Holding

The exemption under Notification 120/84‑CE applies to all blended or compounded lubricating oils regardless of their tariff classification, and the tribunal’s majority view is set aside.

Summary

Castrol India Ltd manufactured a blended lubricating oil called ‘Super TT’ with a flash point below 94°C and classified it under tariff heading 2710.99, claiming exemption under Notification 120/84‑CE which exempts blended or compounded lubricating oils. The Central Excise Department argued that the notification applied only to oils falling under heading 2710.60, which excludes oils with flash point below 94°C, and the CEGA‑T tribunal upheld this view. Castrol appealed, contending that the notification makes no reference to any tariff heading and therefore covers all blended lubricating oils irrespective of classification. The Supreme Court held that the exemption is not limited to heading 2710.60, set aside the tribunal’s majority decision, and affirmed the minority view that the notification applies to all blended or compounded lubricating oils. The Court also confirmed that the notification remained operative under Section 5A(4) of the Central Excise Act, 1944. The appeals were allowed.

Issues considered

Whether Exemption Notification 120/84‑CE is limited to lubricating oils classified under tariff heading 2710.60 or extends to all blended or compounded lubricating oils irrespective of heading.
Interpretation of the expressions ‘that is to say’ and ‘excluding’ in tariff heading 2710.60 and their effect on the scope of the exemption.
Whether Notification 120/84‑CE continues to be in force under Section 5A(4) of the Central Excise Act, 1944.
Whether the CEGA‑T tribunal’s majority view is legally sustainable.

Legislation cited

Central Excise Act, 1944s. 3, s. 5A(4)
Central Excise Tariff Act, 1985

Subjects

Excise duty exemptionNotification interpretationTariff classificationBlended lubricating oilFlash pointSection 5ACEGA‑TSupreme Court

Judgment

A M/S. CASTROL INDIA LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, CALCUTTA-I

FEBRUARY 25, 2005

B [RUMA PAL, ARIJIT PASAYAT AND C.K. THAKKER, JJ.J

Central Excise Act, 1944-Sections 3 and 5A(4)-Assessee manufacturing
blended lubricating oil having flash point below 94"C and classifying it under
heading 2710.99-Exemption Notification No. 120184-CE of 11.5.1984
C exempting blended or compounded lubricating oils from excise duty-Claim
of-Majority view of the Tribunal that benefit of Notification applicable only
to the lubricating oils falling under heading 2710. 60 and lubricating oil with
flash point below 94"C ceases to be lubricating oil falling under heading
2710.60 but under heading 2710.99 - Sustainability of-Held: Under the
D Notification lubricating oil was exempted without reference to any tariff
heading/sub-heading and as such criteria satisfied-Hence, majority view
unsustainable and the minority view that the Notification extends benefit to all
types of lubricating oils, irrespective of their classification, upheld-Central
Excise Tariff Act, 1985, Heading 2710.60 and 2710.99.

E Words and Phrases:

'That is to say', 'excluding'-Meaning of-In the cont.ext of Central
Excise Tariff Act, 1985, Heading 2710.60.

Blended or compounded lubricating oil with flash point above 94°C
were classifiable under sub-heading 2710.60 and other lubricating oils were
F classifiable under sub-heading 2710.99. Exemption Notification No. 120/
84-CE dated 11.5.1984 exempted blended or compounded lubricating oils
from excise duty.

Appellant - company is manufacforing blended lubricating oil
ordinarily used for lubrication having flash point below 94°C. It classified
G the product under heading 2710.99 and cleared the same at 'nil' rate of
duty during different periods. Respondent-Department issued show cause
notices and thereafter levied duty. Assessee preferred appeals before
CEGAT contending that benefit of Notification is applicable only to the
lubricating oils falling under sub-heading 2710.60; and that for the purpose
H 414
CASTROL INDIA LTD. v. C.C.E. 415
of exemption Notification lubricating oil for flash point below 94°C ceases A
to be lubricating oil falling under sub-heading 2710.60 as it acquires
general description 'others' under sub-heading 2710.99 .. Appellant
contended that the Notification extends the benefit to all types of
lubricating oils, irrespective of their classification and that since the
product is a lubricating oil, scope of notification cannot be restricted to
lubricating oils falling under particular tariff entry. Majority view of the B
Tribunal accepted the stand of the Department and dismissed the assessee's
appeals. Hence the present appeal.

