TaxTMI 
TaxTMI 
2021 (9) TMI 1267
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....adodara vide Test Memo 1 to 10 dated 07/05/2018. The said imported goods were seized by the DRI vide Seizure Memo dated 15.05.2018. The Chemical Examiner at Customs Lab Vadodara vide his test reports dated 10/05/2018 had communicated that the samples have characteristics of HSD/Automotive Fuel Oil confirming to IS 1460:2005 and the samples were other than Base Oil. The appellant requested for retest of the samples at Central Revenues Control Laboratory (CRCL), New Delhi or Indian Institute of Petroleum, Dehradun and accordingly the second set of samples (10 bottles) were sent to CRCL, New Delhi who vide their report dated 3.7.2018 confirmed that the analytical parameters of each of the ten samples conformed to the specifications of HSD/Automotive Fuel as per IS 1460:2005 and the samples were other than base oil. The appellant preferred a Special Civil Application No. 10882 of 2018 before the Hon'ble High Court of Gujarat demanding retesting of samples by a reputed Independent institution and the Hon'ble High Court vide their interim order dated 30.7.2018 directed the department to send the requisite quantity of samples to the IOCL, Mumbai which is one of the notified laboratori....
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....General of Revenue Intelligence (DRI) issued the SCN dated 22/4/2019 on the appellant proposing to classify the imported goods under CTH 27101930 as High Speed Diesel (HSD) and to confiscate the imported goods which were seized vide panchanama dated 15.5.2018 under Section 111(d) & (m) of the Customs Act and to impose penalty on the appellant under Section 112(a) and (b) of the Act. The notice also proposed to impose penalties under Section 112(a) & (b), Section 114AA and Section 117 of the Customs Act on the directors of the appellant, on the foreign suppliers M/s. Kelorex Energy FZE, UAE, M/s. Renish Petrochem FZE, Dubai and Shri Rajesh Shah of Kelorex Energy FZE, UAE and Shri Hitesh Mehta of M/s. Renish Petrochem FZE, Dubai, and on the coimporters namely Shri Gastrade International and M/s. Divinity Impex. 1.5 After due process of law, the Commissioner of Customs, Kandla passed Order in original No. KND-CUSTM 000-COM-12-2019-20 dated 3.12.2019 wherein he reclassified the imported goods under CTH 27101930 as HSD and confiscated the imported goods with an option to re-export on payment of fine of Rs. 3.50 Crores and imposed penalty of Rs. 2 crores on the appellant and Rs. 50 La....
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....n stated in the test report that the imported oil in question is other than Base oil but without discussing as to how it was ascertained that the imported oil is not Base Oil. In the Third test report dated 14/8/2018, the Central Laboratory, IOCL, Mumbai, who have carried out the test on the basis of the direction the Hon'ble High Court of Gujarat, also have tested the samples only for 14 out of 21/22 parameters and it was stated that they do not have facility for testing the balance parameters. It is clearly mentioned that the samples tested met the specification only for 14 parameters for which it was tested. However, the test report did not state whether the sample tested is HSD or it is not base oil. 2.1 On cross examination of Dr. Gobind Singh, DGM (Lab), IOCL, Mumbai, he categorically put forth that the samples were tested only for 14 parameters as against 21/22 parameters specified in IS 1460:2005 for HSD and they do not have the facility to test for the balance parameters in their lab and he cannot comment on the relevance of such parameters for which tests were not conducted. When he was questioned as to whether the samples are automotive diesel, he could only state....
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....e goods are classifiable under a particular tariff entry and the following are some the citations in this regard: 1. Hindustan Ferodo Ltd. - 1997 (89) ELT 16 2. Garware Nylons Ltd. 1996 (87) ELT 12 3. Calcutta Steel Industries- 1989 (39) ELT 175 He also placed reliance on the decision of the larger bench of this Tribunal in the case of Brindavan Beverages Pvt. Ltd. reported in 2019 (29) GSTL 418. 2.4 He further submits that for fuel oils, there is a BIS standard namely IS: 1593. As per the said standard, 9 characteristic requirements are prescribed. He submits that except for the parameter "Gross Calorific value" all other parameters are covered within the 21/22 parameters prescribed for HSD under IS:1460:2005. The Flash point is 66ºC for both HSD under IS: 1460 as well as for Fuel Oils under IS: 1593. Further, all the 8/7 parameters out of the 9 parameters stands already tested in view of the aforesaid test reports and the samples meets the requirement in respect of such 8/7 parameters. The samples have not been tested for gross calorific value alone. From the above requirements stipulated under IS:1593 for "Gross Calorific Value" the stipulat....
