TaxTMI 
TaxTMI 
2021 (12) TMI 633
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....as not been determined. Customs duty with penalty has also been demanded under section 28(1) of the Customs Act with applicable interest under section 28AA of the Customs Act. 2. The appellant imported "Reformate" under three Bills of Entry and classified the same under CTH 2707 50 00 as "other aromatic hydrocarbon mixtures". The applicable custom duties was 2.5% BCD + 14% CVD + 3% Cess + 4% SAD and the goods were cleared for home consumption on payment of duty at the rates applicable to CTH 2707 50 00. The appellant claimed that the Reformate so cleared was used at the plants of the appellant, either as a feedstock for manufacture of aromatics such as Xylene, Benzene etc. or as a blend stock for blending with Motor Spirit. The details of the Reformates so imported are as follows:- S. No. Bills of Entry No. Date Item Description CTH Quantity in MTS Assessable Value in Rupees 1. 7113801 17.10.2016 Reformate-AFS 2707 50 00 9,091.514 33,53,44,076.16 2. F-251 07.10.2016 Reformate 2707 50 00 35,877.064 97,48,06,563.46 3. F-35 28.04.2017 Reformate 2707 50 00 6,000 23,84,94,847 3. Reforma....
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....or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than those containing bio-diesel and other than waste oils 2710 12 -- Light oils and preparations: --- Motor Spirit: 2710 12 11 ---- Special boiling point spirits (other than benzene, toluol) with nominal boiling point range 55-115ºC Kg 10% 2710 12 12 ---- Special boiling point spirits (other than benzene, benzol, toluene and toluol) with nominal boiling point range 63-70ºC Kg 10% 2710 12 13 ---- Other special boiling point spirits (other than benzene, benzol, toluene and toluol) Kg 10% 2710 12 19 ---- Other Kg 10% 2710 12 20 --- Natural gasoline liquid (NGL) Kg 10% 2710 12 90 --- Other Kg 10% 2710 19 -- Other: 2710 19 10 --- Superior kerosene oil (SKO) Kg 10% 2710 19 20 --- Aviation turbine fuel (ATF) Kg 10% 2710 19 30 --- High speed diesel (HSD) Kg 10% 2710 19 40 --- Light diesel oil (LDO) Kg 10% 2710 19 50 --- Fuel oil Kg 10% 2710 1....
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....imary products enumerated in the HSN Explanatory Notes to CTH 2710 since for a product to be covered by category (C), the oils covered by category (A) should have been processed further and Reformate is processed from Naphtha; b) As per the US Cross Review Rulings, Reformate is classifiable under CTH 2710 of the US Customs Tariff; c) Some of properties of Reformate, namely, the Final Boiling point, Flash point, RON, MON and AKI are "very similar" to those of Motor Spirit. Accordingly, Reformate is usable as a fuel in spark ignition engines just as Motor Spirit; and d) The Public Sector Undertakings such as IOCL, Numaligarh Refinery Ltd., BPCL and HPCL have classified Reformate under CTH 2710 12 19. 9. The appellant filed a detailed reply to the show cause notice and some of the main submissions are as follows: (i) The HSN Explanatory Notes to Heading 2707 clarifies that in addition to distillates of coal tar or mineral tar, the said heading covers 'similar products' which are obtained by processing of petroleum. The assumption in the show cause notice that only distillates of coal tar or mineral tar are covered by....
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....sp; The existence of high aromatics does not debar Reformate from being classified under the four-digit Heading 2710; (iv) Reformate is very similar to Motor Spirit which is available in the market as its principal parameters, RON, MON, AKI and Final Boiling Point, are approximately same as that of Motor Spirit as specified in BIS IS 2796:2017; (v) The classification adopted across the world (including US) is important to understand and pass the 'common parlance'/'market parlance' test, but the same has only persuasive value since world over, classification of commodities are uniformly based on HSN.; (vi) Several Public Sector Undertakings were importing and classifying Reformate under CTH 2710 12 19 and the same cannot be overlooked or ignored; and (vii) There is no willful mis-statement or mis-declaration and, therefore, neither the extended period is applicable nor is the imposition of mandatory penalty attracted. However, by claiming wrong classification, the appellant has rendered the goods liable to confiscation. 11. Shri Vipin Kumar Jain learned counsel appearing for the appellant made the following submiss....