Allowing the appeals, the Court

HELD : 1.1. Under the Exemption Notification 120/84-CE dated C
11.5.1984 lubricating oil was exempted without reference to any tariff
heading/sub-heading. Consequently, the criteria specified in the
Notification were satisfied. Therefore, majority view contained in the order
of the Tribunal that for the purpose of Exemption Notification lubricating
oil for flash point below 94°C ceases to be lubricating oil falling under sub- D
heading 2710.60 as it acquires general description 'others' under sub-
heading 2710.99 is unsustainable and is set aside. The minority view that
since the product is a lubricating oil, scope of notification cannot be
restricted to lubricating oils falling under particular tariff entry, is upheld.
[423-D; 419-D; 417-E) E
Bharat Petroleum Corporation ltd. v. Commissioner ofCentral Excise,
Kolkata-l (2003) 154 ELT 698(Tri - Kolkata), approved.

Collector of Customs, Bangalore v. Maestro Motors ltd. (2004) 174
EL T 289, referred to.
F
1.2. Exemption Notification 120/84-CE dated 11.5.1984, in view of
what is prescribed in Section 5A(4) of the Customs Tariff Act, 1985
continued to be operative and effective as it was not amended, varied,
rescinded or superseded under the provisions of Section 5A of the Act.
1422-DJ G
Collector of Customs, Bangalore v. Maestro Motors ltd., (2004) 17 4
ELT 289, referred to.

1.3. The sub-heading 2710.60 significantly uses two expressions, 'that
is to say' and 'excluding'. The first expression is used in description H
416 SUPREME COURT REPORTS [2005] 2 S.C.R.

A enumerative and exhallstive sense and to a great extent circumscribes the
scope of the entry~ The expression "that is to say" in su~-heading 27.I0.60
has to be interpreted to be words of limitation. But the second expression
dilutes the pervasiveness by carving out an exception for the purpose of
the particular sub-heading a particular type of lubricating oil. All other
B types of lubricating oil are covered by the residuary entry i.e. 2710.99.
(423-CJ

State of T.N. v. Pyare Lal Malhotra, (1976) 1 SCC 834; Mahindra
Engineering and Chemical Products Ltd. v. Union of India, (1992) t SCC
727; Sail Rikhaji Furtarnal v. State of A.P. (19911 Sl!PP· 1 SCC 202; R.
C .Dalmia v. C.l.T, (197712 SCC 467 and Commissioner ofSales Tax, MP. v.
Popular Trading Company,. Ujjain, [2000) 5 SCC 511, relied on.

~t!oud's Judicial Dictif}nary, 4th Edition, Vol. 5 pg 2753, referred to.

CIVIL ,APPELLATE JURISDICTION : Civil Appeal No~. 6289-629Q
D of 1999.
From the Judgment and Order dated 10:8.99 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, East Zonal Bench, Calcutta
in F'.b. Nos. A-870-871/Cal/99 in A.· Nos. E(SB) 5084/93 and E/R-349 of

E
1996.

Joseph Vellapally, Ravinder Narain, Ms. Sonu Bhatnagar, Ajay
-
Bhatnagar, Nupur Singh· and Rajan Narain for the Appellant.

Mohan .Parasaran, Additional Solicitor General and B.Krishna Prasad
for the Respondent.
F
The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Appellant calls in question legality of the
judgment rendered by Customs, Excise & Gold (Control) Appellate Tribunal,
Calcutta (in short the 'CEGA T'). Initially there was a difference of opinion
G between two Members i.e. Technical Member and the Judicial Member and
the matter was referred to a third member. The third member agreed with the
Technical Member and by majority the decision went against the assessee-
appellant. The judgment is reported in 2000 (123)ELT 789 Tribunal (Castro/
India Ltd v. Commissioner of Central Excise, Calcutta-I).

H The factual position· in a nutshell is as follows :
CASTROL INDIA LTD. v. C.C.E. [PASAYAT, .1.) 417

The appellant is engaged, inter a/ia, in the manufacture of blended or A
compounded lubricating oils. It also processes a product called 'Super TT'
which the appellant claimed to be a blended lubricating oil ordinarily used
for lubrication. The undisputed process of manufacture of the said product as
stated by the appellant is as under :

"Base Oils are taken to the blending kettle, heated to remove B
moisture. Additives are added and mixed well. Temperature reduced
and MTO and green dye added and mixed well, to get the final
product."

