Order Nos. 1676-1680/99-WRB/C-II arising from in Appeal Nos. E/3212 to 3216/V/98-Bom. Case: Savita Chemicals Ltd. Vs Commissioner of Central Excise, Mumbai-VI. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)

Case NumberOrder Nos. 1676-1680/99-WRB/C-II arising from in Appeal Nos. E/3212 to 3216/V/98-Bom
CounselFor Appellant: Shri V. Lakshmikumaram, Advocate and For Respondents: Shri A.K. Chatterjee, SDR
JudgesShri J.H. Joglekar, Member (T) and G.N. Srinivasan, Member (J)
IssueCentral Excise Act, 1944 - Section 4(1)(a)(ia)
Citation2000 (119) ELT 394 (Tribunal)
Judgement DateJuly 13, 1999
CourtCEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)


J.H. Joglekar, Member (T), (West Zonal Bench At Mumbai)

  1. These five appeals arise out of the same impugned order and are, therefore, taken up together for disposal.

  2. M/s. Savita Chemicals Ltd. the present appellants manufacture lubricating oil (automotive oil). The goods are cleared in four different ways:-

    (1) packed in 20 ltrs & 210 ltrs containers and sent to wholesale dealer;

    (2) packed in 20 ltrs & 210 ltrs containers and sent to their depots on stock transfer;

    (3) cleared in bulk in tankers to buyers; and

    (4) cleared in bulk in tankers to M/s. Unique Packers, job workers, who repack the bulk oil in tins of 5 ltrs., 1 ltr and.5 ltr capacity and despatch them to the depots of M/s. Savita Chemicals Ltd. from where they are sold.

  3. The dispute in the present appeals relates to (4) above. Sometime ago, such oil in bulk was sent by the appellants to M/s. Unique Packers under the procedure prescribed in Rule 57F(3) of the Central Excise Rules, 1944, where the job workers would return the lubricating oil packed in smaller containers to M/s. Savita Chemicals Ltd. M/s. Savita Chemicals would then transfer the smaller containers to their depots and would sell from there. Similar procedure was adopted by M/s. Castrol India Ltd. It appears that in February, 1996 the department objected to this procedure. Vide letter, dated 25-10-1994, the department directed M/s. Castrol India Ltd. to clear the goods on payment of duty to their job workers holding that the activity of repacking in smaller containers did not amount to manufacture. The present appellants came to know of this development and therefore from February 1996 adopted the department''s advice to M/s. Castrol India Ltd. for their clearances also. The goods were thereafter cleared in bulk to the packers on payment of duty.

  4. Four show cause notices were issued to M/s. Savita Chemicals Ltd. alleging that the clearances of oil in bulk to M/s. Unique Packers did not involve a sale but that it was only a stock transfer. It was alleged that the value of the bulk lubricating oil should be arrived at taking as basis the price at which the oil packed in smaller containers was sold from the depot. Differential duty totally amounting to Rs. 99,82,967/- was demanded. Allegations as to penalty were made vide show cause notice dated 6-6-1997. It was alleged that apart from the assessee company, the Dy. General Manager (Works) Shri Satish Talwar was also liable to penalty. The noticees put forth their case before the Commissioner. The Commissioner in the common impugned order confirmed the duty demanded. He imposed a penalty of Rs. 31,11,015/- on M/s. Savita Chemicals Ltd. under Section 11AC of Central Excise Act, 1944. He also imposed a separate penalty under Rule 173Q of Rs. 70,00,000/- on M/s. Savita Chemicals Ltd. and a penalty of Rs. 50,000/- on Shri Satish Talwar. These five appeals are against this common order.

  5. The case for the appellants was argued by Shri V. Lakshmikumaran, advocate along with Shri Nambirajan. The Revenue was represented by Shri A.K. Chatterjee, SDR.

  6. The first submission of Shri Lakshmikumaran is that the difference in value of oil sold in bulk as against that sold in containers is equal to the value of the containers. By the assistance of some charts, he established that the value of the bulk lubricating oil had been calculated in this manner. His second submission is that apart from transferring the bulk oil to the packers the assessee also sell oil in bulk to industrial consumers. He submits that the factory gate price is thus available and states that this value must be applied to the clearances made to the packers. His third contentions is that the provisions of Section 4 do not rule out the situation where there is no sale. Therefore, the clearances to the packers would continue to fall under the provisions of Section 4(1) (a) as the department, where such price was available, could not go to the provisions of Section 4(1)(b). His fourth submission is that packing of lubricating oil in tins does not amount to manufacture. His fifth argument is that the department has based its case on the amended provisions of Section 4 with effect from 28-9-1996, whereby, "the place of removal" has been defined as "depot from where the excisable goods are to be sold after their clearance from the factory". It is his next submission that since the form of lubricating oil is changed between its clearance from the factory and the removal from the warehouse, the amended provisions would not apply. His concluding submission is that the duty payable has been wrongly calculated as part of the demand in the show cause notice, dated 6-6-1997 is barred by limitation and that the assessees were acting on good faith and on the basis of the department''s advice to M/s. Castrol India Ltd. the levy of penalty was not warranted.

  7. Shri Chatterjee advanced arguments rebutting the contentions made by Shri Lakshmikumaran and supporting the impugned orders.

  8. We have carefully considered the submissions advanced by both the sides and have perused the citations.

  9. The department''s mind is reflected in the following paras of the show cause notice, dated 3-7-1998:

    "The clearance from M/s. Savita Chemicals Ltd. to M/s...

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