1. M/s. Apar Private Limited has filed an appeal being aggrieved from Order-in-Appeal No. A-2028/BII-236/82 dated 14th December, 1982 passed by the Collector of Central Excise (Appeals), Bombay.
2. Briefly the facts of the case are that M/s. Apar Private Limited through its Division, Special Oil Refinery filed a classification list under protest for power oil transformer oil (T.I. 8) vide their letter dated 17-4-1978. The appellants had claimed that since the transformer oil base stock is already duty-paid, no further duty should be recovered on the transformer oil as the process of conversion does not amount to "manufacture" within the meaning of the Central Excises and Salt Act, 1944. A show cause notice dated 7-2-1979 was issued to appellants disputing the stand taken by them and desiring them to show cause as to why central excise duty at the appropriate rate should not be recovered on the transformer oil (T.I. 8) manufactured by them out of duty-paid base oils falling under a different tariff item, viz., HA4(a). The appellant had replied to the show cause notice vide their letter dated 18-4-1979 and a personal hearing was granted by Assistant Collector and at the time of hearing the appellant reiterated the contentions made in the reply to the show cause notice and had argued that the goods transformer oil is converted from transformer oil base stock which is already duty-paid. The conversion of transformer oil base stock to transformer oil does not amount to manufacture, and a new product does not come in existence. The appellant had relied upon the Supreme Court's judgment in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. and had argued that "manufacture implied a change but every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having distinctive name, character or use." It was further argued that the decision of the Superintendent, Central Excise, Esso Refinery, vide letter No. C.Ex. (oil) 20/T.O/70/340 dated 3rd March, 1971 was a valid decision and the same cannot be set aside by the Assistant Collector, Central Excise, as he has no powers of review under Central Excises and Salt Act, 1944. It was further argued that physical and chemical properties of the product transformer oil base stock and transformer oil falling under tariff item No. HA4(a) and tariff item 8 respectively are the same. The specifications in terms of viscosity, flash point, flame height are the same for both products so there was no new product coming from transformer oil base stock which was commercially and physically different from that. Both the products were the same since they only purify transformer oil base stock by adding caustic soda. As no new product came into existence from that conversion, there was no duty leviable on the transformer oil. The learned Assistant Collector did not accept the contentions of the appellant. He had observed that the transformer oil base stock conforms to the specifications in terms of viscosity, flash point, flame height under central excise tariff item No. 8. So far as it had also been classified under tariff item 8 and duty had also been paid under tariff item 8 but due to budgetory change on 1-3-1978, the transformer oil base stock was taken into the tariff item HA4(a) and as such there was no dispute regarding classification of transformer oil base stock under tariff item 11A4(a). The learned Assistant Collector had further observed that there was difference between transformer oil base stock and transformer oil, and he was of the view that the Supreme Court judgment cited by the appellant does not help them. In the same judgment it was also held that if the processing of the goods results in a different commercial article or commodity which is known to the market as such then such processing amounts to "manufacture". In the present case transformer oil base stock after the processing resulted in transformer oil which was commercially distinct from the input.
Hence the argument that no new product emerged as a result of the process was not factually correct. The party was, therefore, legally bound to file a classification list for the new product, obtained. The learned Assistant Collector had further held that the central excise duty is not charged on a commodity until and unless it has been mentioned by the Legislature itself. The physical and chemical properties and the specification of technical requirements may be the same for the transformer oil base stock and transformer oil but transformer oil base stock has been specifically excluded from the purview of tariff item 8 by virtue of Explanation II to the said tariff item. Thus transformer oil classifiable under tariff item 8 and the transformer oil base stock falling under tariff item 11Aare two separate and distinct commodities under the central excise law. As to the earlier findings of the central excise authorities in 1971 that the goods transformer oil base stock and transformer oil are the same and no new product comes into being as a result of the processing so transformer oil is not dutiable product and the Assistant Collector could not review the earlier decision, does not help the appellants.
Transformer oil base stock and transformer oil both were classified under tariff item 8 only but from 1st March, 1978 the transformer oil base stock has been included in tariff item No. 11A(4) by specific mention in the tariff itself. Hence the previous classification of the Superintendent has no relevance in the changed context. The legislature has changed the position as and when conditions and circumstances warranted it. Thus the position in 1971 had no relevance whatsoever to the changed situation and hence their argument on that event was rejected. He had held that the two products, transformer oil base stock and transformer oil were clearly distinct and separate in their characteristics and in their end use. He had approved the classification list for power oil, transformer oil filed by the appellants and submitted by them under protest. Being aggrieved from the aforesaid order the appellant had filed an appeal to the learned Collector of Central Excise (Appeals), Bombay. The learned Collector of Central Excise (Appeals), Bombay had confirmed the fidings of the Assistant Collector of Central Excise and had rejected the appeal.
Being aggrieved from the aforesaid order the appellant has come in appeal before the Tribunal.
