TaxTMI 
TaxTMI 
2022 (2) TMI 264
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....al 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 herein requested that the samples be retested at ....
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.... 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 things to the determination of any question having a relation to the rate of du....
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....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 definition of the said expression to Sub-section 5 of Section 129-D, it is proper that the said ex....
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....o 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 High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award ....
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....ot 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 assessees have sought to create a ghost that the matter relates to the determination of the rate of duty and value of goods for the purposes of assessment by advancing specious arguments, even when the ....
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...." 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 repute have been quoted for purported goods 'Base Oil SN 50' to distinguish them from HSD. Therefore, these opinions are of no value to the facts of the case. 28. Noticees have argued that Petroleum Class 'B' under Petroleum Act, 1934 means petroleum....
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.... 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. NOMENCLATURE Two main grades of diesel fuel are marketed in India, High Speed Diesel (HSD) and Light diesel Oil (LDO). The former is a 100% distillate fuel whereas the latter is a blend Of distillate fuel with a small proportion of residual fuel. END USE HSD is normally used as a fuel for high speed diesel engi....
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....quid 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. Total sulphur is expressed as a percentage of the weight of the fuel sample. CORROSIVE SULPHUR It is important that diesel fuels shall be free of these sulphur compounds which in themselves attack metal parts of the engine or the fuel system. This characteristic is tested by the Copper Strip Corrosion Test, a severe discoloration or pitting of the polished strip indicating the presence of corrosive sulphur ....
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....m 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 the fuel and minimum values are usually specified in the specification. The flash point of High Speed diesel is stipulated as min. 32 deg C and thus it falls under the category of Class 'B' of Petroleum products. While other diesel fuels have a flash point of min 66 deg C and hence fall in the category of class 'C' of petroleum products. SPECIFIC GRAVITY This is defined as a ratio of weight of given volume of oil to the weight of same volume Of water at a given temperature. Another index for measuring thi....
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....firmed 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 hydrocarbon oil. 31. Further I find that Shri Meet B. Mehta, Director of M/s. Rajkamal, Ahmedabad in his statement dated 17.05.2018 has agreed that the Test Reports of the sample drawn from the goods imported by them per vessel MT. AL HEERA, given by the Chemical Examiner, Central Excise & Customs Laboratory, Vadodara indicated that the sample has characteristics of High Speed Diesel Oil/Automotive fuel oil confirming to 1S: 1460:2005 and is other than Base Oil, thereby the goods imported is High Speed Diesel Oil. 32. I find that M/s Rajkamal has not produced ....
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....se 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 pointed out by noticee it is only a hollow argument and has no substances in it. Also M/s IOCL themselves have their refineries and producing HSD. They would have facility to test the vital parameters for determination as to whether the sample meets the specifications of IS1460:2005. Once they have performed the tests for which they have the facility and given the report that the sample meets the 14 parameters of IS1460:2005 for which the facility is available with them, I think nothing remains for determination further and it can safely be concluded that imported item was mis-declared as 'Base Oi....
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....nly 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 in the present case also irrespective of whether the base oil was correctly declared by the appellant or otherwise but since the proposed classification by the department does not sustain the case of department clearly fails, for this reason also the impugned order is not sustainable. 5.2 As per our above discussion and finding we hold that the goods are not classifiable as HSD under CTH 271031930. Consequently the claim of the appellant for classification of goods as base oil under CTH 271019160 is maintained. The appellant have submitted that irrespective decision of Classification they seek permission to reexpor....
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....ial, 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 raises a mere question of fact. The Delhi High Court laid down in DCIT vs. Marudhar [245 ITR 138] the following four tests to determine whether the question involved is one of fact or law: "As the Tribunal is the ultimate fact-finding authority, if it has reached certain findings upon examination of all relevant evidence and materials before it, the existence or otherwise of certain facts at issue is a question of fact. Any inference from certain facts is also a question of fact. If a finding of fact is arrived at by the Tribunal after improperly rejecting evidence, a question of law can arise. While the Tribunal acts on materials....
