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CASE NO.: Appeal (civil)  6289-6290 of 1999

PETITIONER: M/s. Castrol India Limited                               

RESPONDENT: Commissioner of Central Excise, Calcutta-I       

DATE OF JUDGMENT: 25/02/2005

BENCH: RUMA PAL,ARIJIT PASAYAT & C.K. THAKKER

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

       Appellant calls in question legality of the judgment rendered by  Customs, Excise & Gold (Control) Appellate Tribunal, Calcutta (in short  the ’CEGAT’).  Initially there was a difference of opinion between two  Members i.e. Technical Member and the Judicial Member and the matter  was referred to a third member.  The third member agreed with the  Technical Member and by majority the decision went against the  assessee-appellant.  The judgment is reported in 2000 (123) ELT 789  Tribunal (Castrol India Ltd. v. Commissioner of Central Excise,  Calcutta-I).

The factual position in a nutshell is as follows:

The appellant is engaged, inter alia, in the manufacture of  blended or compounded lubricating oils.  It also processes a product  called ’Super TT’ which the appellant claimed to be a blended  lubricating oil ordinarily used for lubrication.  The undisputed  process of manufacture of the said product as stated by the appellant  is as under:   "Base Oils are taken to the blending kettle, heated  to remove moisture. Additives are added and mixed well.   Temperature reduced and MTO and green dye added and mixed  well, to get the final product."

Admittedly, the flash point of the ’Super TT’ is below 94oC  Therefore, assessee appellant claimed that the same is not classifiable  under Heading 2710.60 of the Tariff under Customs Tariff Act, 1985 ( in  short the ’Tariff Act’) as the same covers lubricating oils having  flash point more than 94:C. As such, the product was claimed to be  classifiable as ’others’ under sub-heading 2710.99.  Revenue disputed  the position and held that the benefit of the Exemption Notification  No.120/84-CE dated 11.5.1984 is applicable only to the lubricating oils  falling under sub-heading 2710.60, as there is no other heading for  lubricating oil in the Tariff Act.  The appellant’s stand was that the  said Exemption Notification extends the benefit to all types of   lubricating oils, irrespective of their classification. As its product  is admittedly a lubricating oil, the scope of the Notification cannot  be restricted to the lubricating oils falling under a particular tariff  entry.

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Two show-cause notices issued related to demand of duty against  the assessee in respect of their blended "Super TT" which was cleared  at "nil" rate of duty during different periods.  The said notices  culminated into two different orders whereby proposed amount of duty  and personal penalty were confirmed.  The dates of show-cause notices,  the period involved, the duty demanded and the penalty demanded are as  follows:-

Sl.  No. Date of show  cause notice Period  involved Demand of duty Penalty 1 a)29.1.1992 1.8.1991 to  31.12.1991 Rs.20,46,994.23 Nil

b)3.8.1992 1.1.1992 to  29.2.1992 Rs.10,77,390.00 Nil

c)1.10.1992 1.3.1992         to  31.8.1992 Rs.19,96,362.88 Nil

d)25.2.1993 1.9.1992 to  31.1.1993 Rs.19,83,411.76 Nil

 Total Rs.71,04,159.47

2. 28.1.1994 7.1.1989 to  31.7.1991 Rs.47,59,343.40 Rs.30  lakhs            Assessee preferred two appeals before the CEGAT.  It was  submitted that for a long time Exemption Notification dated 16.3.1976  in relation to Item no.11B and the rate of duty was nil was held  applicable to it.  The Entry 11B was repealed in the year 1984 and it  became a part of Item 68.  Thereafter Notification no.120/84 covered  the field and the same notification continued upto 1994.  In between  the Tariff Act was introduced which introduced a new tariff in Chapter  27 w.e.f. 1.3.1986 under the Tariff Act.  Section 5A(4) of the Central  Excise Act, 1944 (in short the ’Act’) all along held the field.   Originally Item No.11B was a part of the First Schedule of the Act.   Prior to introduction of Section 5A(4)in the Act w.e.f. 19.5.1988 Rule

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8 of the Central Excise Rules, 1944 (in short the ’Rules’) provided for  exemption.  The Notification No. 120/84-CE was issued on 11.5.1984 when  the earlier Excise Tariff was a part of the First Schedule of the Act.  The said notification exempted blended and compounded lubricating oils  i.e. lubricating oils obtained by straight blending of mineral oils or  by blending or compounding of mineral oils with other ingredients.  The  said exemption was granted without reference to any tariff item under  which such blended and compounded lubricating oils were classified.   The new Excise tariff contained in the Tariff Act came into force  w.e.f. February 1986.  Under that Tariff, blended or compounded  lubricating oils with flash point above  94: C were classifiable under  sub-heading 2710.60 and other lubricating oils along with other  petroleum products were classified under Chapter sub-heading 2710.99  which was a residuary entry.  The Exemption Notification No.120/84-CE  continued un-amended till it was rescinded by Notification No.64/94-CE  dated 1.3.1994.  Three classification lists were filed by the appellant  which were operative from 1.4.1986, 5.5.1996 and 1.3.1998.  All these  classification lists were approved by Assistant Commissioner by  extending the benefit of Notification No.120/84. The classification  list dated 18.3.1988 was operative for the relevant period under  dispute. Since product was having flash point below 94: C, therefore,  there was no question of any suppression as alleged by the Department.   It was further submitted that the notices were issued after prescribed  period of limitation.

