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2023 (10) TMI 801
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....008 January 2007 to March 2007 39,89,573/- V-27/15-123/Dem/OA/ 2007-08 dated 30.4.2008 April to September, 2007 31,65,484/- Total 1,72,87,474/- 1.2 The dispute in this case is about correct classification of a product described as ARH-C Crude Oil (Residue Oil obtained from distillation of Water in the Raw material Comingled Crude Oil purchased by the Appellant). The Tariff entry and chapter heading is "Petroleum Oils and Oils obtained from bituminous minerals, crude - 27090000" as claimed by the Appellant and "Other Petroleum Oils and Oils obtained from bituminous minerals (other than crude) - 27101990" as contended by the Department. 2. Shri H D Dave, Learned Counsel for the Appellant submits that earlier this case has been remanded 3 times by this tribunal and lastly the case was heard and allowed by way of remand of all 4 SCN's vide Order dated 11-4-2022 passed by this Bench, specifically directing Cross Examination of the Chemical examiner which was denied earlier. 2.1 He submits that upon this remand, finally after some deliberation the Cross examination of the Chemical Examiner (MR G P Sharma) was duly conducted on 11-4-2022, by the Adv....
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....s Caleb Brett India Pvt. Ltd., Mumbai (Govt accredited Laboratory for Oils & Petroleum Products) who also opined that the sample comes in the category of "Crude Oil". There upon the DGCEI dropped the proceedings and closed the investigation at that stage. 2.7 Learned Counsel for the Appellant has taken us through the relevant test reports dated 3-10-2006 of Regional Laboratory Central Excise & Customs Vadodara, the Opinion given upon the said Test Report dated 5-1-2007 by the Chemical Examiner (Grade II) Mr G P Sharma, the Test Report dated 28-9-2007 given by the Chemical Examiner Dr T A Sreenivasa Rao, Test Report of Caleb Brett India Pvt Ltd dated 24-7-2007 and the comparison done of the test reports by the DGCEI under letter dated 5-10-2007. 2.8 The Learned Counsel for the Appellant also took us through the Tariff heading 29 along with the explanatory notes to Chapter 29. 2.9 He submits that the Ld Commissioner is in clear error to find, only upon the opinion of the Chemical Examiner (Grade II Mr G P Sharma) and not above 3 clear test reports to seek a different classification. He submits that all these test reports of the product sample are that the same is a derivativ....
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....Commissioner has wrongly sought to distinguish the settled judicial precedents and decisions under the impugned order, by anyhow seeking to classify the products only as other petroleum products under 2710, when the said chapter clearly says other than crude and 27090000 clearly says petroleum oils obtained from minerals and Crude. Once the original product is subjected to the defined processes what remains is Crude oil itself, having majority ingredient of Crude alone. And therefore any derivative obtained from the same has to come under the category of Oils obtained from Crude only. 2.15 He submits that the Ld Commissioner finds only on further opinion of the Chemical Examiner dated 5-1-2007 and not 3 clear test reports read with the explanatory notes (Supra). He submits that when all test reports of the products are that the same is a derivative of Petroleum crude oil there cannot be any other classification. It therefore only warrants clear classification only under 27090000 which defines other oils and not under 27101990 which are for "others" i.e. products derived other than from Crude. Hence the entire attempt to seek to classify products obtained from crude under chapter....
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....ssion, he also relied upon the following judgments: Indian Oil Corporation Ltd. 2018 (363) ELT 718 (Tri. Chennai) KRAP Chem P Ltd. 2015 (325) ELT 339 (Tri-LB) SRK Petrochemicals Ltd. 2022 (381) ELT 353 (H.P.) The aforesaid submission has been taken on record and considered the same carefully. 4. The Learned Counsel for the Appellant in rejoinder submits that it is crystal clear that the whole manufacturing process is divided in two parts, i.e. decantation and distillation (Dehydration) & blending. The first part i.e. decantation, is for the entire quantity of crude oil (Raw material), by which water content in the bought out crude oil is removed by simple decantation. Thereafter, comes the second part of the process i.e. distillation (Dehydration). 4.1 There is absolutely no dispute that this distillation/dehydration process is carried out, not for the entire quantity, but only for the miniscule quantity (2 to 5% of the whole quantity) of crude oil, which is the bottom water obtained through the aforesaid decantation process. The remaining 95 to 98% of the quantity of crude oil which is obtained through decantation by removal of water, is not sub....