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....he impugned order holding the imported base oil as HSD meriting classification under CTH 2710 1930 is not sustainable at all and merits to be set aside. For the same reason, the imported goods are not confiscable and the redemption fine and penalties imposed are not sustainable. He submits that even though the appellants have strong prima facie case on merits in their favour but they are prepared to re-export the goods. 2.6 Though the learned counsel in his submission raised the issue about jurisdiction that DRI is not proper officer for issuing the show cause notice, but on the query from the bench the learned counsel withdrawn this submission and submitted that he is not taking up the question of jurisdiction. 2.7 He also argued that in view of the facts the goods are not liable to confiscation therefore, the demurrage/detention charges also required to be set aside. 2.8 Shri Hardik Modh, learned counsel appearing on behalf of the appellant M/s Divinity Impex adopted the argument made by learned counsel Shri S. Jaykumar. Subsequent to the hearing he filed a written submission dated 15/09/2021. In his submission he submits that burden lies on the Revenue as held in the fo....
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....nce the product in dispute exceeds threshold limit of flashpoint as prescribed under IS 1460:2005, IOCL certified that the product as HSD. 2.12 He referred to the Petroleum Act, 1934. As per the meaning of Petroleum as defined under Section 2 of the Petroleum Act which means any liquid Hydrocarbon or mixture of hydrocarbon and any inflammable mixture (liquid, viscos or solid) containing in any liquid Hydrocarbon. He submits that any petroleum product exceeding the threshold limit of 93oC, it should not be called petroleum item. He also referred to the work order under the Petroleum Act Explosive Safety Organization (PASO)- Ministry of Commerce and Industry and submits that in the present case, flashpoint of the disputed goods is above 93oC and therefore, cannot be classified as HSD. 2.13 He once again referred to the cross-examination of Shri Gobind Singh, Manager, IOCL regarding classification, regarding flashpoint and answers given by him and submits that the answers given by Shri Gobind Singh who tested the goods reveal that he has not considered the flash point as important parameter for testing the goods. According to him, irrespective of the flash point of goods, it rem....
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....parameter and there is no maximum limit prescribed in the standard for flash point; that flash point is not the only parameter used for measuring the sample as per (IS:1460:2005). He submits that the entire submission of the appellant only harps on the parameter relating to flash point. The appellant is silent on the fact that the report of the IOCL gives finding on 13 other parameters. There is no averment raised by the respondent that in respect of 13 parameters which has been tested (other than flash point) the characteristics does not fulfill the requirement. Further, even if in respect of the flash point the appellant's averment does not stand on legal test; The DGM of IOCL clearly states that the parameter only gives the minimum flash point. As regard reliance of the appellant on section 2 of Petroleum Act, 1934, he submits that the classification was to be done not as per the petroleum act, 1934 but based on tariff which clearly states that high speed diesel means any hydrocarbon oil conforming to the BIS 1460; 2005. As against the appellant's primary ground that owing to the flash point, the goods do not fall within the ambit of HSD in terms of BIS 1460:2005 which stands su....
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....re 21 Parameters and as per amended IS 1460:2017 it is 22 parameters. However, IOCL Lab tested 21 parameters as per IS 1460:2005. The adjudicating authority decided the confiscation on the basis of test report given by IOCL laboratory. Therefore, relevant test report of IOCL Laboratory is scanned below:- From the above report it is observed that the test was conducted as per specification of IS: 1460:2005 as amended by IS: 1460:2017. There are total 21/22 parameters which are the requirement for testing of the goods to determine that the goods are HSD. However, out of 21/22 parameters only 14 parameters were tested and for the remaining parameters it is clearly stated in the report that the IOCL has no facility for testing the remaining parameters. For classification, HSD is defined as per supplementary note of chapter 27 under section V which is reproduced below:- (e) "High Speed Diesel (HSD)" means any Hydrocarbon Oil Conforming to the Indian Standard Specification of Bureau of Indian Standard IS: 1460:2005. 4.2 As per the above statutory definition provided in the Customs Tariff Act which needs to be construed strictly and according to t....
