TaxTMI 
TaxTMI 
2022 (2) TMI 264
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....al Bench at Ahmedabad in the Customs Appeal No.10240 of 2020 and allied appeals dated 28th September 2021, by which the Tribunal allowed the appeals filed by the respondents herein taking the view that the product in question is not classifiable as High Speed Diesel, but the same is just in the form of base oil. 3 The facts giving rise to the three appeals before us may be summarized as under; 4 It appears from the materials on record that one of the respondents before us namely Divinity Impex imported the subject goods declaring it to be Base Oil SN50 through a vessel by name "Al Heera" and filed bills of entry by classifying the product under the CTH 27101960. The DRI officers received information that the product imported was High Speed Diesel and not Base Oil. The DRI officers collected samples of the product in question and forwarded those to the customs laboratory at Vadodara for analysis. The Chemical Analyzer at the customs laboratory at Vadodara, vide his test report dated 10th May 2018, certified that the samples have characteristics of High Speed Diesel (HSD) - Automotive Fuel Oil confirming to IS 1460 : 2005 and was other than the Base Oil. 5 The respondents he....
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....go as High-Speed Diesel? b. Whether the Tribunal was right in setting aside the confiscation of prohibited goods and penalties imposed vide Order in Original? c. "Whether the impugned order of Tribunal relates to the determination of any question having a relation to the rate of duty of Customs or to the value of goods for purposes of assessment so as to make the present appeals maintainable before this Court under Section 130 of the Act?" 11 We have heard Mr. Devang Vyas, the learned Additional Solicitor General of India assisted by Mr. Dhaval D. Vyas, the learned Senior Standing Counsel appearing for the appellant and Mr. D. K. Trivedi and Mr. Modh, the learned advocates appearing for the assessees. 12 We propose to first look into the question as regards the maintainability of the present appeals before us under Section 130 of the Act. According to the learned advocates for the assessees, the appeals filed by the Revenue before this High Court under Section 130 of the Act, 1962 are not maintainable. It is argued that an appeal shall lie to the High Court from an order that may be passed by the Appellate Authority, except an order relating to, among other ....
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....bmitted that the expression "determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment" must be read as meaning a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. Mr. Vyas placed much emphasis on the observations made in para 11 of the said judgement. Para 11 reads thus: "It will be seen that Sub-section 5 uses the said expression 'determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment' and the Explanation thereto provides a definition of it 'for the purposes of this sub-section'. The Explanation says that the expression includes the determination of a question relating to the rate of duty; to the valuation of goods for purposes of assessment; to the classification of goods under the Tariff and whether or not they are covered by an exemption notification; and whether the value of goods for purposes/of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Although this Explanation expressly confines the de....
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.... 3 [Principal Commissioner of Customs or Commissioner of Customs] or the other party; (b) accompanied by a fee of two hundred rupees where such appeal is filed by the other party; (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (2A) The High Court may admit an appeal after the expiry of the period of one hundred and eighty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period. (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The Hi....
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.... of excluding the jurisdiction of the High Court, namely that the order which is subject matter of appeal should be relating to the rate of duty or value of goods for the purposes of assessment is not satisfied in the present case. 22 From the facts noted hereinabove, it is clear that the controversy before the Tribunal was as to whether the applicant herein had correctly described the goods imported by it. It is in the context of such controversy, that the Tribunal has rendered its findings. From the findings recorded by the Tribunal, it is clear that none of the findings touch any issue relating to the determination of the rate of duty or value of goods for the purposes of assessment. The entire controversy relates only to the description of the goods in the IGM in connection with the question as to whether such goods are liable to confiscation. None of the issues decided by the Tribunal are in the context of determination of the rate of duty or the value of goods for the purposes of assessment. In such circumstances, the appeal squarely falls within the ambit of section 130 of the Act and has, therefore, rightly been filed before this Court. 23 We are of the view that the ....
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....the goods were other than base oil and the same have been found to conform to the specifications of High Speed Diesel Oil / Automotive Fuel oil confirming to IS 1460:2005. Accordingly, the imported goods declared. as "Base Oil SN50-In Bulk" can not be considered as conforming to the declared description. 26. I find that the test analysis report has been unconditionally accepted by the noticee No.1. I further find that the department had considered the request of the importer repeatedly and got the sample re-tested and sought clarification from the testing laboratories. Further, the laboratories are well equipped and have technical expertise. These facts demonstrate that the department has taken all steps to secure natural justice to the importer. 27. Further, the noticees have given opinion of Shri Bhavadip N. Vaidya, Managing Director of HARB Global Consultants Pvt. Ltd. and Prof. M. C. Dwivedi (Ex. Department of Chemical Engineering, I.I.T. Bombay) of the aspect of various factors distinguishing Base Oil SN 50 from HSD Oil as obtained by them. However, I find that in these letters, no authentic standards specified by any Govt. Agency or Petroleum Institute of re....