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....h 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 available only for testing of 14 parameters and for the remaining 8 parameters, the facility is not available for which I can't comment. Q: Do you know the function/characteristics of the 8 parameters provided under IS 1406:2005 that have not been tested? A: As the 8 parameters have not been tested, I can't comment in respect of these parameters. Q: On perusal of report, have you concluded that it meets with the criteria of high speed diesel of IS 1460:2005? A: Again, it is submitted in the report that the samples tested for 14 parameters as per IS 1406:2005, at the lab which itself is for high speed diesel. Q: In respect of Flash Point, two methods are prescribed, Abel as well as PMCC. Remark No. 2 of test report provides that flash point was tested by Abel apparatus metho....
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.... 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 to Mr. Vivek W. Sawant, DGM, IOCL to test the samples as requested under test memo in accordance with the parameters prescribed under IS 1460:2005 for "High Speed Diesel" and to categorize the identity of the goods. Had you tested these good only to ascertain 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. 14 to the Show Cause Notice dated 2404.2019? 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? ....
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....s 93°C, what you call it? A: Can't comment. As flashpoint isn't the only parameter. We have tested the samples that were submitted to us as per IS 1460:2005. Q: IOCL supplies HSD to various parties. Have you ever come across any situation in which you have found the Flash Point of all these test reports above 93°C and considered 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." 33 The cross-examination of Shri Singh at the instance of Divinity Impex 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- 13(INT-02/2018)/2018 dated 24.04.2019 issued to M/s. Divinity Impex & Others by Shri Kumar Pal Mehta, Practising Company Secretary and Authorized representative of M/s Divinity Impex. Q: What is your name? A: Shri (Dr.) Gobind Singh. Q: What is your qualification? A: P.hd Ch....
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....erted that all the 14 tests carried out indicated only one thing that the sample analyzed was High Speed Diesel. 35 It is a settled position of law that the burden of showing the correct classification lies only on the Revenue. It is not in dispute before us, as it cannot be, that the onus of establishing that the sample meets with the specification IS 1460 : 2005 lay upon the Revenue. The burden of proof is on the Taxing Authority to show that the particular goods or item in question is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. There should be material to enter appropriate findings in that regard and the material may be either oral or documentary. It is for the Taxing Authority to lay evidence in that behalf even before the first adjudicating authority. 36 In the aforesaid context, and more particularly, keeping in mind the test reports of the laboratories and the cross-examination of the expert, we must look into the observations of the Supreme Court in the case of Collector of Customs, Madras and others vs. D. Bhoormall reported in AIR 1974 SC 859, which reads thus: "31. It cannot be disputed that in proceeding for imposing penaltie....
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....tober 2003 in Civil Appeal No. 10585 of 1996), the Apex Court held as follows: "Whether a civil or a criminal case, the anvil for testing of 'proved', 'disproved' and 'not proved', as defined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be 'proved' when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. "The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient for a conviction in a criminal case. BEST says : There is a strong and marked difference as to the effect of evidence in civil and criminal proceedings. In the former a mere preponderance of probability, due regard being had to the burden of proof, is a sufficient basis of decision : but in the latter, especially when the offenc....
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....more than a prudent man's estimate as to the probabilities of the case. 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. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying S.106, Evidence Act, the burden to establish those facts is cast on, the person concerned; and if he fails to establish or explain those facts, an adverse inference of facts may arise ....
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....t to prove its case with mathematical accuracy. So long as the department has been able to establish its case with such a degree of preponderance, the existence of a fact could be said to have been proved. The only ground on which the Tribunal interfered with the findings recorded by the adjudicating authority is that the laboratories were not in a position to conduct all the 21 tests. The Tribunal has ignored the fact that all the 14 tests carried out in three different laboratories revealed only one thing that the sample showed the characteristics of the High Speed Diesel. If the department is able to lead evidence to this extent, the onus would thereafter shift upon the assessees to establish that these 14 tests cannot be said to be conclusive of the fact that the subject goods is High Speed Diesel. No such attempts have been made by the assessees. 41 Once again, at the cost of repetition, we state that Mr. Singh, as an expert, has deposed in clear terms that the sample met with the specification IS 1460 : 2005 i.e. with the parameters tested at the IOCL, Central Laboratory, Mumbai. We are conscious of the fact that unless a question of law arises for the determination, the Hig....