3. Shri C.S. Lodha and Mrs. P.S. Shroff, advocates have appeared on behalf of the appellant. Shri C. S. Lodha, the learned advocate has reiterated the facts. He has pleaded that the appellant had removed the impurities from the transformer oil base stock and there is no process of manufacture as defined by Section 2(f) of the Central Excises and Salt Act, 1944. After the removal of the impurities transformer oil base stock becomes transformer oil and no new product comes into existence as the physical and chemical properties of the transformer oil base stock and transformer oil are the same in terms of viscosity, flash point, flame height, etc., and as such no new product comes out from transformer oil base stock which is commercially and physically different from the same. Both the products are the same since the appellants only purify transformer oil base stock by adding caustic soda to form transformer oil. Shri Lodha, the learned advocate states that up to 28th February, 1978 it was an accepted fact that transformer oil base stock and transformer oil are the same and did not amount to manufacture and no excise duty was leviable. Both the items fell under the same tariff item. It was only from 1-3-1978 due to budgetory change that transformer oil base stock was taken into the tariff item HA4(a).
Shri Lodha has referred to a letter dated 7th February written by the appellant to the Assistant Collector of Central Excise wherein the appellant had applied for L4 manufacturing licence in the prescribed form and had agreed to clear transformer oil on payment of provisional duty at 5% ad valorem under protest and without prejudice to their rights to represent their case further and claim refund of such amounts paid by them under that provisional assessment. Shri Lodha states that in his letter dated 3rd March, 1971 the Superintendent of Central Excise had informed the appellant that production of transformer oil from duty-paid transformer oil base stock does not amount to manufacture so as to attract levy of excise duty. It was further mentioned in that letter that the transformer oil produced by the appellant out of duty-paid transformer oil base stock does not attract levy of excise duty. Shri Lodha also referred to a letter dated 3rd March, 1975 which appears on pages 70 and 71 of the paper book. In the said letter the appellant had filed an application for the issue of excise licence and PLA under tariff item 68 provisionally and the respondent vide letter dated 14th March, 1975 had informed the appellant that the transformer oil as manufactured by the appellant was excisable under tariff item 8 but no duty was recoverable because of the fact that base stock from which it was manufactured had already suffered duty under, the same tariff item, viz., tariff item 8 and as such the transformer oil will not attract the new levy under tariff item 68. Shri Lodha has referred to rule 140 of the Central Excise Rules and has pleaded that in , terms of Sub-rule (2) of rule 140 of the Central Excise Rules, 1944, the Central Government by a general or special order declare any premises Or group of premises to; be a refinery,; either permanently or for a specified period and on such declaration, such refiriery shall be deemed to be a warehouse appointed or licensed under Sub-rule (1) and; the provisions of that chapter shall apply in relation to the goods processed, or .manufactured: in-such refinery;as they apply in relation to the goods. stored -in the warehouse appointed or licensed under Sub-rule (1). He has also referred to rule l43A of,the Central Excise Rules which lays down special provisions with respect to the goods processed and manufactured in refineries and in terms of the said rule with the sanction of the proper officer and in accordance with such instructions as the Collector may, from time to time, issue in writing in this behalf, the owner of the goods, processed or manufactured in a refinery declared under Sub-rule (2) of Rule 140 may blend or treat or make such alterations and conduct such further manufacturing processes in the aforesaid goods in such manner and subject to such conditions as the Central Government may, by notification in the official Gazette, specify. Shri Lodha has also referred to a judgment of the Hon'ble Supreme Court in the case of Chhotabhai Jeihabhai Patel and Co. v. The Union of India and Anr. wherein the Hon'ble Supreme Court had held that duty of excise is a tax levy on home produced goods of a specified class or description, the duty being calculated according to quantity or value of the goods and which is levied because of the mere fact of the goods having been produced or manufactured and unrelated to and not dependent on any commercial transaction in them.
He has referred to another judgment of the Hon'ble Supreme Court in the case of R. C. Jail Parsi v. Union of India and Anr.
wherein Hon'ble Supreme Court had held that excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on [to] the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production is not lost. He has referred to the judgment of the Hon'ble Supreme Court in the case of A. B. Abdul Kadir and Ors. v. State of Kerala wherein the Hon'ble Supreme Court had held that The fact that the levy of excise duty is in the form of licence fee would not detract from the fact that the levy relates to excise duty. It is, however, essential that such levy should be linked with production or manufacture of the excisable article. The recovery of licence fee in such an event would be one of the modes of levy of the excise duty. Where, however the levy imposed or tax has no nexus with the manufacture or production of an article the impost or tax cannot be regarded to be one in the nature of excise duty.
He has also referred to another judgment of the Supreme Court in the case of Union of India and Ors. v. Delhi Cloth and General Mills Co.
