TaxTMI 
TaxTMI 
2021 (9) TMI 1267
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....5/2018. 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 laboratories as per department circular dated 16.11....
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....e 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 Lakhs each on the two directors of the appellant un....
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....n 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 that they have conducted the test as per the above s....
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.... 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 stipulation is "Not limited, but to be." Note 1 of IS 1593 reads as "Normally the gross calorific value is of the order ....
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....ble 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 following decisions to prove the classification of the goods claimed by the importer is wrong it falls under the particula....
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....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 remains HSD. 2.14 As regard the criterion of flashpoint to decide the product, he referred to the case of Gulf First Petro Product Pvt. Ltd vs C.C....
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....e 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 suitably answered by none other than a technical expert. It goes without saying that IOCL as the testing laboratory was selected by the Hon'ble Gujara....
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....ty 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 the definition only that hydrocarbon oil which conforming to the Indian Standard Specification IS1460; 2005 can be classified as HSD. As per said specification there is a....
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....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, Maharashtra. (ii) The inscription of the words on the wrapper "Ayurvedic Proprietary medicines or and Ayurvedic licence No. A 888 on the wrapper mentioning of percentage of ingredients as approved by t....
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....mples 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 ascertained that the samples meet the criteria of HSD .He repeatedly stated that 14 parameters were tested as per IS 1460:2005. He also stated that since 8/7 parameters have not been tested the Function / Importance of 8/7 parameters cannot be commented on. We find that the test report if re....
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....ch 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 limit prescribed in the standard. If case, flash point exceeds above 100º C, 150º C, 200º C and does it still it pertains to HSD? Can't comment as above 35º C whatever the flash point is, it does not matter. Point No.1 of Supplementary not of Chapter 27 of Customs Tariff Act provi....
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....arbon 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 case that the product is HSD not MGO and failed to prove so. The tribunal held that since the chemical examiner has not examined all the parameter which are required to classify the same as HSD, the impugned order classifying it HSD was quashed and set aside. Relevant portion of order is as under: "8 We have consider....
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....05) 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 conclude that the imported product is HSD even though none of the laboratories were able to test the samples for all 21/22 parameters prescribed in IS 1460:2005 and no test was conducted to decide whether product is a base oil. The department has not adduced any document to support or substantiate their claim that the imported products a....
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....t 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 mandate of the law pertaining to recovery of duties not paid or short-paid will have to be followed to the letter." The above decision of the tribunal is based on the view taken by the Hon'ble Supreme Court in the case of WARNER HINDUSTAN LIMITED -(1999) 6 SCC 762 wherein the Hon'ble Supreme Court has held as under: "In our opinion, the tribunal was quite wrong in these c....