Admittedly, the flash point of the 'Super TT' is below 94°C Therefore, C
assessee appellant claimed that the same is not classifiable under Heading
2710.60 of the Tariff under Customs Tariff Act, 1985 ( in short the 'Tariff
Act') as the same covers lubricating oils having flash point more than 94°C.
As such, the product was claimed to be classifiable as 'others' under sub-
heading 2710.99. Revenue disputed the position and held that the benefit of
the Exemption Notification No. 120/84-CE dated 11.5.1984 is applicable 0
only to the lubricating oils falling under sub-heading 2710.60, as there is no
other heading for lubricating oil in the Tariff Act. The appellant's stand was
that the said Exemption Notification extends the benefit to all types of
lubricating oils, irrespective of their classification. As its product is admittedly
a lubricating oil, the scope of the Notification cannot be restricted to the E
lubricating oils falling under a particular tariff entry.

Two show-cause notices issued related to demand of duty against the
assessee in respect of their blended "Super TT" which was cleared at "nil"
rate of duty during different periods. The said notices culminated into two
different orders whereby proposed amount of duty and personal penalty were . F
confirmed. The date.s of show-cause notices, the period involved, the duty
demanded and the penalty demanded are as follows :-

SI. Date of Period Demand of duty Penatly
No. show cause involved
notice G
a) 29.1.1992 1.8.1991 to Rs. 20,46,994.23 Nil
31.12.1991
b) 3.8.1992 l. l.1992 to Rs. 10,77,390:00 Nil
29.2.1992
H
418 SUPREME COURT REPORTS [2005) 2 S.C.R.

A c) 1.10.1992 t.3.1992 to Rs. 19,96,362.88 Nil
31.8.1992
d) 25.2.1993 l.9.1992 to Rs. 19,83,411.76 Nil
3 l. l.1993
Total Rs. 71,04,159.47
B 2. 28.1.1994 7. l.1989 to Rs. 47,59,343.40 Rs.JO '--
31.7.1991 lakhs

Assessee preferred two appeals before the CEGAT. It was submitted
that for a long time Exemption Notification dated 16.3.1976 in relation to
C Item No. 11 B and the rate of duty was nil was held applicable to it. The Entry
11 B was repealed in the year 1984 and it became a part of Item 68. Thereafter
Notification No. 120/84 covered the field and the same notification continued
upto 1994. In between the Tariff Act was introduced which introduced a new
tariff in Chapter 27 w.e.f. 1.3.1986 under the Tariff Act. Section 5A(4) of the
Central Excise Act, 1944'(in short the 'Act') all along held the field. Originally
D Item No. 1 rn was a part of the First Schedule of the Act. Prior to introduction
of Section 5A(4) in the Act w.e.f. 19.5.1988 Rule 8 of'the-Central Excise
Rules, 1944 (in short the 'Rules') provided for exemption. The Notification
No. 120/84-CE was issued on 1 l .5.1984 when the earlier Excise Tariff was
a part of the First Schedule of the Act. The said notification exempted blended
E and compounded lubricating oils i.e. IUbricating oils obtained by straight
blending of mineral oils or by blending or compounding of mineral oils with
other ingredients. The said exemption was granted without reference to any
tariff item under which such blended and compounded lubricating oils were
classified. The new Excise tariff contained in the Tariff Act came into force
w.e.f. February 1986. Unde~ that Tariff, blended or compounded lubricating
F oils with flash point above 94°C were classifiable under sub-heading 2110.60
and other lubricating oils along with other petroleum products were classified
under Chapter sub-heading 2110.99 which was a residuary entry. The
Exemption Notification No. 120/84-CE continued un-amended till it was
rescinded by Notification No. 64/94-CE dated 1.3 .1994. Three classification
G lists were filed by the appellant which were operative from l.4.l 986, 5.5.1996
and l.3. l 998. Ail these classification lists were approved by Assistant
Commissioner by extending the benefit of Notification No. 120/84. The
classification I ist dated 18.3 .1988 was operative for the relevant period under
· dispute. Since product was having flash point below 94°C, therefore, there
was no question of any suppression as alleged by the Department. It was
H further submitted that the notices were issued after prescribed period of
CASTROL INDIA LTD. v. C.C.E. [PASA YAT. J.] 419

limitation. A
The assessee-appellant's stand was resisted by the Revenue on the ground
that the assessee-appellant had given description of its product to claim benefit
under Notification No. 120/84 CE. Its product was not classifiable under
Heading 2710.60. Wrong claiming of benefit establishes ma/a fide intention
and, therefore, the extended period of lin;itation was rightly invoked by the B
Department. There is specific and unambiguous definition of lubricatiQg oil
under Chapter Heading 2710.60 of Chapter 27. Chapter Heading 27.10 covers
a number of petroleum products and each category is further covered under
a separate sub-heading. Sub-heading 60 covers lubricating oil and there is no
other sub-heading covering lubricating oils. When the exemption notification C
granted exemption it necessarily means that lubricating oil falling under said
sub-heading alone was covered.