Ltd. and Ors. reported in 1977 ELT (J 199) wherein the Hon'ble Supreme Court had held that the word "manufacture is generally understood to mean as bringing into existence a new substance" and does not mean merely "to produce some change in substance." Therefore, 'manufacture' implies a change but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinctive name, character or use. Shri C. S. Lodha, the learned advocate further states that the Hon'ble Supreme Court in the judgment of Delhi Cloth and General Mills Co. Ltd. and Others had held that the definition of the word "manufacture" in Section 2(f), do not equate "processing" to "manufacture". Therefore, mere processing of goods is not liable to excise duty. He has also referred to another judgment of the Supreme Court in the case of Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers reported in 1980 ELT 343 (SC) wherein the Hon'ble Supreme Court had held that the manufacture is the end result of one or more processes through which the original commodity is made to pass. Although the nature and extent of processing may vary from one case to another yet, it is only when the change, or a series of changes take the commodity to the point where commercially it is recognised as a new and distinct article that a manufacture can be said to have taken place. The Hon'ble Court had further held that if there is no 'essential' difference in identity between the original commodity and the processed commodity, it cannot be said that the one commodity has been consumed in the manufacture of another even though it may have undergone a degree of process ing. Shri Lodha states that in the said case a degree of processing was involued in preparing pineapple slices from the original pineapple, yet to the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it or adding sugar to preserve it and cannot be said to be "manufacture".
The fact that the pineapple slices have a higher price than the original fruit, is occasioned only because of the labour put into making fruit more readily consumable and because of the can employed to contain it. Shri Lodha states that in the present matter before us the transformer oil base stock has been processed and impurities have been removed and there is no manufacture and as such no excise duty could be levied. He has referred to another judgment of the Supreme Court in the case of Alladi Venkateswarlu and Ors. etc. v. Government of Andhra Pradesh and Anr. wherein the Hon'ble Supreme Court had held that we do not think that it is fair to so interpret a taxing statute so as to impute an intention to the legislature to go on taxing what is virtually the same product in different forms over and over again.
Such a result would be contrary to basic axioms of taxation. Unless the language of taxing statute was absolutely clear, it should not be given an obviously unfair interpretation against the assessee.Collector of Central Excise, Jaipur v. Fine Marble & Minerals Pvt., Ltd. Makrana wherein the Tribunal had held that the cutting or sawing of marble blocks to obtain marble slabs is not a process of 'manufacture' for the simple reason that no new and distinct commercial product comes into existence as the end product would still be called 'marble' and thus the original identity continues. As a matter of fact, the manufacture of the article 'marble' is complete only after all or most of the processes of cutting/sawing, polishing, etc., are undergone. As such, marble slabs are not liable to duty under item 68 of the central excise tariff.
Shri Lodha the learned advocate states that in view of the various judgments cited by him it is abundantly clear that in the appellant's case there is no activity of manufacture as manufacture means transformation and a new product must emerge having distinct name, character and name (use). He also gave an example of wheat. He states that it has to undergo a number of processes before its use. He states that in the matter before the Tribunal there is just removal of moisture from transformer oil base stock. In support of his arguments he has referred to another judgment of the Hon'ble Supreme Court in the case of Tungabhadra Industries Ltd, Kurnool v. The Commercial Tax Officer, Kurnool reported in AIR 1961 412 wherein the Hon'ble Supreme Court had held that when raw groundnut oil is converted into refined oil, there is, no doubt, processing but this consists merely in removing from raw groundnut oil that constituent part of the raw oil which is not really oil. The matter removed from the raw groundnut oil not being oil or (sic) any purpose for which oil could be used. In other words, the processing consists in the non-oily content of the raw oil being separated and removed, rendering the oily content of the oil 100 per cent. The Hon'ble Supreme Court had further held that there is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Hydrogenated oil still continues to be "groundnut oil" notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving the keeping qualities for those who desire to consume groundnut oil. Shri Lodha, the learned advocate has referred to the provisions of Section 2(f) of the Central Excises and Salt Act, 1944. In terms of Section 2(f) "manufacture" includes any process [incidental] or ancillary to the completion of a manufactured product.
Shri Lodha states that in the present case there is just purification and not manufacture and the Parliament has got full authority to amend the section. Since the Parliament has not amended the same and a simple reading of the section shows that there is no express or clear wording of the section which can lead to the conclusion that the processing is manufacture and that under a specific provision in the Act the transformer oil base stock cannot be treated as manufacture. He has further stated that the revenue has not been able to establish that in processing transformer oil base stock to transformer oil there had been a process of manufacture. The onus is on the revenue and the same has not been discharged by it. He has referred to a judgment of the Hon'ble Supreme Court in the case of The Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S. Pai and Co.