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....ch have a flash point less than 37.8°C ( 100.0°F) are called flammable, whereas fuels having a flash point above that temperature are called combustible. Petrobazaar.com DIESEL FUELS (HSD/LDO) A diesel fuel is any fuel suitable for burning in diesel or compression ignition engines. Petroleum diesel fuels may be distillates or blends of distillates and residual fuels. In a compression ignition engine, air alone is drawn in to cylinder and compressed until it is very hit (about 500 deg C). At this stage, finely atomized fuel is injected at a very high pressure, which is ignited by the heat of compression and hence the term compression ignition (C.1).A spark ignition engine on the other hand, relies upon a carburetor to supply into the cylinder a mixture of gasoline vapour and air, which after compression, is ignited by a spark. The average compression ratio of a diesel engine is much higher (about 15:1) than that of a gasoline engine (about 8:1) and this is the reason for the higher thermal efficiency of the diesel engine (about 33% as compared to about 25% of the gasoline engine) which makes for economy in operation. NOME....
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....nder similar conditions. This property is normally measured by the Conradson or the Ramsbottom coke tests. In these tests, a sample of the fuel is heated without contract with air under specified conditions and the weight of carbon residue remaining after the test is expressed as a percentage of the weight of the sample. VOLATILITY As a rule, the higher the viscosity of a liquid fuel, the lower its volatility. Therefore provided the viscosity lies within specified limits, a satisfactory volatility is automatically ensured. However, the percentage recovered at some particular temperature e.g. 366 deg C, is specified in the case of HSD mainly to control engine fouling due to Incomplete combustion of the higher boiling components. TOTAL SULPHUR This is significant because it governs the amount of sulphure oxides formed during combustion. Water from combustion of fuel collects on the cylinder walls, whenever the engine operates at low jacket temperatures. Under such conditions, sulphurous and sulphuric acids are formed, which attack the cylinder walls and piston rings, promote corrosion, and thus cause increased engine wear and deposits. Tot....
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....est temperature at which it will pour or flow when chilled under prescribed conditions. It is a very rough indication of the lowest temperature at which a given fuel can be readily pumped. However, since practical conditions are quite different from those under which the laboratory test is conducted, many fuels can be pumped at temperatures well below their laboratory pour point. Sometime cloud point is measured. This the temperature at which paraffin wax begins to crystallize or separate from solution when the fuel is chilled under prescribed conditions. This may settle out in the fuel system and cause blockage of filters leading to malfunctioning or stalling of the engine. COLD FILTER-PLUGGING POINT The cold filter plugging point (CFPP) is defined as the highest temperature at which the fuel, when cooled under prescribed conditions, either will not flow through the filter (45 microns) or will require more than 60 seconds for 20 ml to pass through. This is the temperature at which wax crystals begin to cause blockage of filter. FLASH POINT This has no bearing on performance but is important largely from the point of view of safety in handling th....
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....tual imported restricted goods. 30. I find that The Directorate of Revenue Intelligence, Ahmedabad had inquired with Central Revenues Control Laboratory, New Delhi whether the Central Excise & Customs Laboratory at Vadodara and the CRCL, New Delhi had the requisite facilities for testing of samples of HSD against the parameters prescribed under the IS1460:2005 in the light of Circular No. 43/2017-Customs dated 16th November, 2017 issued under F. No. 401/243/2016-Cus-III. The Joint Director, Central Revenues Control Laboratory, New Delhi reconfirmed that the testing facilities for the sample of Base Oil and Petroleum products including HSD/Automotive Diesel Fuel were available at Central Excise And Customs Laboratory, Vadodara and the Central Revenues Control Laboratory, New Delhi on reporting date of Test Reports i.e. 11.05.2018 and 03.07.2018 respectively for the parameters reported in the respective test reports. 30.1 As discussed above, I find that the findings of the three independent laboratories of repute has held that the sample meets the specification for parameters tested as per the specification IS:1460:2005 prescribed for High Speed Diesel, as hydrocarb....
