2025 (11) TMI 369 - AT - Central Excise

Exemption under N/N.120/84-CE applies to lubricating oils and greases (3403.00) despite no proven blending, goods shown as ordinarily used

CESTAT allowed the appeal and set aside the impugned order, holding the appellant entitled to exemption under N/N.120/84-CE dated 11.05.1984 for ... Eligibility for exemption under N/N. 120/84-CE dated May 11, 1984 as claimed in the classification list dated June 11, 1990 - lubricating oils and greases manufactured by the appellant falling under sub-heading 3403.00 - HELD THAT:- From the N/N. 120/84-C.E. dated 11.05.1984, it is found that the said Notification does not mention any heading or sub-heading and does not stipulate that the goods in respect of which exemption is granted should contain any particular quantity by weight of petroleum oils or oils obtained from bituminous minerals. Exemption is granted in respect of 'lubricating oils and greases obtained by straight blending of mineral oils or by blending or compounding of mineral oils with any other ingredients'. It is observed that the Tribunal order dated September 2, 2004 also categorically stated that the benefit of exemption would not dependent on the classification of the goods and the eligibility for the exemption was to be resolved by reaching a finding as to whether the appellant's goods satisfied the definition contained in the said Notification and whether the goods were ordinarily used as lubricants. The appellant had not produced any evidence to show that the goods were obtained by blending or compounding of mineral oils with other ingredients. The lower authorities have completely overlooked the Chartered Engineer's certificate. It is also observed that the lower authorities did not dispute the evidence adduced by the appellant to show that the goods in question were lubricating oils and greases ordinarily known and used as lubricants and no evidence has been brought on record by the Revenue to counter the said certificates/evidence produced by the appellant. Consequently, the appellant is eligible for the benefit of the N/N. 120/84-C.E. dated 11.05.1984. The benefit of the N/N. 120/84-C.E. has been allowed in respect of the impugned product viz. lubricating oils and greases, manufactured by other manufacturers. Hence, there are no reason to deny the benefit of the said Notification to the case of the appellant, as the products manufactured are the same. The appellant is entitled to the benefit of N/N. 120/84-C.E. dated 11.05.1984, as claimed - there are no merit in the impugned Order-in-Appeal dated 29.07.2024 denying the benefit of N/N. 120/84-C.E. to the appellant. The impugned orders are set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether lubricating oils and greases classified under heading 34.03 are eligible for exemption under the Notification exempting 'blended or compounded lubricating oils and greases' obtained by straight blending of mineral oils or by blending/compounding of mineral oils with other ingredients, notwithstanding tariff classification under Chapter 27. 2. Whether entitlement to the exemption under the said Notification depends on classification by tariff heading/sub-heading or on satisfaction of the Notification's intrinsic definition and ordinary use as lubricants. 3. Whether the evidence produced by the manufacturer (including Chartered Engineer's certificate, purchaser certificates, registration/standards and invoices) sufficiently establishes that the goods satisfy the definition in the Notification and are ordinarily used as lubricants, thereby attracting exemption and negating confirmed duty and penalty. 4. Whether administrative technical opinion (e.g., Chief Chemist's interpretation) can displace documentary and expert evidence on eligibility under the Notification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Eligibility of goods under heading 34.03 for exemption under the Notification Legal framework: The Notification exempts 'blended or compounded lubricating oils and greases, that is to say, lubricating oils and greases obtained by straight blending of mineral oils or by blending or compounding of mineral oils with any other ingredients', subject to duty-paid mineral oil precondition and the Explanation deeming certain stocks duty-paid. Precedent treatment: Tribunal's earlier order remanded the matter directing determination by reference to the Notification's definition and ordinary use; Tribunal decisions (including a cited Kolkata Bench decision favoring exemption where conditions met) have treated the Notification as definition-driven rather than tariff-heading limited. Reference to Supreme Court principle (Hansraj Gordhandas / Hari Chand Shri Gopal) that notifications must be interpreted by their plain wording was relied on. Interpretation and reasoning: The Court reasoned that the Notification contains its own definition and does not specify any tariff heading/sub-heading or percentage composition threshold (e.g., 70% petroleum oils). The relevant inquiry is whether the products are produced by blending/compounding of mineral oils and are ordinarily used as lubricants. Classification under heading 34.03 does not, by itself, exclude eligibility where the intrinsic definition is satisfied. Ratio vs. Obiter: Ratio - entitlement to exemption is governed by the Notification's definition and ordinary use criterion, not precluded by classification under heading 34.03. Obiter - comparative observations on composition