2020 (6) TMI 70 - AT - Customs

Revenue's SKO reclassification overturned due to lack of evidence

Swarna Oil Services, SM Trading Company Versus Commissioner of Customs, Mundra

The Tribunal set aside the Revenue's reclassification of imported goods as Superior Kerosene Oil (SKO) under CTH 27101910 due to lack of conclusive ... Classification of imported goods - Petroleum Hydrocarbon Solvent - restricted item or not - whether classified under Chapter Tariff Heading (CTH) 27101990, or under CTH 27101910 as Superior Kerosene Oil (SKO)? - HELD THAT:- It is not in dispute that for a product to be classified under 27101910 as SKO, it has to meet with the specifications in supplementary Note ‘C’ to Chapter 27. From a perusal of the test reports of CRCL Delhi and CRCL Kandla, assuming the same to be correct, notwithstanding the difference in the test results between the two qua the parameter regarding final boiling point. It is seen that out of the 8 parameters on which the sample has to be tested for determining whether or not the same meets with the specifications of Kerosene, it is seen from both the test results that test have not been undertaken with respect to 3 parameters - The law on the question that the burden of classification is on the Revenue is well settled by the Apex Court in the case of [2006 (4) TMI 1 - SUPREME COURT] where it was held that Department has not shown that the subject product is not bought or sold or is not known or is dealt with in the market as Denatured Salt. Department’s own Chemical Examiner after examining the chemical composition has not said that it is not denatured salt. In the absence of evidence that the imported goods meet with all the specifications laid down in supplementary note (c) to chapter 27, for a product to be classified as Kerosene, the case made out by the revenue cannot be sustained. Appeal allowed - decided in favor of appellant. Issues:Classification of imported goods under Chapter Tariff Heading (CTH) 27101990 vs. 27101910 as Superior Kerosene Oil (SKO) - Burden of proof on Revenue.Analysis:1. The case involved importers who classified a product as Petroleum Hydrocarbon Solvent under CTH 27101990, while authorities classified it as Superior Kerosene Oil (SKO) under CTH 27101910 due to restrictions on SKO import. The lower authorities allowed redemption on re-export condition.2. The Appellant imported Petroleum Hydrocarbon Solvent, tested by CRCL Kandla and CRCL New Delhi. While CRCL Kandla's report matched Petroleum Hydrocarbon solvent, CRCL Delhi's report indicated similarities with SKO. Discrepancies led to re-testing requests and subsequent reclassification notices.3. The Appellant disputed the reclassification under CTH 27101910 and denial of SKO import. The adjudicating authority upheld reclassification, confiscation, and penalty. The Commissioner Appeal rejected the appeal, leading to this appeal.4. The central issue was whether Revenue's reclassification under CTH 27101910 as SKO was correct. For SKO classification, the product must meet IS 1459:1974 specifications, including acidity, distillation, flash point, and sulphur content, among others.5. The Tribunal noted the burden of classification lies with Revenue, per HPL Chemicals vs. CCE. Lack of evidence on all required parameters for SKO classification led to setting aside the reclassification orders and allowing the appeals.6. Citing precedents like Hindustan Ferodo vs. CCE, the Tribunal emphasized the Revenue's failure to prove imported goods' compliance with SKO specifications. Without conclusive evidence, the reclassification was deemed unsustainable, and the appeals were allowed.7. The judgment, delivered on 01.06.2020, emphasized the necessity for Revenue to provide substantial evidence for reclassification decisions, especially when disputing importers' classifications. The burden of proof in such cases remains on the Revenue, as established by legal precedents.