While the Judicial Member accepted the stand of the assessee-appellant,
the Technical Member took the view that for the purpose of Exemption
Notification No. 120/84-CE lubricating oil for flash point below 94°C ceases D
to be lubricating oil as it acquires general description 'others' under sub-
heading 2710.99. Therefore, the Department's view was accepted. With t~e
similar observations the third member concurred with the member technical
and upheld the Department's stand.

In support of the appeal, Mr. Joseph Vellapally, learned senior counsel E
submitted that the two members constituting the majority lost sight of the fact
that there may be lubricating oils having flash point 94°C which may be
classified under Tariff sub-heading 2710.99 as "others". The view of the
majority that "lubricating oil" has been defined in a particular manner under
heading 2710.60 is apparently erroneous.
F
In response, Mr. Mohan Parasaran, learned Additional Solicitor General
submitted that the Exemption Notification has to be strictly construed and the
view taken by the majority of the members is on a proper reading of the
various provisions and the Notifications.

It would be relevant to take note of the entries and relevant Notifications G
at different points of time. The Notification dated 16.3.1976 read as follows

"The Central Government has exempted the excisable goods of the
description in column (3) of the Table below and falling under the H
420 SUPREME COURT REPORTS [20051 2 S.C.R.

A Item of the First Schedule to the Central Excise and Salt Act, 1944
(I of 1944), specified in the corresponding.entries in column (2) of
the said Table, from so much. of the duty of excise leviable thereon
under Section 3 of said Act as is in excess of the duty leviable at the
rates specified in the corresponding entries in column (4) of the said
Table;
B
TABLE

S. No. Item No. Description· Rate of duty

c (I) (2) (3) (4)

6 118 Blended or Nil
compounded
lubricating oils
and greases.

D Notification dated 11.5.1984 reads as follows :
"BLENDED OR COMPOUNDED LUBRICATING OILS AND
GREASES. 120/84-CE, dt. 11.5.1984.

Blended or compounded lubricating oils and grease are fully exempt
E from basic excise duty. L
G.S.R. 354(E) In exercise of the powers conferred by sub-rule (1) of F
rule 8 of the Central Excise Rules, 1944, the Central. Government r
hereby exempts blended or compounded lubricating oils and greases,
that is to say lubricating.oils and greases obtained by straight blending
F of mineral oils or by blending or compounding of mineral oils with
any other ingredients, from the whole of th.e duty of excise leviable
thereon under Section 3 of the Central Excises and Salt Act, 1944 (I
of 1944).

Explanation - The expression "mineral oil" has the meaning
G assigned to it in Explanation I to Item No. 6 of the First Schedule to
the Central Excises and Salt Act, 1944 (1 of 1944)."

Entry No. 11 B read as follows :
r'
"118 - Blended or compounde~ lubricating oils and greases :
H
t
I
CASTROL INDIA LTD. 1·. C.C.E. [PASA YAT. J.) 421

"Blended or compounded lubricating oils and greases" means A
lubricating oils and greases obtained by straight blending of mineral
oils or by blending or compounding of mineral oils with any other
ingredients.

Explanation - The expression "mineral oil" has the meaning assigned
to it in Explanation 1 of Item No. 6.'' B
Chapter 27 so far as relevant for the purpose of present dispute contains
sub-headings 2710.60 and 2710.99 which read as follows :

"2710.60 - Lubricating oil, that is to say, any oil as is ordinarily used
for lubrication, excluding any hydrocarbon oil which has it s flash C
point below 94°C.

2710.99 - Others."