thresholds of headings 27.10 vs 34.03, while explanatory, are not decisive where the Notification sets its own terms. Conclusion: Lubricating oils and greases classified under 34.03 may be eligible for the Notification if they satisfy the Notification's definition and ordinary use as lubricants. Issue 2 - Dependence (or not) of exemption on tariff classification Legal framework: Principle that taxing/exemption notifications are to be interpreted by plain language; where Notification does not reference tariff headings, it should govern irrespective of tariff classification. Precedent treatment: Tribunal's earlier order (remand) and subsequent Tribunal decisions relied upon hold that exemption is not dependent on tariff classification; authoritative decisions cited support interpretation by plain wording. Interpretation and reasoning: The impugned adjudicatory orders relied on classification (Chapter 27 sub-headings) to deny exemption. The Tribunal rejected this approach as contrary to its earlier direction and to the plain terms of the Notification which lacks any tariff or quantitative stipulation. The correct exercise is to assess whether products meet the definition and ordinary use criteria set out in the Notification. Ratio vs. Obiter: Ratio - classification alone cannot be the determinative criterion for exemption under a Notification that defines eligible goods by process/composition and use; denying exemption solely on tariff classification is impermissible when Notification language is otherwise. Conclusion: Exemption entitlement cannot be negated merely because goods are classifiable under heading 34.03; determination must proceed on the Notification's terms. Issue 3 - Sufficiency of the manufacturer's evidence to establish entitlement and nullify duty/penalty Legal framework: Burden on applicant to prove that goods satisfy Notification definition and are ordinarily used as lubricants; documentary/expert evidence admissible to establish blending/compounding and ordinary use; confirmation of duty and penalty stands unless relevant exemption established. Precedent treatment: Tribunal and other Bench decisions granted exemption where blending of duty-paid mineral oils and ordinary use as lubricants were established and Revenue did not rebut evidence; administrative findings ignoring material documentary evidence have been set aside. Interpretation and reasoning: Appellant produced Chartered Engineer's certificate specifying percentage composition and blending, multiple purchaser/standards certificates (Railways, ONGC, BPCL), DGSD registration, IS specification, invoices/orders and other corroborative documents. Revenue did not produce contrary evidence to rebut these materials. Lower authorities overlooked the Chartered Engineer's certificate and erred in finding absence of evidence on blending/compounding. Given uncontroverted documentary proof that goods are produced by blending/compounding of mineral oils and are ordinarily used as lubricants, the Notification's conditions are satisfied. Ratio vs. Obiter: Ratio - where applicant furnishes credible, uncontradicted documentary and expert evidence showing composition/process and ordinary use fitting the Notification's definition, exemption must be allowed and consequent duty/penalty set aside. Obiter - catalogue of specific documents relied upon serves illustrative evidentiary support but does not limit types of acceptable proof. Conclusion: The evidence produced was sufficient to establish that the goods satisfy the Notification and are ordinarily used as lubricants; therefore the confirmed duty and penalty are unsustainable and are set aside. Issue 4 - Role of administrative technical opinion in interpreting scope of Notification Legal framework: Interpretation of statutory/exemptive notifications is a legal/judicial function; technical opinions may inform factual aspects (composition, properties) but cannot override the Notification's plain language or legal tests; jurisdictional limits on departmental technical officers in determining legal scope. Precedent treatment: Tribunal has held that Chief Chemist's opinion on interpretation is beyond appropriate scope where legal interpretation is required; administrative technical opinion cannot displace documentary proof meeting Notification criteria. Interpretation and reasoning: Revenue relied on Chief Chemist's opinion to support classification-based denial. Tribunal observed that such opinion is not a substitute for legal interpretation and cannot negate uncontroverted documentary evidence of blending/compounding and ordinary use. The Chief Chemist's view was therefore insufficient to justify denial of exemption contrary to the Notification's plain terms and the appellant's evidence. Ratio vs. Obiter: Ratio - administrative technical opinion cannot supplant legal determination of exemption scope where plain language and evidentiary record point to entitlement. Obiter - utility of technical opinions for factual clarification remains, but they must not determine legal entitlement. Conclusion: The Chief Chemist's interpretation could not justify denying exemption when the Notification's plain language and the appellant's unrefuted evidence established eligibility. Cross-reference Refer to Issue 1 and Issue 2 for the primacy of the Notification's definition over tariff classification; refer to Issue 3 and Issue 4 for evidentiary sufficiency and limits of administrative technical opinion in the entitlement determination.