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.... (A), (B) and (C), but only to the first part of the Heading 2710; (viii) The doctrine of last antecedent has been completely mis- interpreted by the Adjudicating Authority; (ix) Reformate is not classifiable under CTH 2710 12 19 as "other motor spirits"; and (x) The onus to classify a product under a particular heading is on the Revenue and the Revenue has to adduce positive evidence to establish that the classification adopted by the assessee is not correct. In this connection reliance has been placed on the following decisions: a) H.P.L. Chemicals Ltd. vs. Commissioner of C. Ex. Chandigarh [2006 (197) E.L.T. 324 (S.C.)]; b) Swarna Oil Services, SM Trading Company vs. Commissioner of Customs, Mundra [2020 (6) TMI 70 - CESTAT Ahmedabad]; and c) Larsen and Toubro Ltd. vs. Commissioner of Customs, Mundra [Customs Appeal Nos. 10832 and 10833 of 2020 decided on 24.05.2021]. 12. Shri P.R.V. Ramanan, learned special counsel appearing for the Department, made the following submissions: (i) The product imported by the appellant is Heavy Reformate which is used as a blend stock....
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.... to 250ºC, as it is scientifically unacceptable. 13. The submissions advanced by the learned counsel for the appellant and the learned special counsel for the Department have been considered. 14. The first issue that arises for consideration in this appeal is as to whether the product Reformate merits classification under the four digit CTH 2707. The reason assigned in the show cause notice for not classifying it under aforesaid four digits CTH is that Reformate is not a distillate of coal tar or mineral tar. 15. In this connection, reference needs to be made to the HSN Explanatory Notes to CTH 2707. They clarify that the said Heading covers, in addition to distillates of coal tar or mineral tar, similar products obtained by the processing of petroleum or by any other process. The relevant portion of Heading 2707 to Explanatory notes to HSN are: "27.07 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the constituents. xxxxxxxx This heading covers: (1) xxxxxxxx (2) Similar oils and products....
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....reparation" under Sub- Heading Note 4 to Chapter 27 alleging that 90% or more by volume of the product distills around 163ºC to 175ºC, whereas the said Note requires distillation of 90% or more of a product at 210ºC. The show cause notice, therefore, itself has read "at 210ºC" to mean "by 210ºC". The conclusion drawn by the Adjudicating Authority is, therefore, not only incorrect but even otherwise, the Department cannot be permitted take a contrary stand. It follows that the expression "at 250ºC" appearing in the description of CTH 2707 50 00, should be read as "by 250ºC". The product would, therefore, merit classification under CTH 2707 50 00. 22. This apart, this position also emerges from a perusal of the Notification No. 12/2014 dated 11.07.2014 and the budget speech of the Finance Minister made on 10.07.2014. The Finance Minister proposed to reduce the tax incidence on Reformate to 2.5% and immediately on the next date, the Customs Notification No. 12/2014 was issued providing for effective rate of basic customs duty on products classifiable under CTH 2707 50 00 as 2.5%. 23. This Notification dated 11.07.2014 seeks to amend....
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....s that the basic customs duty on Reformate and other goods under Sub-Heading 2707 50 00 has been reduced from 10% to 2.5% and the earlier Notification dated 17.03.2012 has been amended to that extent shown at Serial No. 126B in the Notification dated 11.07.2014. The Annexure to the Circular reads as follows: "(4) Basic Customs Duty on reformate and other goods under sub-heading 2707 50 00 is being reduced from 10% to 2.5%. Notification No. 12/2012- Customs, dated 17th March, 2012 as amended by notification No. 12/2014-Customs, dated the 11th July 2014 [new S. No. 126B] refers." (emphasis supplied) 27. Learned special counsel appearing for the Department has however, submitted that reliance upon the Tax Research Unit Circular, which makes reference to the speech of the Finance Minister as also the Customs Notification, and provides for the summary of the changes mentioned in the Annexure, cannot be used in any quasi- judicial or judicial proceedings, where only the relevant legal texts need to be referred to. 28. It is not possible to accept this contention of the learned special counsel appearing for the Department. The Notification dated 11.07.2014 wa....