In Collector of Customs, Bangalore v. Maestro Motors Ltd., (2004) 174
ELT 289 SC, this Court held as follows : D
"It is settled law that to avail the benefit of a notification a party must
comply with all the conditions of the Notification. Further, a
Notification has to be interpreted in terms of its language. If in the
Notification exemption is granted with reference to tariff items in the
First Schedule to the Customs Tariff Act, 1975, then the same Rules E
of Interpretation must apply. In that case the goods will be classified,
even for the purposes of the Notification, as they are classified for
purposes of payment of duty. But where the language is plain and
clear effect must be given to it. In this Notification what is exempted
is components, including components of fuel efficient motor cars in
semi-knocked down packs and completely knocked down packs. F
Undoubtedly, for purposes of levy of custom duty, by virtue of
Interpretative Rule 2(a), the components in a completely knocked
down pack would be considered to be cars. But in view of the clear
language of the Notification the components including components
in completely knocked down packs are exempted. Effect must be G
given to the wording of the Notification. Thus components in
completely knocked down packs would get the exemption under this
Notification, even though for purposes of classification they may be
considered to be cars."

Section 5A(4)of the Act reads as under : H
422 SUPREME COURT REPORTS [2005] 2 S.C.R.

A "Every notification issued under sub-rule (I), and every order made
under sub-rule (2) of Rule 8 of the Central Excise Rules, 1944, and
in force immediately before the commencement of the Customs and
Central Excise Laws (Amendment) Act, 1987 shall be deemed to
have been issued or made under the provisions of this Section and
shall continue to have the same force and effect after such
B commencement until it is amended, varied, rescinded or superseded
under the provisions of this Section."

Undisputedly in the present case there was no reference to any tariff
entry in the Notification. Therefore, the majority view is clearly unsustainable.
C Additionally, we find that CEGA T had in some other cases taken the same
view as the minority view. It is fairly accepted by learned Additional Solicitor
i.
General that there has been no challenge to .the sai.d decisions one of which
is Bharat Petroleum Corporation Ltd v. Commissioner of Central Excise,
Kolkata-1 (2003) 154 EL T 698 (Tri-Kolkata) decided on 30.l 0.2002.

D Exemption Notification 120/84-CE dated 11.5.1984, in view ofwhat is
prescribed in Section 5A(4) of the Act, continued to be operative and effective
as it was not amended, varied, rescinded or superseded under the provisions
of Section 5A of the Act.

In Stroud's Judicial Dictionary, 4th Edition, Vol.5, at page 2753, we
I
E find: "That is to say" is the commencement of ·an ancillary clause, which . >
explains the meaning of the principal clause. It has the following properties: I
~
(1) it must not be contrary to the principal clause; (2) it must neither increase t-
nor diminish it; (3) but where the physical clause is general in ternis it may '
restrict it; see this. explained with many examples, Stukeley v. Butler Hob,
F 1971". The quotation, given above, from Stroud's Judicial Dictionary shows
that, ordinarily, the expression "that is to say" is employed to make clear and
fix the meaning of what is to be explained or defined. Such words are not
used as a rule, to amplify a meaning while removing a possible doubt for
which purpose the word "includes" is generally employed. In unusual cases,
depending upon the context of the words "that is to say", this expression may
G be followed by illustrative instances. (See State of TN. v. Pyare Lal Malhotra,
[1976] I SCC 834, Mahindra Engineering and Chemical Products Ltd. v.
Union of India, [1992] l SCC 727; Sait Rikhaji Furtarnal v. State of A.P.,
[1991] Supp I SCC 202 and R. Dalmia v. C.t.T.; [1977] 2 SCC 467).

The expression "that is to say" is descriptive, enumerative and exhaustive
H and circumscribes to a great extent the scope of the entry. (See Commissioner
CASTROL INDIA LTD. v. C.C.E. [PASAYAT, .I.] 423

of Safes Tax. kl. P. v. Popular Trading Company, Ujjain, [2000] 5 SCC 511 ). A
The expression "that is to say" in sub-heading 2710.60 has to be
interpreted to be words of limitation. The fact that sub-heading 2710.60
contains an exclusion clause goes to show that there may be other lubricating
oils which may fall in the residuary heading "others".
B
The sub-heading 2710.60 significantly uses two expressions. They are
(i) "that is to say" and (ii) "excluding". The first expression is used in
description, enumerative and exhaustive sense and to a great extent
circumscribes the scope of the entry. But the second expression dilutes the
pervasiveness by carving out an exception for the purpose of the particular
sub-heading a particular type of lubricating oil. All other types of lubricating C
oil are covered by the residuary entry i.e. 2710.99.

Under the Notification 120/84CE lubricating oil was exempted without
reference.to any tariff heading/sub-heading. Consequently, the criteria specified
in the Notification were satisfied. That being so, majority view contained in D
the order of the CEGA T is not sustainable and is set aside. The minority view
as expressed is confirmed ..

- N.J.
The appeals are allowed with no order as to costs.

Appeals allowed. E

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