1990 (5) TMI 113 - AT - Central Excise

Tribunal Upheld Petrochemical Tariff Classification, Duty Demand Limited

The Tribunal upheld the classification of petrochemical products under Tariff Item 68, denying the applicability of exemption Notification No. 276/67-C.E. ... Classification Issues Involved:1. Classification of petrochemical products (ethylene, propylene, butadiene) under Central Excise Tariff.2. Applicability of exemption Notification No. 276/67-C.E. dated 21-12-1967.3. Validity of demand for duty for the period prior to 14-12-1984.4. Application of extended period of limitation under Section 11-A of the Central Excises & Salt Act, 1944.Detailed Analysis:1. Classification of Petrochemical Products:The core issue was whether ethylene, propylene, and butadiene, derived from cracking raw naptha, should be classified under Tariff Item 11-AA(2) or Tariff Item 68. The respondents argued that their products should be classified under Item 11-AA(2) as they were derived from refining raw naptha, which is a crude petroleum product. However, the Assistant Collector held that these products were not derived directly from refining crude petroleum but from cracking raw naptha, thus classifiable under Item 68. The Tribunal upheld this view, citing the Gujarat High Court's judgment in the case of Mehta Brothers and the Tribunal's decision in Nav Bharat Enterprises, which established that a product to be excisable under Item 11-A must be the immediate result of refining crude petroleum. Therefore, the products in question were correctly classified under Item 68.2. Applicability of Exemption Notification No. 276/67-C.E.:The respondents claimed exemption under Notification No. 276/67-C.E., which exempts goods falling under Tariff Items 6 to 11AA produced in premises declared as a refinery. The Assistant Collector rejected this claim, stating that the products were not derived directly from refining crude petroleum and thus not eligible for the exemption. The Tribunal agreed, noting that the exemption notification specifically excludes goods produced in a refinery wherein crude petroleum is refined. Since the products were derived from raw naptha and not directly from crude petroleum, the exemption was not applicable.3. Validity of Demand for Duty for the Period Prior to 14-12-1984:The Collector (Appeals) had confined the demand for duty to the period from 14-12-1984 onwards, rejecting the demand for the period prior to this date. The Revenue appealed, arguing that the demand could be raised for a period of six months under Section 11-A of the Central Excises & Salt Act, 1944. The Tribunal, referencing Supreme Court judgments, held that demand for duty could indeed be raised for a period of six months prior to the issue of the show cause notice, provided there was no fraud, collusion, or suppression of facts. Since the Department did not establish such grounds, the demand was limited to six months prior to the notice.4. Application of Extended Period of Limitation:The Revenue argued that the extended period of five years under Section 11-A(1) could be invoked due to suppression of facts by the respondents. However, the Tribunal found no evidence of suppression or mis-statement, citing Supreme Court judgments that clarified the application of the extended period. The Tribunal concluded that the demand for duty should be confined to the standard six-month period, as the conditions for invoking the extended period were not met.Conclusion:The Tribunal upheld the classification of ethylene, propylene, and butadiene under Tariff Item 68 and denied the applicability of exemption Notification No. 276/67-C.E. The demand for duty was limited to six months prior to the issue of the show cause notice, and the appeal by the Revenue was allowed while the cross-objection by the respondents was dismissed.