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....t 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. On the other hand, after examining the chemical composition has opined that the subject matter is to be treated as Sodium Chloride. From the above judgment of the Apex court it is the settled position that the burden of proving the classification is on the department and not on the assessee. Similar view was taken by the Hon'ble Supreme Court in the case of PUMA AYURVEDIC HERBAL PVT LTD 2006 (196) ELT 3(SC) wherein para 8 the Hon'ble Supreme Court opined as under : "8. On the other hand the revenue led no evidence of any sort to rebut the evidence led by the assessee. It is settled law that burden of showing correct classification lies on the revenue. The revenue has done precious little in this case to discharge this burden. The Collector (Appeals) further relied on the following evidence in support of his finding that the products in question fall in the category of medicaments : (i) Licence No. A40 888 granted by the Drug Controllers, Maharasht....
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....2005. Relevant extracts of the question placed before Shri Gobind Singh and his answered are as under: Questions Answers Table 1 of IS: 1460:2005 provides total 21 parameters are to be tested for ascertaining whether the samples meet with the criteria of HSD? The samples meets with the specification of IS; 1460:2005 for the parameters tested at our laboratory which are 14 parameters tested as per our lab capabilities. Does it mean that the other parameters are not important for ascertaining or deciding whether the samples meet with the criteria of HSD? Already provided in the report that in the lab the samples were tested as per IS :1460:2005 and there is facility available only for testing 14 parameters and for the remaining 8 parameters the facilities is not available for which I can't comment. Do you know the function/importance of the 8 parameters provided under IS: 1460:2005 that they have not tested? As the 8 parameters have not been tested, I cannot comment on these parameters. From the above question and answer it is clear that Shri Gobind Singh has not confirmed that out of 21/22 parameters on testing of only 14 parameters, whether it can be asce....
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....ason also the goods cannot be classified as HSD. The learned AR countering the above submission argued that classification of the goods for purpose of the customs has to be strictly made on the basis of definition provided in Customs Tariff Act and no resort can be made of any other Act such as Petroleum Act. We find that since the test report by IOCL is incomplete and inconclusive, in such case it is just and proper in the interest of justice to refer to other statutory authority to determine the nature of goods as HSD. Therefore, the aforesaid submission of the learned AR is not tenable in the given facts of the present case. 4.8 In the cross examination when Shri Gobind Singh, DGM (Lab) of IOCL was asked the question related to flash point he answered in the following manner: Questions Answers Do you think one of the ingredients for considering HSD is flash point? Can't comment on the ingredients. The minimum temperature flash point is 35º C as prescribed in standard. We have submitted report. What is the maximum and minimum flash point for considering the samples as HSD? Only the minimum limit is talked about that is 35º C and there is no maximum ....
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....ELT 393. In this case the dispute was whether the goods are base oil or lubricating oil on the chemical test by the customs laboratory. The flash point of the imported product was found to be above 94ºC as per chapter note 27 lubricating oil means any oil which is ordinarily used for lubrication excluding hydrocarbon oil which has its flash point below 93.3ºC. It was held by this tribunal that product having flash point above 94 ºC cannot be classified as lubricating oil and the classification as base oil has been maintained. In the present case also the flash point is 112 ºC applying the ratio of the aforesaid judgment the goods having flash point above 94 ºC will merit classification as base oil only. In this position goods cannot be classified as HSD. The identical issue has been considered by the CESTAT Hyderabad in the case of Deep Water Pacific Inc reported in 2019 (4) TMI 1704 wherein the question under consideration was whether the importer imported consignment is MGO or HSD. The revenue alleged that the goods in dispute are HSD. The tribunal held that it is an accepted principal that "he who asserts must prove" and the department asserts in that ca....
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....d consequently cannot be classified as HSD. 4.10 As regard the contention of the revenue that even if remaining 8/7 parameters are not tested the other parameters which were tested are sufficient to hold the classification as HSD. We find that in this tribunal judgment in the case of Petroplus International Marketing 2006 (205) ELT 1041 CESTAT Bangalore, while dealing with the issue as to whether the imported product is "super kerosene oil (SKO)" or "Aviation turbine Fuel (ATF)". It was held that all the 28 parameters prescribed for testing ATF have to be met with before concluding that the same is ATF and since ATF and SKO have several common parameters the benefit of doubt should go to the appellant. The present case, applying the ratio of the above judgment, is on better footing that out of 21/22 parameters, 8/7 parameters are not tested due to which goods cannot be classified as HSD. This tribunal in the case of Jagadamba petroleum 2003 10 (TMI) 123 CESTAT new Delhi also decided the similar issue of classification of petroleum product and held as follows: 4.11 In the present case also we find that the commissioner has merely relied on the 3 test report to conclu....
