COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV versus M/S. DAMNET CHEMICALS PVT. LTD. ETC.

Citation: [2007] 9 S.C.R. 813 · Decided: 10-09-2007 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed
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Judgment (excerpt)

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COMMISSIONER OF CENTRAL EXCISE, MUMBAI-IV 
A 
v. 
MIS. DAMNET CHEMICALS PVT. LTD. ETC. 
SEPTEMBER IO, 2007 
(TARUNCHATIERJEEANDB.SUDERSHANREDDY,JJ.J 
B 
Central Excise Act, 1944: 
'CRC 2-26' -Exemption under Notification-Entitlement of-Held: 
Product 'CRC 2-26' is b(ended lubricating oil, th.us assessee entitled to C 
exemption under the Notification-Notification No. 120184-CE dated 
11.5.1984. 
'CRC Acryform'-Exemption under Notification-Entitlement of-Held: 
'CRC Acryform' entitled to exemption under the Notification-Product did D 
not carry on it brand name/trade name of a person not entitled to the benefit 
of Notification-Notification No. 175186-CE dated 1.3.1986. 
S. l lA(J) proviso-Extended period of limitation-Invocation of-
Assessee manufacturing product 'CRC 2-26' and 'CRC Acryform'-Demand of 
duty invoking extended period of limitation-Sustainability of -Held: There E 
was no willful misstatement or suppression of facts by assessee with intent 
to evade duty with regard to the products or about the relationship between 
assessee and the company who are bulk buyer of product manufactured by 
assessee-They are not related persons-Thus, extended period of limitation 
not available to the Department for initiating the recovery proceedings-
Penalty cannot be levied 
F 
Respondent-manufacturer of products 'CRC 2-26' and 'CRC Acryform', 
claimed exemption under Notification No. 120/84-CE dated 11.5.1984 for the 
product 'CRC 2-26' and SSI exemption under Notification No. 175/86-CE 
dated 1.3.1986 for the product 'CRC Acryform'. The Department issued show 
cause notice to the respondent calling upon as to why excise duty should not G 
be demanded. The Commissioner held that the respondent-assessee was not 
---i. 
entitled to exemption of duty under the Notifications for its product Respondent 
filed an appeal. Tribunal held in favour of the respondent-assessee. Hence the 
present appeal. 
813 
H 
A 
814 
SUPREME COURT REPORTS 
[2007] 9 S.C.R. 
The question which arose for consideration in these appeals were: 
(1) Whether the product 'CRC 2-26' is a blended lubricating oil and 
thus, entitled to exemption under Notification No. 120184-CE dated 11.5.1984? 
(2) Whether the respondent is entitled to the benefit of Notification No. 
B 175/86-CE dated 1.3.1986 in respect of the product 'CRC Acryform'? 
(3) Whether there was any willful misstatement or suppression of facts 
with intent to evade duty with regard to the products 'CRC 2-26' and 'CRC 
Acryform' or about the relationship between the respondent and BBL-bulk 
buyer of product manufactured by assessee so as to enable the Department to 
C invoke the proviso to se_ction llA(l) of the Central Excise Act, 1944 in sho~ 
cause notice and whether the demand raised in the said show cause notice is 
substantially time-barred? 
(4) Whether the Department could impose any penalty? 
D 
(5) Whether the respondent was a fa~ade or dummy of BBL and/or 
whether the respondent and BBL are related persons within the meaning of 
Section 4 (a) and 4 (3) (b) of the Act? 
Dismissing the appeals, the Court 
E 
HELD: 1.1. The HSN explanatory notes specifically declares that oils 
classified under the head remain classifiable if various substances have been 
added to render them suitable for particular uses, provided the product 
contains by weight 70% or more of petroleum oil or oils obtained from · 
bituminous minerals as the base and that they are not covered by a clear 
F specific heading. There is no dispute whatsoever the product 'CRC 2-26' to 
be a preparation containing 70% or more of mineral oil apart from 20% 
petroleum oil and 3% rust preventives. The product is predominantly a blended 
lubricating oil. Negligible percentage of rust preventives does not make the 
product to be a rust preventive one. The plea of the Department that the product 
is not a lubricating oil is untenable. There is no material or evidence in support 
G of the said plea. The findings recorded by the Tribunal based on material and 
evidence available on record does not suffer from any error requiring 
interference in exercise of appellate jurisdiction. (Para 15) (822-E-H] 
H 
1.2. The test report on 'CRC 2-26' carried out by Professor of IIT 
categorically stated that 'CRC 2-26' is a blended lubricant and that the 
C.C.E.v.DAMNETCHEMI.PVT.LID.ETC. 
815 
lubricating oil used in the formulation conforms with the requirements of A 
the Bureau of Indian Standards requirements. The Department did not
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