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of <h1>Product's Classification as 'Dehydration' Upheld; Duty Recovery Appeal Allowed</h1> <h3>MVR Chemicals And Oils Versus C.C.E. -Bangalore</h3> MVR Chemicals And Oils Versus C.C.E. -Bangalore - 2019 (26) G. S. T. L. 108 (Tri. - Bang.) Issues Involved:1. Classification of the product under the Central Excise Tariff.2. Determination of whether the process undertaken amounts to 'Dehydration' or 'Distillation.'3. Burden of proof for classification.4. Validity of the Show Cause Notice (SCN) and the subsequent demand for duty.Issue-wise Detailed Analysis:1. Classification of the Product:The appellants initially classified their product under CTH 27101950 and later under CTH 27090000, asserting that the oil manufactured falls under this heading as per Chapter 27 of the Central Excise Tariff and HSN. The Tribunal referenced several cases (Ok Play (India) Ltd. Vs. CCE, Rudraksh Petrochem Pvt. Ltd. Vs. CCEx, CCEx. Vs. Bajrang Petro Chemicals Pvt. Ltd., and Oil India Ltd. Vs. CCEx) to support the classification under CTH 27090000.2. Dehydration vs. Distillation:The appellants argued that their process was 'Dehydration,' not 'Distillation.' They provided detailed descriptions of their process, emphasizing that only water was removed from the crude oil, which aligns with the definition of dehydration. The Tribunal agreed, noting that the process did not change the essential character of the crude oil and was not akin to distillation. The Tribunal cited HSN 8379 and HSN 27.10 to substantiate that dehydration processes fall under CTH 27090000.3. Burden of Proof:The appellants contended that the burden to prove the correct classification lies with the Department, referencing cases such as Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner of C.Ex., Nagpur, UOI Vs. Garware Nylons Ltd., and Essar Oils Vs. CC. The Tribunal found that the Department failed to conduct necessary examinations or obtain expert opinions to refute the appellants' classification. The Tribunal emphasized that the Department did not take immediate action upon receiving the appellants' classification submissions and audit reports.4. Validity of the SCN and Duty Demand:The Tribunal noted that the Department's audit team had visited the factory and did not raise any issues regarding the product or process. Therefore, issuing a SCN in April 2008 to recover duty for the period from 2006 to 2008 was deemed inappropriate. The Tribunal also dismissed the argument that the appellants' sale of off-specification oil was illegal, as it was irrelevant to the classification issue.Conclusion:The Tribunal concluded that the product emerging from the appellants' process is rightly classifiable under CTH 27090000. The appeal was allowed with consequential relief, emphasizing that the Department did not discharge its burden of proving the classification.Order:The appeal was allowed, and the order was pronounced in open court on 08/08/2018.
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