. He has also referred to another judgment of the Tribunal in the case of Hindustan Lever Ltd., Bombay v. Collector of Central Excise, Bombay where the Tribunal had held that it is well settled that the burden to prove that a product falls under a specified entry of the tariff schedule lies on the revenue. He has referred to another judgment of the Bombay High Court in the case of Garware Nylons Ltd. v. Union of India and Ors. reported in 1980 ELT 249 (Bombay) wherein the High Court had held that it is for the taxing authorities to prove that a product is liable to duty in the manner claimed by them. Shri Lodha, the learned advocate, has stated that earlier the revenue authorities had taken a view that removal of impurities from base stock does not amount to manufacture and the change of view amounts to reviewing of the earlier order. He has relied on a judgment of the Hon'ble Supreme Court in the case of Harbhajan Singh v. Karam Singh and Ors. . There the Hon'ble Supreme Court had held that in the absence of any such express power, the Director, Consolidation of Holdings, cannot review his previous order of dismissing the application of the petitioner under Section 42 of the East Punjab Holdings Act, 1948. Hence, the subsequent review order of the Director was ultra vires and without jurisdiction. The High Court was right in quashing that order by the grant of a writ under Article 226 of the Constitution. He has referred to another judgment of the Madras High Court in the case of Indian Organic Chemicals Ltd. v. Union of India and Ors. reported in 1983 ELT 34 (Mad) wherein the Hon'ble High Court had held that the Central Excises Act and the Rules do not confer any powers on the central excise officers to review their own order, because it is settled law that there is no inherent power of review in a quasi-judicial authority while acting judicially or gwm-judicially unless the power of review is conferred exclusively or by necessary implication by the provisions of the statute. He has also referred to another judgment of the Tribunal in the case of Collector of Central Excise, Bangalore v. Guest Keen Williams Ltd. where the Tribunal had held that where the matter has been concluded by a formal and definitive order of an Assistant Collector, it cannot be reviewed by his successor because the former did not interpret the provisions of law correctly. This is in spite of the limited power of review inherent in the provisions of Section 11A of Central Excises and Salt Act, 1944. He has also referred to the judgment of the Supreme Court in the case of Patel Narshi Thakershi and Ors. v. Pradyumansinghji Arjunsinghji where the Hon'ble Supreme Court had held that The power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication.
Shri Lodha, the learned advocate, has pleaded that in view of his arguments the appeal filed by the appellant may be accepted.
4. Shri A. S. Sundar Rajan, the learned J.D.R. has appeared on behalf of the respondent. He has referred to the tariff item 8 as it stood on the 1st day of March, 1978. He has stated that the period involved in the present matter is 1st March, 1978 to 10th May, 1982. He has argued that transformer oil is a refined oil and explanation III in tariff item 8 relating to refined diesel oils and vaporising oil was inserted from 1st March, 1978 and as per this explanation this item does not include (a) base mineral oil including mineral oil commonly known as transformer oil base stock or transformer oil feedstock. He has pleaded that the present appeal stands fully covered by two earlier judgments of the Tribunal in Appeal No. ED/SB/T/206/82-C and Appeal No.ED/SB/T/1124/81-C vide order Nos. C/260-261/85 dated 23rd March, 1985 in the case of Collector of Central Excise, Calcutta v. Indian Petroproducts Manufacturing Pvt. Ltd. and Indian Petroproducts Manufacturing Pvt. Ltd. v. Collector of Central Excise, Calcutta. Shri Sundar Rajan has pleaded that as per para. No. 11 of the said judgment the Tribunal had held that transformer oil must be assessed under this head by the lower authorities was wrong (sic) and it was rectified by the Tribunal. Shri Sundar Rajan states that this order was passed on the basis of an earlier order of the Tribunal in appeal No.ED/SB/T/191/82-C vide order No. C/119/85 dated 2nd February, 1985 where the Tribunal had held that the transformer oil manufactured from transformer oil feed stock or transformer oil base stock was correctly assessed in central excise tariff item 8. Shri Sundar Rajan has referred to the order passed by the Appellate Collector of Central Excise, Calcutta which appears on pages 38 to 41 of the paper book. He has stated that the said order does not hold good in view of the judgment of the Tribunal. Shri Sundar Rajan has referred to the details of the purification process which appears on page 57 of the appellant's paper book and stated that there is total transformation of the product and as such this process amounts to manufacture. He has referred to a judgment of the Tribunal in the case of Lai Woollen and Silk Mills Pvt.
Ltd. Amritsar v. Collector of Central Excise, Chandigarh where the Tribunal had held that the process of bleaching, dyeing, dyeing and printing etymologically are manufacturing processes. Therefore, the process of dyeing of grey yarn undertaken by the appellants amounted to manufacture for the. purpose of levy of central excise duty.
