TaxTMI 
TaxTMI 
2019 (11) TMI 778
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....? (b) Whether in the Advance Authorisation Scheme, it is required to use permissible input as specified in relevant SION, for manufacture of export product and the same must be physically incorporated in the export product? (c) Whether in the facts and circumstances of the case, the products namely Low Sulphur Fuel Oil (LSFO) and Vacuum Gas Oil (VGO) are same product or otherwise, since HSN, SION and Physical property of these products are classifying the product as separate one? (d) Whether in case, where in respect of product only 02 or 3 parameters out of total 9 parameters, as specified under IS 1593:1982, were tested, such the product can be construed as a product confirming to the standard specified under IS 1593:1982? (e) Whether Tribunal was justified in admitting addition/fresh evidences in the form of "technical note" at a belated stage especially when the same were not produced/brought before either the investigating agency or the Adjudicating Authority? (f) Whether the Tribunal was correct in rejecting all the statements of technical employees of the company which were recorded under Section 108 of the Customs Act, 1962? (g) Whether the Hon'ble Tribuna....
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....rting test results, by offering his own interpretation and views on what LSFO is; when Circular No.33/2001 dated 04.06.2001 read with BIS 1593:1982 clearly specifies the specification of Fuel Oil? (n) Whether the Tribunal was acting within the purview of appeal and was correct in ousting the jurisdiction of any investigating agency and making the provisions of Customs Act under section 28(4) [and even 28(1)] and Section 108 otiose in all such cases pertaining to violation of FTP? (o) Whether, in case where the export goods are rendered liable to confiscation under section 113(d) and 113(i) of the Customs Act, 1962, it is justified that no penalty is imposed under Section 114(iii) of the Customs Act, 1962?" 2. The impugned order passed by the Tribunal was rendered in two appeals being Customs Appeal No.11391 of 2018 which was filed by the respondent M/s. Nayara Energy Limited and Customs Appeal No.11674 of 2018 which was filed by the appellant. Since a common appeal will not lie against the order of the Tribunal passed in two different appeals, this appeal is treated as an appeal preferred against the order passed by the Tribunal in Customs Appeal No.11391 of 2018. Out of th....
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....feed component of the Fluidized Catalytic Cracking Unit (FCCU), was an LSFO meeting all specifications of LSFO as prescribed in IS 1593:1982. The respondent also contested the show cause notice on the grounds of jurisdiction and limitation and sought cross-examination of witnesses. After granting opportunity of cross examination of witnesses to the respondent, the Commissioner of Customs by an order dated 20.2.2018, confirmed the demand for duty by invoking the larger period of limitation and also imposed penalties under section 28AA and section 114A of the Customs Act. 5. Being aggrieved, the respondent carried the matter in appeal before the Tribunal. By the impugned order dated 4.6.2019, the Tribunal allowed the appeal filed by the respondent and set aside the order-in-original dated 20.2.2018. 6. Mr. Parth Divyeshwar, learned senior standing counsel for the appellant, assailed the impugned order by submitting that the respondent has failed to prove that VGO produced within its refinery and used as FCCU feed stock was meeting with all the specifications of LSFO as per IS 1593:1982. It was submitted that the in-house test reports did not contain test findings for acidity, ash....
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....was changed to LSFO (FCCU FEED) from 14.09.2013, 20.09.2013 and 14.09.2013 respectively and the closing stock of VGO was considered as opening stock of LSFO on the date of changing the name of the service tank. Thus, the respondent had changed the name of four storage tanks which demonstrated a willful intent to deceive and mislead the customs authority into believing that motor spirit had been produced out of LSFO when in fact it had been produced from VGO which was a product different from LSFO as per trade parlance. 6.3 It was submitted that the Commissioner of Customs in the order-in-original has recorded findings based upon the evidence available on record and that the Tribunal without reference to such findings, was not justified in overruling the findings recorded by the Commissioner. It was, accordingly, urged that the appeal requires consideration on the questions as proposed or as may be deemed fit by this court. 7. As can be seen from the impugned order, before the Tribunal it was the case of the respondent that exemption had been wrongly denied to it as there was no requirement in the advance licence or notification that the imported LSFO should be used as an input ....
