Petroleum tariff classification of sludge fails where residue does not meet prescribed specifications, despite mineral oil content or market sale.

Sludge cleared from storage tanks was not assessable to central excise duty as LDO because it did not satisfy the tariff specifications of any petroleum product. The material was described as a dark, viscous residue with substantial water content, and the Chemical Examiner did not certify conformity with any prescribed petroleum standard. Mere mineral oil content or marketability was insufficient to treat the sludge as excisable petroleum product. The Board's Tariff Advice also supported non-classification of such sludge under the relevant tariff items, so the demand was not sustainable.

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Issues: Whether sludge cleared from storage tanks, containing mineral oil, water and impurities, could be assessed to duty as LDO or any other petroleum product under the erstwhile central excise tariff.

Analysis: The samples were found to be dark coloured viscous liquid with substantial water content and the Chemical Examiner did not state that the heterogeneous material conformed to the specifications of any petroleum product covered by the tariff. For petroleum products, dutyability depends on satisfaction of the prescribed tariff specifications; mere presence of mineral oil content, or the fact that the sludge fetched a price in the market, did not establish that it was LDO. The Board's Tariff Advice No. 59/79 also recognised that sludge containing mineral oil was not classifiable under the relevant tariff items and was not liable to duty as such. The contrary view in the impugned order was not supported by the test report or past administrative practice.

Conclusion: Sludge cleared from the tanks was not dutiable as LDO, and the demand could not be sustained.

Ratio Decidendi: A residue or sludge containing mineral oil is not classifiable as a petroleum product unless it satisfies the tariff specifications of that product; marketability alone does not make it excisable.

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