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TMI Blog2000 (3) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ptember, 1991. The Collector, Central Excise, in impugned Order dated 10-3-1993, confirmed the demand of Central Excise duty amounting to Rs. 2,84,981.23, imposed a penalty of Rs. 1,00,000/- and confiscated plant machinery with an option to redeem the same on payment of fine of Rs. 25,000/- holding that the process of conversion of straight grade bitumen into blown grade bitumen amounts to manufacture, relying upon the decision of the Appellate Tribunal in the case of Bitumen Products (India) Ltd. v. CCE, 1989 (44) E.L.T. 504 (T). The Collector also held that longer period was invokable for demanding the duty as they had only declared their final product i.e. felt, and they did not at all declare blown grade bitumen produced by them. 2.2 Appeal No. E/3416/89-C : M/s. STP Ltd., Calcutta, filed a classification list effective from 25-4-1986 in which Blown Bitumen packed in drums and bags was mentioned below Item 7 of the list claiming that no duty was payable. The C.L. was approved on 27-1-1986 by the proper office. Subsequently a show-cause notice dated 25-2-1987 was issued for classifying the product under sub-heading 2714.90 of CETA. The Assistant Collector, under Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs. 65,896.32 P and imposed a penalty of Rs. 5,000/- on M/s. Agra Bitumen, holding that if a tariff provides two different sub-headings, the conclusion is that each will have some items covered thereunder even though one may come into existence by a simple operation and as such Bitumen packed in drums is a different item under Item 2713.21; that extended period of limitation is invokable as they suppressed the fact of manufacture and clearance of B.G. Bitumen. 2.6 E 704/92-C : The Collector, Vadodra, under Order No. 8/91-92, dated 18-12-1991, confirmed the duty amounting to Rs. 68,227.15 against M/s. Gujrat Bitumen for the period from October, 1988 to September, 1990 and imposed a penalty of Rs. 10,000/- on them holding that straight grade bitumen by blowing process is a new product having distinct name, character and use. 2.7 E/707/92-C : Vinay Tar Industries. 2.8 E/708/92-C : Swastik Tar Industries. The Collector, Vadodra under Order No. 6/91-92 and 7/91-92 respectively confirmed the duty and imposed penalty as under : Duty Penalty Redemption Fine (i) Vinay Tar Industries Period 1-4-1987 to 21-9-1990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air blowing is similar to unblown bitumen; (vii) According to various decisions of the Supreme Court, High Court and Tribunal, mare change in grade or improvement of quality cannot by itself result into manufacture of a new commercial commdity. The decisions relied upon are - (a) CCE v. Anil Chemical (P) Ltd . - 1985 (21) E.L.T. 289 (T). (b) CCE v. Bakul Aromatics Chemicals Ltd. - 1989 (43) E.L.T. 758 (T). (c) S.D. Fine Chemical Pvt. Ltd. v. CCE - 1991 (56) E.L.T. 393 (T). 4. The learned Counsel, further, submitted that the demand was hit by time limit as the Board Tariff Advice No. 21/79, dated 2-6-1979 clarified that when blown grade bitumen is produced from duty paid straight grade bitumen, it will not be liable to duty under Item 11 of the erstwhile Central Excise Tariff; that various Trade Notices by different Collectorates, including Baroda Collectorate; were issued to the same effect; that again in Tariff Advice No. 41/82, dated 16-7-1992, it was clarified that "blown grade bitumen" would fall under Item No. 11 but no duty would be chargeable if made from duty paid "straight grade bitumen". The learned Counsel also referred to Board's letter F. No. 88/11/87-CX. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is apparant therefrom that I.O.C. was also using air blowing process as it was stated as under : "The Vacuum Residue (V.R.) is pumped to a heater where it is heated unto 230°C and then the said V.R. goes to a Bitumen reactor where Air is blown/bubbled to manufacture Bitumen and then after cooling, the product known as Petroleum Bitumen is sent to storage tanks at about 140°C". 6. Finally Shri M. Shroff, learned Advocate contended that the demand is barred by time limit specified in Section 11A of the Central Excise Act as in the case of Tiki Tar Industries, a declaration was filed by them in which they had mentioned that B.G. Bitumen is exempted in view of Tariff Advice No. 41/82, dated 16-7-1982 and the Superintendent, Central Excise has certified that exemption is available to them in the declaration itself; that in respect of Vinay Tar Industries, Gujrat Bitumen, Tiki Felt Industries and Swastik Tar Industries, though no declaration was filed by them, they held a bona fide belief in view of Board's clarification that the impugned product was not excisable and in view of this it cannot be claimed that there was any suppression on their part warranting invocation of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.O.I. - 1996 (86) E.L.T. 449 (SC). (iii) CCE v. Usha Martin Industries - 1997 (94) E.L.T. 460 (SC). (iv) Rajan Ramkrishna v. CWT - 1981 (127) ITRI (Guj). 8. The learned Advocate, further, submitted that the Adjudicating Authority has demanded duty on B.G. Bitumen packed in drums relying upon Kanpur Trade Notice dated 2-9-1988 issued on the basis of Board's circular dated 1-7-1988; that the said circular nowhere states that the process of blowing air into straight grade bitumen to convert it as blown grade bitumen amounts to manufacture; that referring to sub-headings of Heading 27.13 and the method of packing, the Board has clarified that B.G. Bitumen is dutiable if the mode of packing of B.G. Bitumen is different from the mode of packing of S.G. Bitumen; that there is no Chapter Note which defines that for purpose of Heading 27.13 repacking of bitumen from bulk packing into smaller packing amounts to manufacturer. Reliance was placed on the decision in A.D. Steel Syndicate v. CCE, Pune, 1998 (103) E.L.T. 180 (T) wherein it was held that process of transferring the material from bulk containers to small containers does not amount to manufacture. Finally he mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is determined by another criterion the penetration test, which measures the depth to which a standard needle will sink into a bitumen, when a specified load is applied to the needle for a fixed time. There will be a certain relationship between softening point and penetration test. It is possible to modify this relationship by a process known as "blowing". If