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....ituents of the preparations, other than waste oils: xxxxxxxxxxx (I) Primary Products The products covered by the first part of this heading are those which have undergone any process other than those specified in the Explanatory Note to heading 27.09. The heading includes: (A) "Topped crudes" (where certain lighter fractions have been removed by distillation), as well as light, medium and heavy oils obtained in more or less broad fractions by the distillation or refining of crude petroleum oils or of crude oils obtained from bituminous minerals. These oils, which are more or less liquid or semi-solid, consist predominantly of non-aromatic hydrocarbons such as paraffinic, cyclanic (naphthenic). They include xxxxxxxxxxx (B) Similar oils in which the weight of the non-aromatic constituents exceeds that of the aromatic constituents. They may be obtained by the low temperature distillation of coal, by hydrogenation or by any other process (e.g., by cracking, reforming ets.). This heading includes xxxxxxxxxx Further, the heading does not include oils with a predominance by weight of a....
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....d by categories (A) and (B). Thus, even if the substances added for making the preparations are considered to be all aromatic in nature, the preparations, by virtue of at least having 70% of categories (A) and (B) oils therein must have 35% non-aromatic constituents (70% of 50%). Thus, the aromatic content at best would be 65% in the preparation of the kind covered under category (C). Reformate, however has 80% aromatic contents and, therefore, cannot be considered under category (C). 35. This apart, from a plain language of the expression "preparations not elsewhere specified or included, containing by weight of 70% or more of petroleum oils, these oils being the basic constituents of the preparations', it is evident that even if it is assumed that Reformate is a preparation, still it will not be classifiable under CTH 2710 as the said Heading specifically excludes preparations which are elsewhere specified or included. It needs to be remembered that Reformate is specifically covered under CTH 2707 and at 8-digit level under CTH 2707 50 00. 36. What also needs to be noted is that Heading 2710 consists of 3 parts namely: (i) Petroleum oils and oils obtained ....
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....fied under CTH 2710 12 19 as "other motor spirit". 41. The contention of the learned special counsel appearing for the Department that Reformate is classifiable under CTH 2710 12 19 cannot be accepted as Reformate is neither a 'motor spirit' nor is it similar to it. Supplementary Note (a) to Chapter 27, defines 'motor spirit' to mean 'any hydrocarbon oil (excluding crude mineral oil) which has its flash point below 25ºC and which either by itself or in admixture with any other substance, is suitable for use as fuel in spark ignition engines'. Thus, for a product to be classified as a 'motor spirit', it has to cumulatively satisfy the twin requirements stipulated below: (a) The product is present by itself or in admixture with any other substance; and (b) Such product is suitable for use as fuel in spark ignition engines. 42. The Adjudicating Authority has held that since Reformate is used as a blend stock for Motor Spirit, it would mean that Reformate is used as 'admixture' with 'motor spirit' and would, therefore, be classifiable as a 'motor spirit' in terms of Supplementary Note (a). 43. The expression 'admixture with ....
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....ntemplated under IS 2796. The appellant has in fact pointed out four parameters namely density, E70 (Evaporation at 70 degrees), E100 (Evaporation at 100 Degrees) and aromatic content out of these twenty one parameters prescribed by IS 2796, which are not satisfied by Reformate. Thus, as Reformate does not conform to all the specification of IS 2796, it cannot be said to be usable as a 'motor spirit'. 49. The contention of the learned special counsel appearing for the Department that the product imported by the appellant is heavy Reformate prepared for a specific use as a blend stock for the manufacture of gasoline is not a reason assigned in the show cause notice and, therefore, cannot be considered to support the impugned order. 50. Learned special counsel also contended that Reformate contains products other than Aromatic and Non-Aromatic compounds, such as Benzene, Ethyl Benzene, Ortho-Xylene, Para-Xylene Meta Xylene etc. This submission cannot also be accepted for the reason that the aforesaid compounds are aromatic compounds. 51. Learned special counsel for the Department also placed reliance upon the Customs Tariffs of UAE and Singapore to contend ....