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Tide Water Oil Co. (India) Ltd. Vs. Collector of Customs and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtKolkata High Court
Decided On
Case NumberAppeal from Original Order No. 520 of 1978 (Mandamus)
Judge
Reported in1984(15)ELT365(Cal)
ActsCentral Excise Act, 1944; ;Central Excise Rules, 1944 - Rules 9(2) and 56A
AppellantTide Water Oil Co. (India) Ltd.
RespondentCollector of Customs and ors.
Appellant AdvocateS.C. Bose, ;Pritimoy Dutta and ;Gopal Dutta, Advs.
Respondent AdvocateD.K. Sen and ;Samar Banerjee, Advs.
DispositionAppeal dismissed
Excerpt:
- .....by the notice dated 31st may, 1976 alleged that greases made by the appellant company out of duty paid compounded lubricating oils fell within the item no. 11b of the 1st schedule of the aforesaid act and the company was asked to show cause why a penalty should not be imposed upon it and why the duty involved on the said greases should not be realised under rule 9(2) of the central excise rules, 1944.2. the appellant filed a writ petition in this court challenging the validity of the said proceeding in regard to the said show cause notice. manas nath roy, j. discharged the rule obtained by the appellant company. the appellant being aggrieved, by the said decision has preferred the present appeal.3. during the relevant period the appellant company used to purchase lubricating oils.....
Judgment:

Chittatosh Mookerjee, J.

1. The appellant Company at the relevant time carried on business of proceeding and sale of lubricating oils and greases. The appellant Company had a factory at 109, Fore Shore Road, Howrah. According to the appellant Company it produced greases of two varieties, namely (1) asphalt base grease and (2) soap base grease for which it blended or compounded lubricating oil was used. In the present case we are concerned with the question whether or not the said soap base greases manufactured by the appellant Company were excisable goods under Item No. 11B of the 1st Schedule to the Central Excise Act. The Asstt. Collector, Calcutta, II Division by the notice dated 31st May, 1976 alleged that greases made by the appellant Company out of duty paid compounded lubricating oils fell within the Item No. 11B of the 1st Schedule of the aforesaid Act and the Company was asked to show cause why a penalty should not be imposed upon it and why the duty involved on the said greases should not be realised under Rule 9(2) of the Central Excise Rules, 1944.

2. The appellant filed a writ petition in this Court challenging the validity of the said proceeding in regard to the said show cause notice. Manas Nath Roy, J. discharged the Rule obtained by the appellant Company. The appellant being aggrieved, by the said decision has preferred the present appeal.

3. During the relevant period the appellant Company used to purchase lubricating oils and according to it the said lubricating oils purchased by it were excisable goods under Items 11 and 11B of the 1st Schedule of the Central Excises and Salt Act, 1944 and as such excise duty had already been paid in respect of these goods at their manufacturing point and before their purchase by the appellant from the open market. The appellant processed the said duty paid lubricating oils by blending or compounding soap and other ingredients. The appellant's case is that the greases produced by it could not be subjected to further excise duty. In any event, the resultant products obtained by the appellant by processing of duty paid lubricating oils were not covered by any of the tariff items specified in the 1st Schedule to the said Act. The respondents, on the other hand, contend that the petitioner Company carried on manufacturing processed by blending or compounding lubricating oils with other ingredients namely fats and chemicals to make them finished products and sold them in the market. The said finished products manufactured by the appellant Company fell under Item No. 11B of the 1st Schedule and as such they were excisable and dutiable. The respondents also contended that in case excise duty had been already paid on any of the item used in manufacturing the appellants products, it was entitled to claim credit of the duty already paid in terms of Rule 56A of the Central Excise Rules, 1944.

