Shah Petroleums Vs C.C.E. & S.T.-Surat-II (CESTAT Ahmedabad)
CESTAT Ahmedabad held that mixing of thermol and the input namely Mixed oil does not alter the nature of the product accordingly the same doesn’t amount to manufacture.
Facts- The issue involved here is whether super mix oil (first final product) is classifiable under CET 27101990 as claimed by the appellant or under CET 27101190 as claimed by the department and Super C-9 Plus (second final product) is classifiable under CET 27079900 as claimed by the appellant or under CET 27101190 as claimed by the department.
Conclusion- We find that the appellant have raised the very vital issue that it is an admitted fact by the department that by mixing of thermol and the input namely Mixed oil does not alter the nature of the product. If this be so, then how the activity amounts to manufacture however, the adjudicating authority without considering this vital issue jumped to the conclusion about the classification of the resultant goods. The classification will come into picture only once it is established that there is manufacturing however, in the present case the department itself is of contention that by entire process of mixing of thermol and mixed oil and any other product and thermol and C-9 Plus, there is no change in the nature of the product therefore, this aspect needs to be considered elaborately by the adjudicating authority. It is also not clear that the department has applied the classification of 27101190 on the basis that the input falls under the same CTH and due to no change in the nature of the product, the classification will remain same.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issues involved in the present case are as under:-
a) Whether Super Mix Oil (first final product) is classifiable under CET 27101990 as claimed by the appellant or under CET 27101190 as claimed by the department.
b) Whether Super C-9 Plus (second final product) is classifiable under CET 27079900 as claimed by the appellant or under CET 27101190 as claimed by the department.
c) Whether the SCN dated 15.11.2011 covering the period from December, 2006 to March, 2008 is barred by limitation.
d) Whether the appellant is liable to pay penalty equal to the duty amount (Rs.1,49,05,855/-) under Rule 25 read with Section 11AC.
e) Whether the partner Shri Snehal Shah is liable to penalty of Rs.20,00,000/- under Rule 26 of the Central Excise Rules, 2002.
2. Shri Willingdon Christian, learned counsel appearing on behalf of the appellant made the following submissions:-
i) The relevant period is from December, 2006 to March, 2008.
ii) For the first final product, i.e. Super Mix Oil (CET 27101990 Vs. 27101190), the Appellant had procured mixed oil from IPCL, Dahej and IPCL, Nagothane respectively. While IPCL, Dahej classified the mixed oil under CET 27101190 charging excise duty @32%, IPCL, Nagothane classified the mixed oil under CET 27101990 charging excise duty @ 16%.
iii) The Appellant added multifunctional additives, i.e. Thermol and cleared the same on payment of duty @ 16% under CET 27101990 after availing cenvat credit.
iv) The Department’s contention is that there is no change in the basic characteristics and structure of the raw materials by adding Thermol and that the raw material characteristics has remained the same in the finished product. Therefore, the final product Super Mix Oil will also merit classification under CET 27101190 (whereunder IPCL Dahej classified the raw material, mixed oil) attracting Central Excise Duty @ 32% and not 16%.
v)For the second product, i.e. Super C-9 Plus, also the Department’s contention is that by mere addition of Thermol (MFA), there is no change in the basic characteristics and structure of the raw material and, therefore, the said final product will be classifiable under CET 27101190 attracting Central Excise duty @ 32% and not under CET 27079900 under which the Appellant has cleared the said final product charging Central Excise Duty @ 16% after availing cenvat credit.
vi) For better understanding, we give below graphical explanation about the aforesaid facts :-