Shri Sundar Rajan has also referred to the explanatory notes CCC Vol. 1 pages 201, sub-heading (C) of heading 27.10 which relates to the oils described in sub-heading A and B to which various substances have been added to render them suitable for particular uses, provided that the products contain not less than 70% by weight of petroleum oils or of oils obtained from bituminous minerals as a basis and that they are not covered by a more specific heading in the Nomenclature. Sub-heading (C) (3) relates to transformer and circuit breaker oil (which are not used for their lubricating properties) are stabilised specially refined oils with added anti-oxidents such as ditertiarybutylparacresol. This heading does not include preparations containing less than 70% by weight of petroleum oils or of oils obtained from bituminous minerals and preparations containing petroleum oils or oils obtained from bituminous minerals in any proportion (even exceeding 70% by weight) covered by a more specific heading in the Nomenclature or based on products other than petroleum oils or oils obtained from bituminous minerals-Shri Sunder Rajan has referred to the comparative chart of physical properties and characteristics of TOBS/TOFS and transformer oil which appear on page 60 of the paper book. He has pleaded that the electric strength breakdown voltage (rms) of TOBS is less than 10 KV whereas in the case of transformer oil it is 50 KV. He pleaded that TOBS/TOFS in no case can be used as transformer oil. He has again referred to the earlier judgment of the Tribunal and has specifically referred to Order No. C/260-261/85, dated 23-3-1985 in the case of Collector of Central Excise, Calcutta v. Indian Petroproducts Manufacturing Pvt. Ltd. [and] vice versa. He has pleaded that the Tribunal had dealt at length in the said judgment and the recent case is fully covered by the said judgment. He has referred to a judgment of the Supreme Court in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Ors. reported in 1983 ELT 1566 (SC) wherein the Hon'ble Supreme Court had held that when an article is by , all standards classifiable under a specific item in the tariff schedule it would be against the very principle of classification to deny it the parentage and consign it to residuary item. Shri Sundar Rajan states that the appellant's argument that there was no manufacturing activity does not carry weight. Shri Sundar Rajan states that the present case is fully covered by the Hon'ble Supreme Court's judgment in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Ors. reported in 1983 ELT 1566 (SC). He has referred to another judgment of Delhi High Court in the case of Hyderabad Asbestos Cement Products Ltd. and Anr. v. Union of India and Ors. reported in 1980 ELT 735 (Del) wherein the Hon'ble High Court had held that, It is now settled law that before excise duty can be levied, the goods brought into existence must be the goods which can be bought and sold in the market. In other words, by the process of treatment, labour and manipulation, the raw material must be converted into a different article having a distinctive name, character or use on which duty is leviable.
He has also referred to the distinction between "manufacture", and, "produce" given by the Hon'ble High Court. The term "manufacture" or "produce" are synonymous and that "manufacture" means creation or production of a product from raw material or by combining two or more products to form a different one. It has also been held interchangeable or synonymous with "fabricate", "make" and "process". Shri Sundar Rajan has stated that without processing transformer oil base stock could not have been sold in the market and conversion of TOBS into transformer oil amounts to manufacture. Shri Sundar Rajan has further argued that the judgments cited by the learned advocate do not help him. He has pleaded for the dismissal of the appeal.
5. Shri C. S. Lodha, the learned advocate, has pleaded that the learned Departmental Representative has referred to two earlier judgments of the Tribunal on the issue but the point raised by him in his arguments were not considered by the earlier benches of the Tribunal and as such he has pleaded that the Bench should reconsider the earlier decisions of the Tribunal. He has also argued that in the present matter the legislature has not exercised its power as to the levy of duty and as such no excise duty could be charged from the appellants. Shri Lodha has lastly referred to a judgment of the Tribunal in the case of Collector of Central Excise, Aurangabad v. Anil Chemicals (P.) Ltd., Aurangabad where the Tribunal had held that mere improving the quality of purity does not amount to manufacture and creation of new and different goods is necessary under the central excise law and there cannot be double taxation. He has pleaded for the acceptance of the appeal.
6. Before expressing our opinion on transformer oil base stock and transformer oil we feel that for the proper appreciation of the facts of the case we have to go through the meanings in terms of IS: 4639-1968 given in Indian Standard Glossary of Petroleum Terms. The definitions as given in the said book are reprodued below:- Transformer Oil: Pale petroleum distillate of low viscosity used for cooling and insulating transformers. (Page 42).
Base: Term relating to the chemical nature of crude petroleum. Crude oil may be of paraffinic, asphaltic or mixed base, according to the presence of paraffin wax, bitumsn, or both, in the residue after distillation. (Page 7).
Feedstock: Primary material introduced into a plant for processing.
(Page 18).
Asphalt: A natural or artificial mixture in which bitumen is associated with inert mineral matter. The word "asphalt" should always be qualified by indication of its origin or nature. (Page 5).
Paraffinic base crude: Crude oil having a predominance of paraffinic hydrocarbons. (Page 30).
Mixed base crude: Crude oil in which no single type of hydrocarbon predominates. (Page 28).