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....product is base oil or otherwise but since it was not proved by the department beyond doubt that the impugned goods are HSD; the case of department got failed. This view has been taken by this tribunal in the case of P.K Exim wherein vide order No A/12326/2021 dated 31.08.2021 passed the following order. "It is a settled position that if the goods are not classifiable under the chapter heading proposed by the revenue thereafter whether the goods is classified under the chapter heading claimed by the assessee is correct or not, the case of the department will fail. This gets support from the following judgments: • • PEPSICO HOLDINGS PVT.LTD.- 2019(25) GSTL 271 (Tri.-Mum) "8. In the light of the above, we cannot decide on a classification that has not been pleaded before us. Once the classification proposed by Revenue is found to be inappropriate, that claimed, while clearing the goods, will sustain even if it may appear to be inappropriate. We cannot also, in our appellate capacity, direct or accord the latitude for invoking Section 11A of Central Excise Act, 1944 by obliteration of the proceedings leading to the impugned order. The mandat....
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.... In this regard we find that as per above finding since the case of the department is not sustained the appellant's claim is Prima facie correct for waiver of demurrage and detention charges. However, the appellant is at liberty to raise this issue before the appropriate authority who, in the light of this decision may consider this aspect leniently. 5.4 Since we have decided this case on merit, we are not addressing the issue of the jurisdiction for issuance of Show Cause Notice as pointed by the Learned Authorized Representative. 5.5 As per our above discussion since we hold that goods is not classifiable as HSD as claimed by the revenue, the redemption fine and penalties imposed on the appellants are set aside. 6. Accordingly, the impugned order is modified to the above extent. The appeal is allowed in the above terms. 7. Since the appeals are disposed of, the MAs also became infructuous and disposed accordingly. (Pronounced in the open court on 28.09.2021) ============= Document 1 विपणन पà¥à¤°à¤à¤¾à¤— Marketing Division PEDIFICATION NO: Test Required Jest Raport No. B. Date ame of Customer Sou....
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....x 200 ISO-12937 75 XVII Cold Filter Plugging Point C( CFPP), Max, (a) Winter/(b) Summer 6°C/18°C P: 120 FNA XVI Oxidation Stability, g/m, Max. 25 ISO: 12205 FNA XIX XX Lubricity Corrected Wear Scar Dia. @ 60°C. mirons, Max Policyclic Aromatic Hydrocarbon(PAH), %m, Мах XXI Continued on next page Oxygen Content, Sm, Max /14/08/2018 पंजीकृत कारà¥à¤¯à¤¾à¤²à¤¯ 'इंडियल - जली धार गादà¥à¤°à¤¾ (पूरà¥à¤µ), मà¥à¤‚बई- 400 051. (à¤à¤¾à¤°à¤¤) Regd. Office: 'Indian Oil Bhavan'. G-9,Al Yavar Jung Marg. Bandra (E), Mumbai-400051 (INDIA) 11 IP-391 FNA 460 ISO: 12156-1 FNA 0.6 Annex.3 FNA Page 1 of 2 all 14/08/2015 Document 2 विपणन पà¥à¤°à¤à¤¾à¤— Marketing Division REMARKS: इंडियन ऑयल कॉरà¥à¤ªà¥‹à¤°à¥‡à¤¶à¤¨ à....
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....olvent' and 'other residue' under sub-headings 2710.90 and 2713.30 respectively, both attracting basic excise duty at the rate of 16% ad valorem and no special excise duty (SED). On the other hand, the Revenue wants both the items to be classified under sub-heading 2710.13 which attracts SED also. Heading 27.10 is extracted below:- "27.10 Petroleum oils and oils obtained from bituminous Minerals, other than crude; Preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations Motor spirit, that is to say, any hydrocarbon oil (excluding crude mineral oil) which has its flash point below 25°C, and which either by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines: 2710.11 Special boiling point spirits (other than Benzene-Toluol) with nominal boiling point range 55-115°C 2710.12 2710.13 Special boiling point spirits (other than Benzene, Benzol, Toluene and Toluol) with nominal boiling Point range 63-70°C Other special boiling p....