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....y Export Obligation Discharge Certificate (EODC)/redemption letter on 11.6.2015; LSFO imported by the respondent as its replenishment entitlement was actually used by it in its refinery as part of the feed stock requires for manufacturing motor spirit, amongst other finished products. It was contended that the respondent had satisfied all the conditions of the relevant Customs Exemption notification No.96/2009- Cus dated 11.9.2009; however the duty had been demanded by denying the benefit of the said exemption notification solely on the basis that one of the requirements in the Foreign Trade Policy, which came to be introduced on 1.8.2013 by insertion of para 4.1.15 in the policy had been infringed. It was contended that the conditions imposed vide para 4.1.15 of the Foreign Trade Policy were inapplicable in the present case as the Advance Authorisation had been issued to the respondent prior to 1.8.2013 when the said para 4.1.15 was inserted in the Foreign Trade Policy. 7.2 It was contended that the demand in the order-in-original was confirmed on two assumptions, the first being that para 4.1.15 of the Foreign Trade Policy introduced with effect from 1.8.2013 was applicable eve....
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....own para 4 of the DGFT notification dated 1.8.2013 by holding that it was manifestly absurd and unreasonable. It was contended that even if para 4.1.15 of FTP inserted with effect from 1.8.2013, is assumed to be applicable to imports made against an Advance Authorization issued before 1.8.2013 and even if para 4 of the notification dated 1.8.2013 is assumed to be correctly reflecting the true effect of para 4.1.15, even in that case the demand had been wrongly confirmed as the respondent had in fact satisfied the requirements of para 4 of the said DGFT notification by actually using LSFO in the manufacture of motor spirit which was exported on 7.10.2013. 7.4 The respondent had further contended that VGO, which is the main component of FCCU feed stock, is an LSFO as it fully meets the specifications of LSFO as per IS: 1593:1982. It was pointed out that according to the Supplementary Chapter Note (g), Fuel Oils means any hydrocarbon oil conforming to IS specifications 1593:1982. Reference was made to a letter dated 9.8.2016 and a statement dated 3.8.2016 of Mr Chakrapany Manoharan, Director (Refinery) of the respondent company, to emphasize that the attention of the investigating a....
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....description LSFO. It was submitted that since a chapter note exists in the customs tariff giving a specific meaning to fuel oils as those conforming to IS 1593:1982, the lower authority has erred in overlooking the said statutory definition by giving a different meaning to LSFO by referring to the internal terminology and nomenclatures given to various types of LSFO streams emerging within the refinery. Explaining the use of the specific terminology VGO (as against LSFO) while exporting some consignments of VGO in the past, it was submitted that it is natural and usual for a seller to use the specific description of a product when the product is a superior variety of the generic product as that enables the seller to command a premium over the average price of the generic product. It was submitted that LSFO being a generic description, products which are sold under the trade name LSFO are usually at the lower end/spectrum of the range of LSFO's. The superior varieties of LSFO such as VGO are marketed and sold, not with reference to their generic name, but by describing them by their specific name VGO. It was submitted that various types of VGO, including sweet VGO, which formed ....
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.... from the investigation agency, the DGFT had neither withdrawn the EODC/Redemption letter nor cancelled the license, nor initiated any proceedings alleging violation of the FTP provisions. 8. The Tribunal, after considering the submissions advanced by the learned counsel for the respective parties has taken note of the Table in IS 1593:1982, which summarizes the specifications of fuel oils in general with a separate reference to LSFO. For ready reference, the table is reproduced hereunder:- The FCC feed boils in the range of 300o 9. Out of the nine parameters prescribed under the said table, the Tribunal noted that two are merely to be reported and no limitation has been prescribed. Effectively thus, there are seven parameters which need to be satisfied. These parameters are acidity, ash, flash point, kinematic viscosity, sediment, sulphur and water content. The Tribunal noted that Note 3 thereunder deals with Low-Sulphur Fuel Oils and observed that the same can be regarded as imposing an additional requirement of sulphur content being low. As to how low the sulphur content should be has not been specified in the BIS Standards and has been left to the contracting parties to d....
