2013 (3) TMI 240 - AT - Customs

Imported Chemical Products Classified Correctly Under Heading 2901

HALDIA PETROCHEMICALS LTD. Versus COMMISSIONER OF CUS. (PORT), KOLKATA

HALDIA PETROCHEMICALS LTD. Versus COMMISSIONER OF CUS. (PORT), KOLKATA - 2012 (285) E.L.T. 49 (Tri. - Kolkata) Issues Involved:1. Classification of the imported products 'Exxsol Hexane RD' and 'Hydrosol n-hexane'.2. Whether the products are classifiable under Heading 2901 or Heading 2710 of the Customs Tariff.3. Burden of proof for incorrect classification.4. Applicability of purity criteria for classification.5. Consideration of chemical composition and structural diagrams.6. Relevance of impurities in classification.7. Applicability of Board Circulars and Explanatory Notes.8. Suitability of the imported products for use as fuel.9. Time-barred nature of the demand and imposition of penalties.Detailed Analysis:Classification of Imported Products:The primary issue was whether 'Exxsol Hexane RD' and 'Hydrosol n-hexane' should be classified under Heading 2901 as 'separate chemically defined organic compounds' or under Heading 2710 as 'special boiling point spirits'. The Commissioner classified them under Heading 2710, while the appellant argued for Heading 2901.Burden of Proof:The appellant contended that the Revenue failed to discharge its burden of proving the incorrectness of the classification claimed. It is well established that the burden of disproving the classification claimed by an assessee lies with the Revenue, which must provide cogent and reliable evidence.Applicability of Purity Criteria:The appellant argued that the purity criteria for several compounds under Chapter 29 are specified, but no such criteria exist for Hexane. The absence of specific purity criteria for Hexane supports the classification under Heading 2901.Chemical Composition and Structural Diagrams:The imported products contained 38.63% n-Hexane, approximately 50% isomers of Hexane, and other cyclic hydrocarbons and acyclic pentanes. The Revenue argued that the product's composition did not meet the criteria for a 'separate chemically defined organic compound' due to the presence of various isomers and other hydrocarbons.Relevance of Impurities:The appellant maintained that the other components in the product were permissible impurities resulting from the manufacturing process. The Explanatory Notes to the HSN define impurities as substances resulting directly from the manufacturing process, including unconverted starting materials and impurities present in the starting materials.Applicability of Board Circulars and Explanatory Notes:The appellant relied on a Board Circular stating that even mixtures of chemicals could be classified under Chapter 29. The Explanatory Notes to Chapter 29 also indicate that 'Hexanes' include commercial grades of Hexane, supporting the appellant's classification claim.Suitability for Use as Fuel:For classification under Heading 2710.12 as 'motor spirit,' the product must have a flash point below 25^0C and be suitable for use as fuel in spark ignition engines. The appellant argued that the product was used as a solvent and there was no evidence of substantial actual and commercial use as fuel.Time-Barred Nature of Demand and Penalties:The appellant argued that the demand was time-barred as there was no suppression or misstatement. The goods were tested by Customs and released after such tests. The issue was one of interpretation, and penalties should not be imposed in such cases.Conclusion:The Tribunal concluded that the products should be classified under Heading 2901 as 'separate chemically defined organic compounds.' The Revenue did not provide sufficient evidence to prove the incorrectness of the classification claimed by the appellant. The Tribunal also found that the demand was time-barred and penalties were not justified. The appeal was allowed with consequential relief to the appellant.