A simple perusal of the above reveals that transformer oil base stock is primary material introduced into a plant for processing. Without processing of the transformer oil base stock, it cannot be used. We would also like to refer to the characteristics of transformer oil as given in IS: 335-1963 Indian Standard Specification for insulating oil for transformers and switchgear. The same are reproduced below: 4.1 The characteristics of the oil when it is sampled (see appendix A) and tested in accordance with the methods described in appropriate appendices (see appendices B & G) or according to the test methods described in IS: 1448 (part I) 1960 Methods of Test for Petroleum and its products, Part I, shall comply with the requirements specified in table I. --------------------------------------------------------------------------------SI. Characteristic Requirement Method of Test RemarksNo. (Ref. To)------------------------------------------------------------------------------------------------------------------------------------------------------------------i) Sludge value(using n-heptane), 1.2 Appendix B percentage by weight, Maxii) Acidity after oxidation (mg o 2.5 Appendix B potassium hydroxide (KOH) periii Electric strength (one minute), 40kv (RMS) Appendix C See Note 1 Miniv) Crackling shall pass the Appendix D testv) Saponification value (mg of 1.0 Appendix E potassium hydroxide (KOH)vii Acidity (neutralization value) 0.05 Appendix F (a) Total (mg of potassiumvii) Viscosity at 27C in centi- 2 Appendix G stokes, Maxx) Copper strip corrosion at Not worse Procedure B 100C for 3 hours) than classi- of P: 15 of fication No.IS: 1448--------------------------------------------------------------------------------- NOTE 1--Oil shipped from overseas in bulk may on arrival have an electric strength below the specified levels. In such cases, therefore, it may be considered necessary to improve its electric strength to 40 kv for one minute, by Alteration or other suitable treatment before the oil is filled in drums or supplied in any other manner.
Owing to the quality and type of drums at present available, it may be difficult to obtain the specified electric strength of 40 kv for one minute on oil delivered in drums. Therefore an electric strength of not less than 30 kv for one minute is permissible for oil received in drums. It may be considered necessary to increase the electric strength to 40kv for one minute by Alteration or other suitable treatment, before transferring the oil to electrical equipment.
NOTE 2--The specific gravity of the oil is considered to have no important bearing on the utility of the oil and, therefore, no limits have been specified in this standard. It may, however, be mentioned that the value normally lies between 0.85 and 0.88 at 27CC. This information may be utilized to calculate the weight of the oil whenever required.
NOTE 3--The mean co-efficient of expansion of oil (conforming to this standard), over the range of normal operating temperature, is approximately 0.0007 per centigrade degree.
NOTE 4--The following typical values of certain physical properties of oil (conforming to the standard), all relating to 70C, are given as a guide: Valuesin parenthesis indicate approximate temperature co-efficient per centigrade degree, for the property concerned.
NOTE 5--The pour point of 10C specified above is considered suitable for majority of the purposes in this country; in locations where the ambient temperatures may fall below 0C a lower pour point may be agreed, upon between the manufacturer and the purchaser 0.3 Another important change in this revision is the specifying of the one minute withstand value for electric strength as 40 kv. A simple perusal of the aforesaid specifications shows that TOBS without purification cannot be used as TO. Note No. 1 on page 5 of IS: 335-1963 has clearly mentioned that the oil shipped from overseas in bulk may on arrival have an electric strength below the specified levels. In such cases, therefore, it may be considered necessary to improve its electric strength to 40 kv for one minute by filteration or other suitable treatment before the oil is filled in drums or supplied in any other manner.
Owing to the quality and type of drums at present available, it may be difficult to obtain the specific electric strength of 40kv for one minute on oil delivered in drums. Therefore, an electric strength of not less than 30kv for one minute is permissible for oil received in drums. It may be considered necessary to increase the electric strength to 40 kv for one minute by filteration or other suitable treatment, before transferring the oil to electrical equipment. The appellant in his paper book at page 60 has filed a comparative chart of physical properties and characteristics of TOBS/TOFS and transformer oil. In that chart it is mentioned that the electric strength breakdown voltage (rms) of TOBS/TOFS is less than lOkv where as the electric strength breakdown voltage (rms) of transformer oil is 50 kv. This shows that by no stretch of imagination TOBS can be used without processing or manufacturing. We would further like to observe that in purifying the TOBS/TOFS processing is involved. It may be by filteration or other suitable treatment which involves manufacturing activity. The learned advocate had referred to various judgments of the Hon'ble Supreme Court and other Courts as to the definition of manufacture. We do not agree with the arguments of the learned advocate that no manufacturing activity is involved. The intention of the legislature prior to 1978 was not to charge seperate excise duty for removing the impurities from TOBS as the same were falling under the same tariff item 8. We further observe that TOBS with impurities cannot be used as insulating oil. The processing activity from TOBS to TO is manufacture within the definition of Section 2(f) of the Central Excises and Salt Act, 1944. Shri Lodha's argument that if the Parliament had intention to bring within the purview of taxation the process of purification as manufacturing process though not amounting to manufacture must be expressly clear does not help him.
