By TIOL News Service

NEW DELHI, SEPT 01, 2017: THE appellants have a registered warehouse and are trading in Light Liquid Paraffin (LLP) & Heavy Liquid Paraffin (HLP). They are also registered as First Stage/Second Stage dealer.

The appellants are engaged in three types of trading activities viz. -

(a) Purchase of LLP/HLP in bulk tankers and selling out the same directly as in transit sale;

(b) Purchase of LLP /HLP in bulk tankers,unloading/transferring the same to the tanks in their warehouse and thereafter, selling in bulk tankers and

(c) Purchase of LLP/HLP in bulk tankers, unloading/transferring the same in their tankers; thereafter filling into barrels/drums in 210/220 ltrs. And selling the same. The drum contained the appellant's name and a logo.

Insofar as the third category (c) is concerned, the Revenue entertained a view that LLP/HLP are to be categorized as lubricating oils or lubricating preparations of CETH 2710 and the activities so carried out by the appellant/assessee amounted to manufacture, in terms of Note-4 of Chapter 27.

The appellant contests the findings of the adjudicating authority by submitting that neither LLP nor HLP falls under CETH 27101990; that the product in question cannot be considered as Lubricants as they have no additives and their usage in pharmaceutical and cosmetic industries will show that they are not to be considered as lubricating preparations; that the chapter note is not attracted; that demand is hit by limitation.

The AR justified the demand and is also aggrieved by the fact that no penalty was imposed u/r 25 by the original authority for which reason they are also in appeal before the CESTAT.

The Bench observed -

+ The Original Authority categorically held that LLP/HLP cannot be called as lubricating oils. However, he held that these products can be called as lubricating preparations attracting the provisions of Note-4.

+ It is clear that the Original Authority mis-directed himself while examining the nature of these products and fell in error by considering the use of paraffin wax to decide the nature of LLP/HLP.

+ We note that the Original Authority presumed LLP/HLP as paraffin wax and held that paraffin wax is commonly used in lubrication. We find this observation is factually incorrect and has no support.

+ On careful consideration of the materials placed before us, we are of the opinion that LLP/HLP cannot be considered as either lubricating oils or lubricating preparations. These products are for specific use mainly in cosmetics, foods and pharmaceutical industries. These are different from lubricating preparations, which are blended products containing more than 70% of the petroleum oils and other additives, to impart specific properties to reduce friction.

Holding that there is no merit in the impugned order regarding the findings of the application of Note 4 of Chapter 27 to the impugned goods, the impugned order was set aside and the appeals by the appellant/assessee are allowed. The appeal by Revenue for penalty was consequently dismissed.

(See 2017-TIOL-3177-CESTAT-DEL)