2024 (8) TMI 327 - AT - Customs

Imported petroleum products qualify for Naphtha exemption under Entry 74 of N/N. 21/2002-Cus despite department's flawed testing

NEPTUNE TRADELINKS PVT LTD Versus COMMISSIONER OF CUSTOMS - KANDLA, DUSHYANT PATEL Versus COMMISSIONER OF CUSTOMS - KANDLA And WORLDLINK TC BOND STORE Versus COMMISSIONER OF CUSTOMS - KANDLA

CESTAT Ahmedabad allowed the appeal regarding classification of imported petroleum products claimed as Naphtha for exemption benefit under Entry No. 74 of ... Classification of imported goods - import of a mixture of petroleum products under the guise of Naphtha - benefit of Entry No. 74 of exemption N/N. 21/2002-Cus., dated 1-3-2002 as amended - method (ASTM D86) of testing to ascertain the nature and classification of the goods - Whether the goods imported by the appellant is ‘Naphtha’ or ‘other’? HELD THAT:- It is found that Tribunal had remanded the matter back for conducting fresh cross-examination of the witness/ Chemist Assistant Grade-I, who was directed to produced the lab records to prove his assertions. From the records of the cross examination so conducted on 22.12.2022 it is apparent that in the reports and lab records there was no mention of the prescribed test having been followed while testing the subject goods and the witness orally insisted that the prescribed test was carried out while testing the subject goods. In the present matter Appellant also strongly argued that the witness during the cross –examination changed his stand while answering the questions so asked to him and further cross examination of the witness was abruptly stopped by the Ld. Commissioner. Appellant has pointed out that further questions need to be asked, amongst others, in view of the order dtd. 25.08.2020 [2020 (8) TMI 656 - CESTAT AHMEDABAD] passed by Hon’ble Tribunal and on ASTM D86 method on different aspect to show that the tests were not conducted as per the said prescribed method. But the said request was declined by the Ld. Commissioner, however time was given to file submission in writing in regard to the above aspect/request for further cross-examination. It was mandatory to ask the said witness questions on different aspects of the prescribed test and also to confront the lab records to him and it was for him to prove his assertion that the said prescribed test method i.e ASTM D86 method was followed while testing the subject goods. It is found that as per the ‘standard test method for distillation of Petroleum products at Atmospheric Pressures’ published by ASTM International, United States prescribes specific condition in relation to testing items - it is apparent that in the reports and lab records so produced there was no mention of the prescribed test having been followed. Appellant has placed on record the quality certificate dated 25-7-2004. Test report is of the port of loading. The said test report categorically states that the method of testing was ASTM D 86 which meets the requirement of sub hearing note 4, chapter 27. “Certificate of Quality” produced by them was issued by M/s. Atlas Inspection Services Ltd., Iran and full specifications were exhibited containing 12 parameters in the said certificate of quality. The test report produced by the department does not indicate the procedure adopted. The finding of the adjudicating authority that the goods in question are not ‘Naphtha’, agreed upon. The impugned order is set aside - appeal allowed. Issues:1. Classification of imported goods as 'Naphtha' or 'other'2. Compliance with testing methods under ASTM D863. Adequacy of lab records and cross-examination4. Judicial approach and procedural fairnessAnalysis:Classification of imported goods as 'Naphtha' or 'other':The case involved determining whether the imported goods declared as 'Naphtha' by the appellants were correctly classified. The revenue sought to classify the goods as 'others' based on testing results. The Tribunal noted the importance of the ASTM D86 method for testing, as per the Customs Tariff Act. The Tribunal found discrepancies in the testing process and concluded that the goods should be considered 'Naphtha' based on the prescribed method, leading to the set aside of the impugned order.Compliance with testing methods under ASTM D86:The appellants argued that the testing did not comply with the requirements of the ASTM D86 method. They highlighted that the Customs Laboratory's test results did not align with the method's specifications. The Tribunal scrutinized the testing process, lab records, and cross-examination reports. It found that the prescribed test method was not followed, as evidenced by the lack of mention in lab records. The Tribunal emphasized the necessity of adherence to testing standards for accurate classification.Adequacy of lab records and cross-examination:The Tribunal criticized the Ld. Commissioner's handling of the cross-examination process. It noted discrepancies in the witness's statements and the abrupt halt of cross-examination. The appellants' requests for further cross-examination were denied, impacting the fairness of the proceedings. The Tribunal emphasized the importance of thorough cross-examination and adherence to judicial disciplines for a just outcome.Judicial approach and procedural fairness:The Tribunal highlighted the Ld. Commissioner's failure to ensure proper cross-examination and address the appellants' submissions adequately. It found the Ld. Commissioner's approach lacking in judicial discipline, as essential questions were left unanswered. The Tribunal stressed the need for a meticulous examination of evidence and adherence to procedural fairness in judicial proceedings. Consequently, the impugned order was set aside, and all appeals were allowed with consequential relief.In conclusion, the judgment focused on the accurate classification of imported goods, the necessity of following testing standards, the importance of thorough cross-examination, and the significance of procedural fairness in judicial proceedings. The Tribunal's decision to set aside the impugned order underscored the need for meticulous adherence to legal procedures and standards in customs classification cases.