality of a substance being free of anything that contaminates or debases it. Purity is important, because it can be used as an analytical standard to identify or determine the concentration of a substance, in order to decide whether it is separate chemically defined compound. 6.5 In the case before us, the contending classification of imported goods discussed in the impugned order are either under CETI 2902 9090 or CETH 2711 1400 of the First Schedule to the Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpurities), except mixtures of acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (Chapter 27); xx xx xx xx xx 2. This Chapter does not cover : (a) goods of heading 1504 or crude glycerol of heading 1520; (b) ethyl alcohol (Chapter 22); (c) methane or propane (heading 2711); Tariff Item Description of goods (1) (2) I. HYDROCARBONS AND THEIR HALOGENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATIVES 2901 Acyclic hydrocarbons 2901 10 00 - Saturated - Unsaturated: 2901 21 00 -- Ethylene 2901 22 00 -- Propene (propylene) 2901 23 00 -- Butene (butylene) and isomers thereof .. 2901 29 -- Other : 2901 29 10 --- Acetylene, whether or not in dissolved conditon 2901 29 20 --- Heptene (Heptylene) 2901 29 90 --- Other 2902 Cyclic hydrocarbons - Cyclanes, cyclenes and cycloterpenes : 2902 11 00 -- Cyclohexane 2902 19 00 -- Other 2902 90 - Other : 2902 90 10 --- Dipentene 2902 90 90 --- Other It could be seen that by applying the GIR 1, the position is made clear that Chapter Heading 27.11 covers within its scope and ambit, mainly of Petroleum gases and other gaseous hydrocarbons. However, separate chemically defined organic compounds, other than pure methane and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em Explanatory Notes 27.11 - Petroleum gases and other gaseous hydrocarbons. - Liquefied: 2711.11 --Natural gas 2711.12-- Propane 2711.13 -- Butanes 2711.14 -- Ethylene, propylene, butylene and butadiene 2711.19 --Other -In gaseous state: 2711.21--Natural gas 2711.29 --Other This heading covers crude gaseous hydrocarbons obtained as natural gases or from petroleum, or produced chemically. Methane and propane are, however, included even when pure. These hydrocarbons are gaseous at a temperature of 15 C and under a pressure of 1,013 millibars (101.3 kPa). They may be presented under pressure as liquids in metal containers and are often treated, as a safety measure, by the addition of small quantities of highly odoriferous substances to indicate leaks. They include, in particular, the following gases, whether or not liquefied: I. Methane and propane, whether or not pure. II. Ethane and ethylene less than 95% pure. (Ethane and ethylene not less than 95% pure fall in heading 29.01.) III. Propene (propylene) less than 90% pure. (Propene not less than 90 % pure falls in heading 29.01.) IV. Butane containing less than 95% of n-butane and less than 95% of isobutane. (Butane containing not l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, [CCE vs. Fusebase Eltoto Ltd. 67-E.L.T 30 (SC): Indian Cable Co. Ltd. Vs. CCE - 74 E.L.T. 22 (SC); Metagraphs Pvt. Ltd Vs. CCE-88 E.L.T 639 (SC): United Copiex (India) Pvt. Ltd. vs. CST - 94 E.L.T. 28 (SC)]. (ii) It is an accepted principle of classification that the goods are to be classified according to their popular meaning as understood in the commercial sense and not as per the scientific/technical meaning [Plasmac Machine Mfg. Co. Pvt. Ltd. Vs. CCE 51 E.L.T 161 (SC)]. However, where the tariff heading/sub-heading itself uses highly scientific and technical terms, the scientific/technical meaning shall take precedence over the commercial/trade parlance [UOI vs. Sahney Steel and Press Works Ltd. 58 E.L.T 38 (SC)]. Also, classification according to commercial nomenclature or trade understanding should be avoided where the statutory context in which the tariff entry appears requires otherwise. [Akbar Badruddin Jiwani vs. Collector of Customs 47 E.L.T 161 (SC)]. (iii) Normally, classification is to be done with reference to the specific wordings of the headings/sub-headings as mentioned in the tariff. However, where the goods in question are capable of being called by more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for home consumption, assessable value, rate of duty, duty payable on the actually paid have been provided by the appellants. Further, correspondence exchanged between the appellants and the Department, particularly letter F. No. III/10-202/EA-2000/BPCL/Group E/F/2013 dated 27.11.2013 written by the Superintendent (Audit Group E/F), Audit Section, C. Ex., Mumbai addressed to the appellants, have raised the issue of classification adopted by the