The intention of the law making authority is very clear in taking away the TOBS/TOFS from TI-8 to TI-11A. TI-8 and TI-11A prior to and after 1978 are reproduced below:- That is to say, any mineral oil (excluding mineral colza oil and turpentine substitute), which has its flashing point at or above seventy six degrees of Fahrenheit's thermometer, and satisfies either of the following requirements: (i) The oil has a flame height of ten millimeters or more but less than eighteen millimetres; or (ii) The oil has a flame- height of less than ten millimetres but has a viscosity of less than one hundred seconds by Redwood I Viscometer at one hundred degrees of Fahrenheits thermometer, and contains less than one quarter of one per cent by weight of any bituminous substance.(a) Refined diesel oils One thousand rupees per Kilo litre at fifteen degrees of centigrade thermometer(b) Vaporizing Oil One thousand rupees per Kilo litre at fifteen degrees of centigrade Explanation : The Expression "mineral oil", "flashing point" and "flame height", have the meanings respectively assigned to them in explanations I and II to item No. 6 and in explanation II to item No. 7.
11A. ALL PRODUCTS DERIVED FROM REFINING OF CRUDE PETROLEUM OR SHALE (WHETHER GASEOUS, LIQUID, SEMI-SOLID, OR SOLID IN FORM), NOT OTHERWISE SPECIFIED, INCLUDING REFINERY GASES, LUBRICATING OIL AND GREASES, WAXES AND COKE-- 1) Mineral Turpentine oil Twenty per cent, ad valorem plus, four hun- dred rupees per metric tonne. 2) Liquefied petroleum gas Two hundred and fifty rupees per metric tonne. 3) Waxes Twenty per cent ad valorem plus four hun- dred rupees per metric tonne.-------------------------------------------------------------------------- ITEM NO. 8--REFINED DIESEL OILS AND VAPORISING OIL-------------------------------------------------------------------------- Item Description of goods Tariff rates That is to say, any mineral oil (excluding mineral colza oil and turpentine substitute), which has its flashing point at or above seventy six degrees of Fahrenheit's thermometer, and satisfied either of the following requirements (i) the oil has a flame height of 10 millimetres or more but less than 18 millimetres; or (ii) the oil has a flame height of less than 10 millimetres but has a viscosity of less than one hundred seconds by Redwood-I viscometer at one hundred degrees of Fahrenheit's thermometer and contains less than one quarter of 1% by weight of any bituminous substance: a) Refined diesel oils 1000.00 2000.00 Explanation I--The expressions "mineral oil", "flashing point" and "flame height" have the meanings respectively assigned to them in explanations I and II to item No. 6 and in explanation II to item No. 7.
a) Base mineral oils (suitable for use in the manufacture of lubricating oils, greases) including mineral oils commonly known as transformer oil base stock or transformer oil feedstock; and b) Lubricating oils including spindle oils, flushing oils and jute batching oils.
11A. ALL PRODUCTS DERIVED FROM REFINING OF CRUDE PETROLEUM OR SHALE (WHETHER GASEOUS, LIQUID, SEMI-SOLID OR SOLID IN FORM), NOT OTHERWISE SPECIFIED INCLUDING REFINERY GASES, LUBRICATING OIL AND GREASES, WAXES AND COKE--1) Mineral turpentine oil 20% ad valorem plus Rs. 2000.00 per Rs. 400.00 per metric tonne.
m.t.2) Liquefied petroleum gas Rs. 400.00 per m.t.
--do--3) Waxes 20% ad valorem plus Rs. 600.00 --do-- per. m.t.4) a) Base mineral oils (suitable Three thousand and five hun- --do-- for use in the manufac- dred rupees per metric tonne, turc of lubricating oils b) Lubricating oils (inclu- Three thousand and five hun- --do-- ding spindle oils, flushing dred rupees per metric tonne, oils, jute batching oils and5) Others 20% ad valorem plus --do-- Rs. 2000.00 per m.t.
A comperative study of the tariff item 8 and 11A before and after 1st March, 1978 clearly indicates that the intention of the legislature was to charge them separately under different tariff items and as such the appellant's advocates arguments cannot be accepted. Shri Sundar Rajan had referred to the judgment of the Supreme Court in the case of Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India and Ors. reported in 1983 ELT 1566 (SC) wherein the Hon'ble Supreme Court had held that when an article is by all standards classifiable under a specific item in the tariff schedule it would be against the very principle of classification to deny it the parentage and consign it to residuary item. Shri Lodha, the learned advocate had tried to distinguish his case from the earlier judgments of the Tribunal cited by Shri Sundar Rajan in the case of M/s. Indian Pelroproducts Manufacturing Pvt. Ltd. vide Order No. 260-261/85 dated 23rd March, 1985 and Raj Lubricants, Madras v. CCE, Madras vide order No. C-1 19/85 dated 2-2-1985. We feel that the learned advocate has not been able to distinguish his case from the two earlier judgments of the Tribunal. We would like to reproduce para, numbers 5, 6, 7, 8, 9, 10, 11 and 12 of the said judgment.
