2014 (12) TMI 769 - AT - Customs

Propane Classified as LPG for Duty Rate

COMMISSIONER OF CUS. (IMPORT), MUMBAI Versus AEGIS LOGISTICS LTD.

COMMISSIONER OF CUS. (IMPORT), MUMBAI Versus AEGIS LOGISTICS LTD. - 2014 (308) E.L.T. 135 (Tri. - Mumbai) Issues Involved:1. Classification of 'commercial propane' under Notification 4/2006-C.E.2. Applicability of concessional rate of duty to 'commercial propane.'3. Interpretation of the term 'liquefied petroleum gases (LPG)' in the context of the Notification.4. Common/commercial parlance understanding versus technical classification.5. Revenue neutrality of the duty paid.Detailed Analysis:1. Classification of 'Commercial Propane' under Notification 4/2006-C.E.:The primary issue in all four appeals was whether 'commercial propane' imported by the respondents and cleared as 'liquefied petroleum gases (LPG)' falls within the scope of Notification 4/2006-C.E., dated 1-3-2006 - Entry at serial No. 27. The imported goods were classified under Tariff Entry 2711 12 00. The scope of the term 'liquefied petroleum gases (LPG)' used in the Notification was not defined. The Commissioner concluded that commercial propane is a subclassification of liquefied petroleum gases and thus chargeable to CVD at the rate of 8% under Entry No. 27 of Notification 4/2006.2. Applicability of Concessional Rate of Duty to 'Commercial Propane':The Revenue's main contention was that the concessional rate of 8% under Notification 4/2006-C.E., dated 1-3-2006, is applicable only to liquefied petroleum gases (LPG) and not to commercial propane. They argued that in common/commercial parlance, LPG is a mixture of propane and butane, and commercial propane in liquefied form should not benefit from the said Notification. The Tribunal, however, found that the Tariff and Notification understanding of the term 'liquefied petroleum gases' would include propane, thereby making it eligible for the concessional rate of 8%.3. Interpretation of the Term 'Liquefied Petroleum Gases (LPG)' in the Context of the Notification:The Tribunal noted that the term 'liquefied petroleum gases' is generic and covers a wide range of gases or mixtures of gases within its fold, including propane. Various entries in Central Excise and Customs Notifications recognize that LPG can be used for manufacturing various items and as fuel. The Tribunal concluded that the term 'liquefied petroleum gases' in the Notification would cover propane, making it eligible for the concessional rate of duty.4. Common/Commercial Parlance Understanding Versus Technical Classification:The Revenue argued that the term LPG should be understood in its common parlance meaning, i.e., as the gas used as fuel. However, the Tribunal emphasized that the understanding in the Central Excise Tariff, Central Excise Notification, or commercial understanding of the term 'liquefied petroleum gases (LPG)' is broader and includes propane. The Tribunal referred to various judgments and ISI Specifications to support their conclusion that propane is considered as LPG in trade or commercial understanding.5. Revenue Neutrality of the Duty Paid:The respondents argued that the exercise is revenue neutral as they are eligible to take credit of the countervailing duty paid. They have taken credit of CVD @ 8%, which was actually paid by them. If the department had charged 14% at the time of clearance, they would have been entitled to take credit of 14%, resulting in no gain to the respondents. The Tribunal agreed with this argument, noting that the respondents do not gain by paying the lower rate of duty.Conclusion:The Tribunal dismissed all four appeals filed by the Revenue, concluding that 'commercial propane' falls within the scope of 'liquefied petroleum gases (LPG)' under Notification 4/2006-C.E., and is eligible for the concessional rate of duty at 8%. The Tribunal emphasized that the term 'liquefied petroleum gases' covers a broad range of gases, including propane, and should not be limited to the common parlance understanding of LPG as only a fuel. The decision was pronounced in court on 11-4-2014.