appellants under CETI 290129 as incorrect, in terms of the test report and the HSN explanatory notes, requesting the appellants to pay the differential duty along with interest for revising the classification under CETI 2711 1400, in respect of the impugned goods cleared for the last 5 years. In response to such communication, the appellants vide their letter dated 04.03.2014 had informed that they are revising the classification under CETI 2711 1400 and paying the duty on the rate of 14% adv. under protest. These records clearly prove that the classification of the impugned product was initially approved by the Department under the classification adopted by the appellants, and the issue of misclassification of the impugned product was ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the product other than those falling under Tariff Item 14E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olition of Classification List - Instruction regarding. I am directed to invite your attention to the provisions of Rule 173B of Central Excise Rules, 1944, as introduced by Notification No. 11/95-C.E. (N.T.), dated the 16th March, 1995. 2. Rule 173B provides for filing of a declaration of goods produced or manufactured by an assessee. In order to secure uniformity and to carry out proper checks in this regard, the following instructions are issued :- 3. Assessee shall file the declaration as per Proforma enclosed with the Range Superintendent in quadruplicate by 15th May, 1995 (or within reasonable time thereafter) initially and, thereafter, at the beginning of each financial year. He should file a fresh declaration as and when there is a change in the rate of duty or tariff classification in respect of the goods manufactured by him or whenever a new item is intended to be manufactured and not contained in the declaration already filed. The correctness and completeness of the declaration should be duly certified by the assessee. 4. The Range Superintendent shall acknowledge forthwith the receipt of the declaration and return the 4th copy back to the assessee in lieu of acknowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays of the receipt of the Declaration in his office. 9. The Range Superintendent shall finalise the assessment in RT-12 keeping in view the observations/instructions, received from the Assistant Collector with reference to declarations. Show-Cause Notice must be issued in time, wherever necessary. 10. Trade and field formations may be informed. 11. Receipt of this circular may be acknowledged. Proforma for Filing Declaration under Rule 173B QUADRUPLICATE Range___________ Code No. _______ 1. Serial Number of the Declaration (to be allotted by the receiving range). Division_________ Code No. ________ 2. Serial Number of the earlier Declaration. Collectorate______ Code No. ________ 3. Whether Amending/ Superseding declaration already filed. State ____________ Code No. ________ Manufacturer's Code No. ______________ Type of Manufacturer's Code No.__________ 1. Name and address of the assessee ________________________________ 2. Location of the factory/warehouse________________________________ 3. Central Excise Registration No. __________________________________ Manufacturer's Code No. _______________________________________ 4. Particulars of all excisable __________________ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the considered view that the classification of the impugned goods have not been properly arrived at on the basis of facts and the legal provisions as applicable under the Central Excise Act, 1944; the rules made thereunder and the Central Excise Tariff Act, 1985. Therefore, the classification of the impugned goods involved in the case and the resultant demand of Central Excise duty, if any, during the normal period is required to be determined on the basis of the facts and evidences with respect to the determining factors and legal provisions, as discussed above in the paragraphs 6.4 to 8.2. Consequently, the confirmation of adjudged demands and imposition of penalty on the appellants, does not sustain and the same is set aside. 11. Therefore, we are of the considered view that the impugned order dated 30.06.2014 classifying imported goods under heading 2711 1400 does not stand the scrutiny of law and therefore it is not legally sustainable. In order to determine the proper classification of the impugned goods as per law, we consider it necessary that the matter should be remanded back to the original authority. Needless to state that sufficient opportunity for personal hea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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