Para. No. 5. The learned Counsel for M/s. Indian Petroproduct said that in 1984 ECR 1795 C.C.E. v." Jayalaxmi Cotton & Oil Product this Tribunal decided that a hydrogenated vegetable oil continued to be an oil under the same item. He said that the transformer oil had all the specifications of TOFS/TOBS and only certain impurities were removed.
It was like a dirty engine oil, inspite of its dirt, it was still an engine oil and, often, car owners run their cars on dirty engine oils.
It cannot be said that the engine had no engine oil. The process of obtaining transformer oil from TOFS/TOBS did not amount to manufacture and this would be in accordance with the famous D.C.M. judgment of the Supreme Court which laid down how to determine if a new product had emerged. The new product must have a new character, name, use. The transformer oil did not materially differ from the raw material TOFS/TOBS from which it was made.
Para. No. 6. When the Finance Bill excluded TOFS/TOBS from item 8 from 1-3-1978, it moved to item 11 A. Transformer oil used to be assessed under item 68 before this bill. This is a bit puzzling because if the oil had the sp2cification of item 8 we cannot understand why the oil was ever assessed under item 68.
Para. No. 7. However that may have been, the issue before us is that from 1-3-1978 TOFS and transformer oil became assessable under two different items. While TOFS was covered by item 11 A, transformer oil came to be assessed under item 8. We are not able to sustain the Appellate Collector when he says in his order dated 30-4-1981 that even if the transformer oil had the specifications of an item 8 oil, it cannot be assessed under this item as it is not known as a refined diesel oil or a vapaurizing oil in trade. There were also said to be trade notices issued by the Central Excise Collectorates that specialities oil like transformer oil not used for lubrication would not fall under item 6 to 11 CET. There is no authority for this declaration, and coming from central excise, it is rather unexpected.
Para. No. 8. We must assess this oil, the transformer oil, in accordance with the law. Item 8 specifies that products that would fall in its coverage by providing limits of flame height, flashing point, smoke point, viscosity etc., etc., which identify an oil. Other petroleum products items like item 6, item 7, etc., also have specified ranges of characteristics and properties which govern assessment under these heads. To assess an oil under any of these heads one must determine which properties it has; if it has the properties of this item, then under this item it goes: and if it has the properties of that item, then there it goes. It is wrong to enquire whether an oil is known as a refined diesel oil before it is assessed under item 8. Under the law it does not matter what the oil is known as if it has the ranges and specifications of item 8, it be assessed under that head.
There is no sanction or authority for not doing so.
Para. No. 9. Furthermore we read in the appeal dated 4-1-1982 filed by Indian Petro Products as a revision petition to the Government of India that the TOFS/TOBS were received from refineries on payment of appropriate central excise duty under item 11 A. They treat the same with fullers earth, sulphuric acid, caustic soda to remove the impurities to TOFS in the form of sludge; the basic character and specifications of transformer oil, they say remain unchanged. The purification is done only because some impurities in TOFS may damage transformers. So we see from all these that the base material TOFS paid duty under item 11A; therefore the transformer oil obtained from it must be assessed to duty under item 8 as it has the specifications of this item.
Para. No. 10. A question may then be asked would not TOFS be assessable under item 8 if it has the specifications of this item Our answer would have been in the affirmative but this would be overruled and supplanted by the fact that the law excludes base mineral oils known as transformer oil base stock and transformer oil feedstock. This can be verified by a reading of item 8 and its explanatory notes.
Para No. 11. We need not labour the matter further. As the law stands, the transformer oil must be assessed under item 8 and so the action to assess it under this head is correct and we ratify it. All orders to the contrary are void and shall have no effect.
Para No. 12. The above discussion and finding will apply to the Appellate Collector's order No. 1545/Cal/81 dated 16-11-1981 dealt with in the Tribunal appeal No. 206/82-C. This appeal relates to the period 9-6-1978 to 21-9-1978. In this appeal too, M/s. Indian Petro Products obtained TOFS/TOBS which paid duty under item 11A and used it to manufacture transformer oil. But the Appellate Collector decided that with effect from 9-6-1978, tranformer oil was classifiable under item 8 CET, a view quite the reverse of his earlier one of 30-4-1981 for the period 1-3-1978 to 31-5-1978.
After going through the earlier orders of the Tribunal we do not find any reason for deviating from the earlier view. Accordingly we do not find any merit in the appeal. Appeal is dismissed.