The assessee-appellant’s stand was resisted by the Revenue on  the ground that the assessee-appellant had given description of its  product to claim benefit under Notification No.120/84 CE. Its product  was not classifiable under Heading 2710.60. Wrong claiming of benefit  establishes mala fide intention and, therefore, the extended period of  limitation was rightly invoked by the Department.  There is specific  and unambiguous definition of lubricating oil under Chapter Heading  2710.60 of Chapter 27.  Chapter Heading 27.10 covers a number of  petroleum products and each category is further covered under a  separate sub-heading. Sub-heading 60 covers lubricating oil and there  is no other sub-heading covering lubricating oils.  When the exemption  notification granted exemption it necessarily means that lubricating  oil falling under said sub-heading alone was covered.

While the Judicial Member accepted the stand of the assessee- appellant, the Technical Member took the view that for the purpose of  Exemption Notification No. 120/84-CE lubricating oil for flash point  below 94: C ceases to be lubricating oil as it acquires general  description ’others’ under sub-heading 2710.99. Therefore, the  Department’s view was accepted.  With the similar observations the  third member concurred with the member technical and upheld the  Department’s stand.                                      

       In support of the appeal, Mr. Joseph Vellapally, learned senior  counsel submitted that the two members constituting the majority lost  sight of the fact that there may be lubricating oils having flash point  94: C which may be classified under Tariff sub-heading 2710.99 as  "others".  The view of the majority that "lubricating oil" has been  defined in a particular manner under heading 2710.60 is apparently  erroneous.   

       In response, Mr. Mohan Parasaran, learned Additional Solicitor  General submitted that the Exemption Notification has to be strictly  construed and the view taken by the majority of the members is on a  proper reading of the various provisions and the Notifications.         

       It would be relevant to take note of the entries and relevant  Notifications at different points of time. The Notification dated  16.3.1976 read as follows:

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               "The Central Government has exempted the  excisable goods of the description in column (3) of  the Table below and falling under the Item of the  First Schedule to the Central Excise and Salt Act,  1944 (1 of 1944), specified in the corresponding  entries in column (2) of the said Table, from so much  of the duty of excise leviable thereon under Section 3  of said Act as is in excess of the duty leviable at  the rates specified in the corresponding entries in  column (4) of the said Table;

TABLE S.No.           Item No.           Description    Rate of duty (1)          (2)           (3)               4)   6               11B             Blended or              Nil.                                         compounded                                                       lubricating oils                                         and greases.  

       Notification dated 11.5.1984 reads as follows:

"BLENDED OR COMPOUNDED LUBRICATING OILS AND GREASES.  120/84-CE, dt. 11.5.1984.

Blended or compounded lubricating oils and grease  are fully exempt from basic excise duty.

G.S.R. 354(E) \026 In exercise of the powers conferred  by sub-rule (1) of rule 8 of the Central Excise  Rules, 1944, the Central Government hereby 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, from the whole of the duty of excise  leviable thereon under Section 3 of the Central  Excises and Salt Act, 1944 (1 of 1944).

Explanation -   The expression "mineral oil"  has the meaning assigned to it in Explanation 1 to  Item No.6 of the First Schedule to the Central  Excises and Salt Act, 1944 (1 of 1944)."

Entry no. 11B read as follows:

"11B \026 Blended or compounded lubricating oils and  greases:  

"Blended or compounded lubricating oils and greases"  means lubricating oils and greases obtained by  straight blending of mineral oils or by blending or  compounding of mineral oils with any other  ingredients.

Explanation \026 The expression "mineral oil" has the  meaning assigned to it in Explanation 1 of Item  No.6."

       Chapter 27 so far as relevant for the purpose of present dispute  contains sub-headings 2710.60 and 2710.99 which read as follows:

"2710.60- Lubricating oil, that is to say, any oil  as is ordinarily used for lubrication, excluding any

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hydrocarbon oil which has it s flash point below 94o  C.

2710.99 \026 Others."

