Crude petroleum oil classification turns on dehydration only, with Heading 27.09 preserved absent proof of a distinct processed product.

Crude petroleum oil that is only settled, heated and dehydrated by removal of water remains classifiable under Heading 27.09, because dehydration is among the processes permitted without taking the product out of the crude oil heading. Heading 27.10 applies only where the product has undergone processing beyond those recognised for Heading 27.09 and emerges with a distinct commercial identity. Where the Department seeks a different classification, it must support that position with evidence such as expert material or a test report. On the facts described, no satisfactory proof of a different product was established, so the Heading 27.09 classification was maintained and the contrary demand could not stand.

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Issues: Whether the product emerging from the appellant's process was correctly classifiable under Heading 27.09 as crude petroleum oil, or under Heading 27.10 as a further processed petroleum product.

Analysis: The process described showed that crude oil was settled, heated, and only water was removed from it. The resulting product remained crude oil in substance, and the process did not amount to distillation in the sense of producing a desired separate product from the mixture. The relevant HSN notes for Heading 27.09 specifically include dehydration among the permissible processes that do not take the product out of the crude oil heading. Heading 27.10 applies only where the product has undergone processes beyond those enumerated for Heading 27.09. The Department did not obtain expert evidence or a test report establishing a different commercial identity, and the burden of establishing an alternative classification was not satisfactorily discharged.

Conclusion: The product was correctly classifiable under Heading 27.09, and the Department's contrary classification was not sustained.

Final Conclusion: The demand and impugned order could not stand, and the appeal was allowed with consequential relief.

Ratio Decidendi: Where a crude oil product undergoes only dehydration and retains its essential character as crude petroleum oil, it remains classifiable under Heading 27.09, and classification cannot be shifted to Heading 27.10 without evidence showing a distinct product emerging from a process beyond the processes permitted under Heading 27.09.

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