2019 (3) TMI 304 - AT - Central Excise

Tribunal rules in favor of Gail (India) Ltd., dismissing Central Excise duty demand.

The Tribunal allowed the appeals of M/s Gail (India) Ltd., challenging the classification by Revenue and the demand of Central Excise duty, interest, and ... Classification of goods - mixture of pentane, hexane and small quantities of heavier hydrocarbons like pentane, hexane, heptane, etc. - Revenue is seeking to classify the pentane recovered during this process under sub heading 2710 11 13 as against the classification 2711 19 00 claimed by the Gail (India) Ltd. - Held that:- If the General Explanatory Note is interpreted in the manner in which Revenue seeks to interpret, “- - -” entry ‘Motor Spirit’ would become otiose. Similarly the definition of ‘Motor Spirit’ appearing in clause (a) of supplementary Note to Chapter 27 would also become otiose. Moreover, it is seen that prior to 01.03.2005 the ‘Special Boiling Point Spirits’ were a “- -” entry immediately preceded by a “-” entry related to ‘Motor Spirit’. So prior to 1.3.2005 the SBPS were a sub classification of ‘motor spirits’ even by revenue’s interpretation. Thus the interpretation of revenue would result in no item falling under under the category of ‘motor’ spirit’ and the definition of the term ‘motor spirit’, and the ‘- - -‘ entry relating to it, would become otiose for the period after 1.3.2005. Any interpretation that makes the specific entry, ‘motor spirit’ and its definition appearing in supplementary notes, otiose, cannot be the correct interpretation. In above circumstances, it is apparent that even after 01.03.2005, the Special Boiling Point would have to answer to the description of ‘Motor Spirit’ just the way it was prior to 1.3.2005. Appeal allowed - decided in favor of appellant. Issues:Classification of product under Central Excise Tariff, challenge to classification by Revenue, demand of Central Excise duty, interest, imposition of penalty, limitation in order dated 29.03.2005.Analysis:The appeals were filed by M/s Gail (India) Ltd. challenging the classification by Revenue and the demand of Central Excise duty, interest, and penalty. The issue revolved around the classification of the product recovered during the processing of natural gas, specifically pentane, under subheading 2710 11 13 as claimed by Gail (India) Ltd., as opposed to the classification sought by Revenue under 2711 19 00. The argument centered on whether the product qualified as 'Special Boiling Point Spirit' (SBPS) under the Central Excise Tariff and conformed to the definition of 'Motor Spirit.' The Tribunal referred to previous decisions and observed that for a product to qualify as SBPS under heading 2710 11 13, it must also meet the definition of 'Motor Spirit' as specified in the tariff. The Tribunal emphasized the need for the product to fulfill specific criteria, including suitability for use as fuel in spark ignition engines.The Tribunal highlighted the importance of testing the product for suitability in admixture with substances other than mineral oil to qualify as 'motor spirit.' It noted that the product in question had not been tested for such suitability, as required by previous decisions. Consequently, the demand for duty and the change of classification sought by Revenue were deemed unsubstantiated, leading to the set aside of the demand and the allowance of Gail (India) Ltd.'s appeal. The Revenue's appeal, based solely on the issue of limitation, was dismissed.The argument put forth by the Revenue regarding the General Explanatory Note to the Central Excise Tariff was also addressed. The Tribunal analyzed the interpretation of the General Explanatory Note for different periods, both before and after 01.03.2005 when the tariff heading changed. It was observed that even under the General Explanatory Note, SBPS had to answer to the description of 'Motor Spirit' for the period prior to 01.03.2005. The interpretation suggested by Revenue would render the specific entry of 'Motor Spirit' and its definition in the supplementary notes meaningless, indicating that SBPS must align with the description of 'Motor Spirit' even after 01.03.2005.In conclusion, the Tribunal allowed the appeals of M/s Gail (India) Ltd. while dismissing the Revenue's appeal solely based on the issue of limitation. The judgment, pronounced on 27.02.2019, provided a comprehensive analysis of the classification under the Central Excise Tariff, emphasizing the importance of meeting specific criteria and interpretations of the General Explanatory Note in determining the classification of products.