       In Collector of Customs, Bangalore v. Maestro Motors Ltd.  (2004  (174) ELT 289 (SC), this Court held as follows:

"It is settled law that to avail the benefit of a  notification a party must comply with all the  conditions of the Notification. Further, a  Notification has to be interpreted in terms of its  language. If in the Notification exemption is  granted with reference to tariff items in the First  Schedule to the Customs Tariff Act, 1975, then the  same Rules of Interpretation must apply. In that  case the goods will be classified, even for the  purposes of the Notification, as they are classified  for purposes of payment of duty. But where the  language is plain and clear effect must be given to  it.  In this Notification what is exempted is  components, including components of fuel efficient  motor cars in semi-knocked down packs and completely  knocked down packs.  Undoubtedly, for purposes of  levy of custom duty, by virtue of Interpretative  Rule 2(a), the components in a completely knocked  down pack would be considered to be cars. But in  view of the clear language of the Notification the  components including components in completely  knocked down packs are exempted.  Effect must be  given to the wording of the Notification. Thus  components in completely knocked down packs would  get the exemption under this Notification, even  though for purposes of classification they may be  considered to be cars."

Section 5A(4)of the Act reads as under:

"Every notification issued under sub-rule (1), and  every order made under sub-rule (2) of Rule 8 of the  Central Excise Rules, 1944, and in force immediately  before the commencement of the Customs and Central  Excise Laws (Amendment) Act, 1987 shall be deemed to  have been issued or made under the provisions of  this Section and shall continue to have the same  force and effect  after such commencement until it  is amended, varied, rescinded or superseded under  the provisions of this Section."

       Undisputedly in the present case there was no reference to any  tariff entry in the Notification. Therefore, the majority view is  clearly unsustainable.  Additionally, we find that CEGAT had in some  other cases taken the same view as the minority view.  It is fairly  accepted by learned Additional Solicitor General that there has been no  challenge to the said decisions one of which is Bharat Petroleum  Corporation Ltd. v. Commissioner of Central Excise, Kolkata-I (2003  (154) ELT 698 (Tri-Kolkata) decided on 30.10.2002.

       Exemption Notification 120/84-CE dated 11.5.1984,in view of what  is prescribed in Section 5A(4) of the Act, continued to be operative  and effective as it was not amended, varied, rescinded or superseded  under the provisions of Section 5A of the Act.

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       In Stroud’s Judicial Dictionary, 4th Edition, Vol.5, at page 2753,  we find: "That is to say" is the commencement of an ancillary clause,  which explains the meaning of the principal clause. It has the  following properties: (1) it must not be contrary to the principal  clause; (2) it must neither increase nor diminish it; (3) but where the  physical clause is general in terms it may restrict it; see this  explained with many examples,   Stukeley v. Butler Hob, 1971". The quotation, given above, from  Stroud’s Judicial Dictionary shows that, ordinarily, the expression  "that is to say" is employed to make clear and fix the meaning of what  is to be explained or defined. Such words are not used as a rule, to  amplify a meaning while removing a possible doubt for which purpose the  word "includes" is generally employed. In unusual cases, depending upon  the context of the words "that is to say", this expression may be  followed by illustrative instances.  (See State of T.N. v. Pyare Lal  Malhotra (1976 (1) SCC 834), Mahindra Engineering and Chemical Products  Ltd. v. Union of India (1992 (1) SCC 727);  Sait Rikhaji Furtarnal v.  State of A.P. (1991 Supp (1) SCC 202); and   R. Dalmia v. C.I.T. (1977  (2) SCC 467).   

The expression "that is to say" is descriptive, enumerative and  exhaustive and circumscribes to a great extent the scope of the entry.  (See Commissioner of Sales Tax, M.P. v. Popular Trading Company, Ujjain  (2000 (5) SCC 511).                  The expression "that is to say" in sub-heading 2710.60 has to be  interpreted to be words of limitation. The fact that sub-heading  2710.60 contains an exclusion clause goes to show that there may be  other lubricating oils which may fall in the residuary heading  "others".   

       The sub-heading 2710.60 significantly uses two expressions. They  are (i) "that is to say" and (ii) "excluding".  The first expression is  used in description, enumerative and exhaustive sense and to a great  extent circumscribes the scope of the entry.  But the second expression  dilutes the pervasiveness by carving out an exception for the purpose  of the particular sub-heading a particular type of lubricating oil.   All other types of lubricating oil are covered by the residuary entry  i.e. 2710.99.

Under the Notification 120/84CE lubricating oil was exempted  without reference to any tariff heading/sub-heading.  Consequently, the  criteria specified in the Notification were satisfied.  That being so,  majority view contained in the order of the CEGAT is not sustainable  and is set aside.  The minority view as expressed is confirmed.  

       The appeals are allowed with no order as to costs.