1999 (7) TMI 218 - AT - Central Excise

Tribunal Upholds Decision on Ethyl Alcohol Classification

COLLECTOR OF CENTRAL EXCISE, PUNE Versus SHRIRAM SSK LTD.

The Tribunal dismissed the appeals filed by the Revenue, upholding the impugned orders. It concluded that Ethyl Alcohol could not be classified under ... Ethyl alcohol Issues Involved:1. Classification of Ethyl Alcohol under the Central Excise Tariff.2. Legislative competence for levy of excise duty on Ethyl Alcohol.3. Applicability of Chapter Heading 3823 for Ethyl Alcohol.4. Suitability of Ethyl Alcohol for use as fuel for spark ignition engines under Chapter Heading 2204.5. Evidence and test reports regarding the purity and use of Ethyl Alcohol.Detailed Analysis:1. Classification of Ethyl Alcohol under the Central Excise Tariff:The primary issue in the appeals was whether Central Excise duty was leviable on Ethyl Alcohol during the relevant period and whether it was classifiable under Chapter Heading 3823. The Collector of Central Excise (Appeals), Pune had held that Ethyl Alcohol could not be classified under Chapter 38. The Assistant Collectors had previously classified it under Chapter Heading 3823 and demanded duty on that basis, which was set aside by the Collector (Appeals).2. Legislative Competence for Levy of Excise Duty on Ethyl Alcohol:The Respondents argued that excisability of Ethyl Alcohol under Central Excise had remained doubtful due to Entry 84, List I of the Seventh Schedule to the Constitution, which excluded alcoholic liquor from the legislative competence of Parliament for levy of duties of excise. The Supreme Court's decision in the Synthetics and Chemicals case clarified that industrial alcohol was outside the legislative competence of the State Legislature, making it clear that Ethyl Alcohol was excisable by the Central Legislature.3. Applicability of Chapter Heading 3823 for Ethyl Alcohol:The Department contended that Ethyl Alcohol, being an Organic Chemical, would normally be classifiable under Chapter 29 but was excluded by Chapter note 2(b). Since Ethyl Alcohol was an excisable item, the Department included it under the residuary heading of 3823.00 under Chapter 38. The Tribunal, however, found it difficult to agree with the Department's contention that Ethyl Alcohol should be classified under the residuary heading of Chemical Products in Chapter 38, as Ethyl Alcohol has a specific chemical formula and is not a miscellaneous chemical product.4. Suitability of Ethyl Alcohol for Use as Fuel for Spark Ignition Engines under Chapter Heading 2204:The Assistant Collectors had held that the type of Ethyl Alcohol manufactured by the Respondents was not fit to be used as fuel for spark ignition engines and therefore was not classifiable under Chapter Heading 2204. The Respondents claimed that their Ethyl Alcohol did not have the purity required for being used as fuel for spark ignition engines. The Tribunal noted that no test report was submitted to support this claim, but also found that Ethyl Alcohol could not be classified under Chapter Heading 2204 due to its lesser purity.5. Evidence and Test Reports Regarding the Purity and Use of Ethyl Alcohol:The Tribunal noted the absence of any test report showing that the Ethyl Alcohol manufactured by the Respondents was not suitable for being used as fuel for spark ignition engines. The Tribunal emphasized that to sustain a duty demand under the Central Excise Act, it is necessary to show that the item is covered under a specific tariff entry. Since Ethyl Alcohol was not covered by Chapter Heading 38.23 and no other tariff entry could be said to cover Ethyl Alcohol during the relevant period, the Tribunal upheld the impugned orders and dismissed the appeals filed by the Revenue.Conclusion:The Tribunal concluded that Ethyl Alcohol could not be classified under Chapter Heading 3823 as it was not a miscellaneous chemical product. The Tribunal also noted the lack of evidence regarding the suitability of Ethyl Alcohol for use as fuel for spark ignition engines. Consequently, the appeals filed by the Revenue were dismissed, and the impugned orders were upheld.