4. The Item No. 11B of the 1st Schedule of the Central Excises and Salt Act, 1944 was as follows :-

Item No. 11B.--BLENDED LUBRICATING OILS AND GREASES----------------------------------------------------------------------------Item No. Tariff Description Rate of duty----------------------------------------------------------------------------1 2 3----------------------------------------------------------------------------11B Blended or compounded lubricatingoils and greases-'Blended or compounded lubricating oils 20% ad and greases', means lubricating oils and valorem plus greases obtained by straight blending of two thousand mineral oils or by blending or compound- rupees per ing of mineral oils with any other ingre- metric tonne,dients.Explanation.-The expression 'mineral oil' has the meaning assigned to it in Explanation 1 to Item No. 6.----------------------------------------------------------------------------

Blended or compounded lubricating oils or greases meant-(1) straight blending of mineral oils and (2) blending or compounding of mineral oils with any other ingredients. In this case, admittedly, the greases manufactured by the appellant did not involve straight blending of mineral oils but the appellant blended or compounded duty paid lubricating oil with other ingredients. We are unable to accept the submission of Mr. Bose, learned Advocate for the appellant, that the said duty paid lubricating oils used by the appellant were not mineral oils within the meaning of the said term given in Explanation 1 to Item Nos. 6 to 11C covered minerals, fuels and related materials. Explanation 1 to Item No. 6 defined mineral oil as a oil consisting of a single liquid hydrocarbon or a liquid mixture of hydrocarbons (except for associated impurities) derived from petroleum, coal, shale, peat or any other bitumen as substance; and includes any similar oil produced by synthesis or otherwise. Thus, the expression 'mineral oil' has been given a wide connotation. Any oil which is derived from petroleum, coal etc. and consisting of a single liquid hydrocarbons or a liquid mixture of hydrocarbons would be mineral oil. Thus, motor spirit in Item No. 6, Kerosene in Item No. 7, refined diesel oils etc. in Item Nos. 8 and 9, furnace oil in Item No. 10 are all derived from mineral oils but having different properties. Other by-products obtained by refining crude petroleum or shales and not otherwise specified, including refinery gases, lubricating oil and greases, waxes and coke were excisable under Item No. 11 A. Central Government, however, by a notification dated 25th April, 1964 had exempted certain kinds of lubricating oils and lubricating greases falling under the said Item No. 11A subject to conditions specified therein.

5. The appellant purchased mineral oil which according to it were already blended with obtain additives and the same were called lubricating oils. In our view, such lubricating oil used in manufacture of greases were still mineral oils because the same satisfied both the conditions stipulated in Explanation 1 to Item No. 6, namely (1) the oils were derived from petroleum and (2) oils consisted of single liquid hydrocarbon or a liquid mixture of hydrocarbons. Mr. Sen, learned Advocate for the respondents, correctly pointed out that the appellant by blending or compounding lubricating oils with fat or other chemicals produced new products. The said products would be excisable under Item No. 11B because they were processed by blending of lubricating oils with other ingredients. In fact, Mr. Bose, appearing on behalf of the appellant did not seriously dispute that fat and other materials blended by the appellant with the lubricating oil purchased by it from the open market would come within the term 'Other ingredients'. We have already indicated that we are unable to accept the submission made on behalf of the appellant that the said lubricating oils purchased by the appellant were already blended with additives, and, therefore, the same was no longer mineral oil within the meaning of Item No. 11B read with Explanation 1 under Item No. 6 of the First Schedule. The lubricating oil used by the appellant for blending with other ingredients for manufacturing greases were still mineral oil and, therefore, the finished products of the appellant Company were fully covered by Item No. 11 B. The alleged fact that the appellant used duty paid lubricating oil in the manufacture of its finished product might entitle it to apply for Central Excise Rules. The learned Single Judge correctly pointed out that in case the appellant used lubricating oil on which duty or excise had been already paid, it could have applied to the Collector for allowing credit of the duty already paid on such materials. But on this ground the appellant cannot claim that greases manufactured by it would not be at all liable to excise duty.

6. In the above view, we hold that this appeal has no merit and it should fall. We accordingly, dismiss this appeal without any order as to costs.

7. Let operation of this order remain stayed for three weeks, as prayed for.


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