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....e details. 33. I find that in this case, certain documents describing it as 'Base Oil SN 50' were prepared. As such, to use the broad terminology to cover an imported petroleum Product is only to disguise the correct specification or declaration to be made and to give it a broad spectrum definition with a view to escape any charge of misdeclaration. All such declarations are as absurd as describing "High Speed Diesel" as 'Base Oil SN SO'. These facts reveal that the whole game plan has been to misdeclare the product so imported, under cover of coining the product broadly as 'Base Oil SN 60'. 33.1 The above deliberation leads me to conclude that Noticees have failed to discharge the onus to prove the goods imported per Al Heera were Base Oil falling under CTH27101960 of Customs Tariff Act, 1975. 34. Another contention of the noticee is that M/s IOCL have tested only 14 parameters out of 22 for HSD IS1460:2005 and since all the parameters have not been tested, it can be said that the sample is of HSD. But, I find fallacy in this argument as the noticee had not pointed out which of these remaining 8 parameters will not be satisfied, if tested. Unless that is....
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.... cannot be reclassified as HSD. The aforesaid decision has been upheld by the Apex Court reported in 2007 (4) TMI 672 (SC) by dismissing the department's appeal. 4.12 The learned counsel for the appellant also raised the valid point that when the value prescribed for flash point is same for both HSD and fuel oil and almost all the parameters prescribed for fuels oil is commonly prescribed for HSD also while the DRI has not considered the testing the samples of the imported product for the parameters prescribed for the fuel oil under IS 1593 and why they have pre supposed that the imported products only HSD and not the fuel oil. Since fuel oil is freely Importable Into India, it appears that DRI has not reckoned with the BIS Standard for fuel oil and the parameters prescribed for it. We have also observed in our above discussion why the DRI only opted to test the product for HSD and not first got the product tested as base oil. However, in our above discussion we opined that in absence of testing of all the 21/22 parameter the product cannot be classified as HSD as the same is not in confirmation to IS 1460:2005. 5.1 In view of the above settled legal position ....
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....ts of parties and/or there is some doubt or difference of opinion on the issue". But "if the question is settled by the Apex Court or the general principles to be applied in determining the question are well-settled, mere application of it to a particular set of facts would not constitute a substantial question of law." Where the determination of the issue depended upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue merely raises a question of fact. A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. But, it is not possible to turn a mere question of fact into a question of law by asking whether as a matter of law the authority came to a correct conclusion upon a matter of fact. Where the determination of an issue depends upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue ....
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....tain whether the parameters prescribed under Indian Standard IS 1460:2005 for High Speed Diesel? A: Yes. Q: As per the letter dated 04.08.2018, you were requested to verify whether the samples were HSD as per IS 1460:2005. Have you followed these instructions? A: Yes. Q: Have you signed the test reports annexed with "Relied upon Documents" at Sr. No. 25 to the Show Cause Notice dated 22.04.2019? A: Yes. Q: What does it mean 'reviewed by'? A: The samples were tested by me and checked, supervised and signed by my senior at the lab. Q: Table I of IS 1460:2005 provides total 22 parameters are to be tested for ascertaining whether the sample meets with the criteria of HSD? A: The Sample meets with the specification IS 1460:2005 for the parameters tested at our laboratory which are 14 parameters tested as per our lab capabilities. Q: Does it mean that the other 8 parameters are not important for ascertaining or deciding whether the sample meets with the criteria of HSD? A: Already provided in the report that in the lab the samples were tested as per IS 1406:2005 and there is facility availa....
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....dered as a HSD? A: Flash Point is not the only parameter which is used to measuring the sample as per IS 1460:2005. Q: Can you Say it is an automotive diesel? A: Already written in the lab report and we have tested the samples as per the parameters as per IS 1460:2005." 32 The cross-examination of Shri Singh at the instance of M/s. Gastrade International is as under: "(Before the Principal Commissioner of Customs, Custom House, Kandla) Cross Examination of Shri Gobind Singh, Manager (Lab), IOCL, Central Laboratory, Mumbai in the matter of SCN F. No.DRI/AZU/CI/ENQ- 11(INT-2/2018 dated 24.04.2019 issued to M/s. Gastrade International & Others by Shri Hardik Modh, Advocate. Q: What is your name? A: Dr. Gobind Singh. Q: Where have you been working and for how long? A: have been working in IOCL at Sewree at Mumbai since 2012. Q: How many samples have you tested In respect of petroleum products? A: I have tested large number of samples running into hundreds of samples. Q: Are you aware of letter dated 04.08.2018 written by the Assistant Director of DRI whereby it was requested t....