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....the water would have evaporated earlier in the distillation process. Inorganic acids are water soluble and not oil soluble. As a result, there is no possibility of presence of water soluble inorganic acids in the Feed. 2. Ash, % by mass IS 1448 [P-4] 0.1 Max 0.01 0.01 Ash is composed of materials that cannot be burnt out during the distillation process. These solid materials (such as dust and other impurities) are likely to be found in the residue crucible of the distillation columns. As the FCC Feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, this residue will not be present in the Feed. The principal elements contributing to high ash contents of petroleum stocks are metallic salts and organometallic compounds. The FCC feed contains metals like Nickel, Sodium etc. in the 5-50 ppmw range (0.005%). Hence, ash content is never likely to be more than 0.1% by mass. 3. Calorific value, gross cal/g IS 1448 [P-7] To be reported (Note 1 - should be around 10,000 cal/g) 10400- 10800 10500- 10800 The numbers given are from test reports obtained subsequent to the issue of the SCN. 4. Relative density at 15/....
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....there is no possibility of presence of water soluble inorganic acids in the Feed. 12. Insofar as ash percentage is concerned, it was explained that ash is composed of materials that cannot be burnt out during the distillation process. These solid materials (such as dust and other impurities) are likely to be found in the residue crucible of the distillation columns. As the FCC Feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, this residue will not be present in the Feed. The principal elements contributing to high ash contents of petroleum stocks are metallic salts and organometallic compounds. The FCC feed contains metals like Nickel, Sodium etc. in the 5-50 ppmw range (0.005%). Hence, ash content is never likely to be more than 0.1% by mass. 13. Insofar as the parameter of flash point is concerned, it was submitted that the flash point is the temperature at which sufficient vapours in presence of air will form combustible mixture and will flash/momentarily ignite, which gives a spark. LSFO FCC feed is heavier than diesel cut has IBP of around 300o C. It is expected to generate sufficient vapours which form co....
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....mprise of various kinds of VGOs some of which are described above. These streams come from different process units within the refinery. Q7. You have in your statement dated 03.08.2016, referred to the Sulphur content of VGO used as a feed but have not given the precise percentage of such Sulphur content. Can you clarify now? A7. I do not remember exact percentage but it generally remains low so that the Motor Spirit produced from it is meeting the Sulphur requirement of Motor Spirit. Q8. Sir, Is it generally less than 1% or can it exceed 1% A8. It is much lower than 1%. Q9. Is it therefore correct to say that MS produced from FCCU was produced from FEED which had less than 1% Sulphur content i.e. LSFO ? A9. Yes. Q11. I am showing you your statement where Mr Gajjar‟s statement has been shown to you, with which you have agreed. Mr Gajjar has stated that according to the reports of production, LSFO is not shown as one of the raw materials. Can you explain your previous answer in the context of this part of the statement?. A11. The specific names of streams are used in the refinery reports rather than the generic name LSFO. This explains the position. 17....
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....pose of customs law. It, accordingly, has turned down the submission of the respondent that VGO and LSFO are the same and has held that it would establish that the export goods, that is, motor spirit was actually manufactured out of VGO only and not LSFO as declared. 19. In the opinion of this court, the adjudicating authority has failed to consider the relevant material namely, the explanation submitted by the respondent explaining that all the seven parameters required for LSFO are duly satisfied in the case of VGO. As noted earlier, out of seven parameters, three parameters were duly tested and found to be conforming to the specifications of IS 1593:1982. Insofar as the other four parameters are concerned, the respondent had duly explained that insofar as the water content is concerned, since the FCC feed boils in the range of 300o C - 570o C, whereas the boiling point of water is 100o C the water would have evaporated earlier in the distillation process and hence, water content was not expected in LSFO. Insofar as ash and sediments are concerned, it was explained that ash and sediments were likely to be found in the residue crucible of the distillation columns, and that as th....