air is blown through molten bitumen, chemical reactions take place, changing the nature of the molecules, and this causes the softening point to increase. The product also has a reduced ductility. Such "blown bitumen", because of its high softening point, and its more rubbery nature, is particularly suitable for impregnating roofing felts, where the requirement is for a product which will neither crack in cold weather, nor flow under hot sunlight. The extract from the book given in detail as above would clearly show that the bitumen is generally used for road making purposes in the form of a binder for stone aggregate and in the "Blowing Process" of bitumen chemical reactions take place, changing the nature of the molecules causing the softening point to increase. Such Blown Bitumen has different uses other than as a binder u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso relied upon the decision in the case of Laminated Packings (P) Ltd. v. CCE, 1990 (49) E.L.T. 326 (SC) wherein the Apex Court held that the contention that both the products fall in the same tariff entry is not relevant to determine duty liability. He distinguished the decision in the case of J.G. Glass by submitting that the process of printing of glass bottles undertaken in that case did not amount to manufacture as no new commodity came into existence. The learned S.D.R. also mentioned that the decision in Tungabhadra Industries Ltd. v. Commissioner of Sales Tax, AIR 1961 Supreme Court 412, relied upon by the Advocate, is not applicable as it was a judgment in the case of Sales Tax matters. 12. In respect of particular appeal filed by M/s. Agra Bitumen, the learned S.D.R. mentioned that the binding nature of the circular dated 1-7-1988 does not help the appellants inasmuch as it nowhere mentions that the process of air blowing does not amount to manufacture; that the allegation contained in show cause notice dated 28-4-1989 was that they were engaged in the manufacture of blown grade petroleum bitumen and as such there is no substance in the submission of the learned Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be charged twice on the same product. 15. We have considered the submissions of both the sides. The relevant Tariff Heading 27.13 reads as under at the relevant time : 27.13 - Petroleum Coke Petroleum bitumen and other residue of petroleum oils or of oils obtained from bituminous minerals -Petroleum coke * * * * * 2713.21 - Packed in drums 2713. 22 - In bulk - Other residues of petroleum oils or of oils obtained from bituminous minerals * * * * * 16. Under Section 3 of the Central Excise Act, duty of excise shall be levied and collected on all excisable goods which are produced or manufactured in India. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article emerges having a distinctive name, character or use. In view of these pronouncements, the argument, that bitumen packed in drums is mentioned in the Tariff, the duty of excise is chargeable and the question of further manufacture, origin, etc., would not arise, is to be discarded. We have to look into the aspect of manufacture before any duty of excise can be levied on blown grade bitumen. 19. The duty paid bitumen received by the Assessee is boiled so that foreign substances like sand and stone settle down; thereafter the air is blown into the material for improving the quality of the bitumen by raising the softening point and penetration; this makes the bitumen suitable for intended application. It is seen from the process undertaken by the Assessees that only the quality of the product which has already suffered duty is improved. It is not the case of Revenue that the bitumen, after the process of air blowing, does no more remain bitumen but becomes a new commercial commodity. The product remains only bitumen with raised softening point and penetration. The Explanatory Notes of HSN clearly mentions that "Petroleum bitumen (also known as petroleum pitch, refinery pit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has come into existence with a new character, name and use, it would not be appropriate to take the oil from Item 12 and classify it under the residuary item. Blown oil is shown both in the Condensed Chemical Dictionary as well as the Glossery of Chemical Terms to be 'A Vegetable oil through which air is passed'. As a result of partial oxidation, it is only the physical properties viz., the density, viscosity, drying power undergo a change. The ratio of the decision of the Supreme Court in J.G. Glass Industries' case, Supra, is applicable in these matters. Applying the two-fold test laid down by the Apex Court whether by the process a different commercial commodity comes into existence or whether the identity of the Original Commodity ceases to exist and whether the commodity which was already in existence will serve no purpose but for the said process, the process of air blowing undertaken in present matters does not amount to manufacture. 20. We also observe that after consulting Chief Chemist, the Central Board of Excise Customs clarified as early as on 2-6-1979 that blown grade bitumen is a variety of "Bitumen" but when it is produced from duty paid straight grade bitumen, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal held that a process of manufacture was involved in the production of blown bitumen from straight grade bitumen. We find sufficient force in the submissions of the learned Advocate, appearing on behalf of the Assessees, that the said decision can be distinguised as it pertains to old Central Excise Tariff and the Board's circulars were not brought to the notice of the Appellate Tribunal. The Supreme Court in the case of Kores (India) Ltd. v. CCE - 1997 (93) E.L.T. 322 (SC), referring to Board clarification that no further excise duty would be attracted if teleprinter rolls are made from printing and writing paper which has already become duty under Tariff Item 17(1) of old Tariff, has held that no duty is payable by the assessee. The Apex Court in CCE v. Kores (I) Ltd. - 1997 (89) E.L.T. 441 (S.C.) also held that "it is not open to the Revenue to advance arguments that are contrary to the terms thereof" (Tariff Advice). Further, the H.S.N. Explanatory Notes on which the Present Tariff is based clearly mentions that "Petroleum Bitumen which has been slightly modified by air-blowing is similar to unblown bitumen and remains in heading 27.13. The Tribunal's decision in Bitumen Prod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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