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....d at Abel method and PMCC method? A: If the temperature is above 66°C then PMCC is required and if the temperature is below 66°C than it is required to do with Able method. Q: Do you think so one of the ingredients for considering HSD is flashpoint? A: Can't comment on ingredients. The minimum temperature for Flash Point 35°C as prescribed in standard. We have submitted the report. Q: What is the maximum and minimum flashpoint for considering the sample as HSD? A: Only the minimum limit is talked about that is 35°C and there is no maximum limit prescribed in the standard. Q: If case, the Flash Point exceeds above 100°C, 150°C, 200°C etc. , then does it still pertains to HSD standard? A: Can't comment as above 35°C whatever the Flash Point is, it does not matter. Q: Point No. I of supplementary note of Chapter 27 of Customs Tariff Act provides that "Jute Batching Oil", "Textile Oil" are Hydrocarbon oils, which have their flash points on and above 93°C. In case flash point exceeds 93°C, what you call it? A: Can't comment. As flashpoint isn't the only parameter. We have ....
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....amples? A: A total of 14 parameters were tested as prescribed in the standard as per the Lab capabilities Q: Did certain parameters were not tested due to the testing facility of other parameters not being available at the lab? A: Yes, as the lab is a marketing lab and it is not a refining lab. Q: Have you tested the sample as per IS 1460:2005? A: This sample has been tested as per the standard IS 1460:2005 and under this specification there are total 22 tests covered out of which we have tested only 14 parameters as per our Lab capability." 34 The plain reading of the aforesaid would indicate that the expert in no uncertain terms has made himself clear that all the 14 tests which were carried out revealed only one thing that the sample was High Speed Diesel and not Base Oil, as imported by the assessees. Shri Singh was honest enough to admit that the IOCL Laboratory is equipped to conduct only 14 tests as it has no facility or means to conduct the remaining 7 tests. The question is whether the analysis could be said to incomplete or inconclusive in any manner. Could it be said that the test could be conclusive as regards the nature o....
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....issue. Thus, legal proof is not necessarily perfect proof.; often it is nothing more than a prudent man's estimate as to the probabilities of the case. 3.2 The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Batch v. Archer (1774) 1 Cowp. 63 "according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted". Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as parts of its primary burden." 37 In the case of A. N. Guha & Co. vs. Collector [1996 (86) E.L.T. 333], the CESTAT, West Zonal Branch, Mumbai held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the inputs were not received i....
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.... In the case of Collector of Customs, Madras vs. D. Bhoormul (supra), the Court further held as follows : "It cannot be disputed that in proceeding for imposing penalties, under Clause (8) of S.167 to which S. 178-A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs, absolute certainty is a myth, and as Prof Brett felicitously puts it all exactness is a fake" El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on i....
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....doubt" and "preponderance of probability" have been lucidly explained by the Apex Court in the case of State of Rajasthan vs. Mohan Lal [2009 (237) E.L.T. 435(S.C.)] as follows: "36. Doubts would be called reasonable if they are free from a zest for abstract speculation. Law cannot afford any favourite other than truth. To constitute reasonable doubt, it must be free from overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arising from the evidence, or from the lack of it, as opposed to mere vague apprehensions. A reasonable doubt is not an imaginary, trivial or a merely possible doubt, but a fair doubt based upon reason and common sense. It must grow out of the evidence in the case. 37. The concepts of probability, and the degrees of it, cannot obviously be expressed in terms of units to be mathematically enumerated as to how many of such units constitute proof beyond reasonable doubt. There is an unmistakable subjective element in the evaluation of the degrees of probability and the quantum of proof. Forensic probability must in the last analysis, rest on robust common sense and, ultimately, on the trained ....
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....the specification IS 1460 : 2005. The assessees have not been able to show anything on the basis of which we can take the view that if all the prescribed 22 tests are not carried out, the report would remain incomplete and would not be admissible in evidence or would not be conclusive of the nature of the sample. The question that is baffling us is that if these 14 tests indicate the sample to be one of High Speed Diesel, then should such evidence be discarded, ignored or overlooked only on the ground that 7 other tests could not be undertaken by the laboratories because of lack of adequate facility to conduct those 7 tests. To say so is to tell the department to prove its case with mathematical accuracy and beyond reasonable doubt. 43 As observed by the Supreme Court in D. Bhoormall (supra) that the department is not required to prove its case with mathematical precision to a demonstrable degree. The legal proof is not necessarily a perfect proof. 44 The import of the High Speed Diesel in any form has been prohibited vide the Notification dated 17th January 2017. It appears from the materials on record that the investigation was also extended to the major buyers claiming to ....