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....5 Degree Centigrade. It is obtained from Bitumen Mineral Crude." 9. However when the department sought a clarification vide letter F. No. IV/16-67/PI/06-07 dated 05.01.2007, the RCL through the Chemical Examiner Mr G P Sharma who had done the test and given the above Test Report, replied on the very same day vide their letter F. No. RCL/AH/C. Ex./41/05-06 dated 5.1.07 as under : (i) The product in question, i.e. the said disputed product is not a crude mineral Hydrocarbon oil and (ii) The product i.e. the said disputed product is a derivative of Petroleum Crude Oil and such product cannot be categorized in Chapter Sub-heading No. 27090000 of the Central Excise Tariff Act, 1985". 10. Accordingly the department had issued 4 different Show Cause Notices (Supra) involving different periods of demand, in which it was contended that tariff item 27090000 is exclusively for "crude petroleum oils and crude oils obtained from bituminous minerals", whereas on the other hand tariff heading No. 27101990 is for other products which are processed/obtained/derived from the products falling under 27090000, i.e. crude petroleum oils and from crude oils obtained from bituminou....
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....ir basic raw material which is comingled/condensate crude oil. Blending here is nothing but remixing of the processed residue oil back with their basic raw material and not any new product. 15. At this stage we take note of the fact that an identical issue of the very residue/bottom crude oil had come up before the Tribunal in the case of MVR Chemicals & Oils V/s CCE Bangalore (Supra) relied upon by the Appellant, wherein in paragraphs 5.1 & 5.2 the this Tribunal observed as follows: 5.1 The appellants vide their letter dated 2-3-2007 have intimated to the Department that they were intending to procure Commingled Crude Oil and after exposing the same to certain process such as Dehydration, they would clear the same to their customers; in this process there was no change in the characteristics of the raw materials and our product i.e., Commingled Crude Oil and Petroleum Oil respectively. They have also enclosed test reports in support of the same. Further, vide their letter dated 30-3-2007, they have intimated the Superintendent that they processed Dehydrating Plant Flow Diagram, Plant Operating procedures and copy of invoice. It has been submitted by them that the Crude....
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....ation oil-deposits or by the destructive distillation of bituminous minerals. The Crude Oils thus obtained remain classified in this heading even when they have been subjected to the following processes : (i) Decantation. (ii) De-salting. (iii) Dehydration. (iv) Stabilization in order to normalize the vapour pressure. (v) Elimination of very light fractions with a view to returning them to the oil-deposits in order to improve the drainage and maintain the pressure. (vi) The addition of only those hydrocarbons previously recovered by physical methods during the course of the above mentioned processes. (vii) Any other minor process provided it does not change the essential character of the product. 5.5 It is also seen that HSN 27.10 categorically states that the products covered by this heading are those who have undergone any process other than those specified in the Explanatory Note to Heading 27.09. In view of the above, it is clear that for the products to fall under 27.10 they have to undergo the processes which are other than those listed under 27.09. We find that in the instant case, the processes undertak....
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....iner are so close that the Residual oil merits classification under Chapter Heading 27.09. (vi) In the instant case, the Residual Crude Petroleum Oil is admittedly not a distillate product but a residuary material which is a residue and crude. Such a residuary material cannot be considered as Petroleum Oils other than crude. Hence, its use as fuel cannot be a clinching factory to conclude its classification under the Heading 27.10. Reliance is placed in this context on the judgment of the Hon'ble Supreme Court in case of Hindustan Petroleum Corporation Ltd. v. UOI - 1999 (112) E.L.T. 8 (S.C.). (vii) In para 7.9 of the notice, it has been stated that as per the test report of Chief Chemical Examiner, CRCL, New Delhi the flash point of Crude Oil is 25 deg. C whereas the flash point of residual crude petroleum oil/residual waste oil is 40 deg. C. which is mineral hydrocarbon oil. It has therefore been contended that the same has the characteristics of "Fuel Oil". The department did not mention the flash point of "fuel oil" before concluding that RCPO has the characteristics of Fuel oil. The Flash point of "Fuel oil" is 66 centigrade hence obviously does not conform t....
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....held to be classified under Chapter sub-heading 2710 19 50 of the Central Excise Tariff. Further, when the subject item is not fuel oil as per the definition given in Note (g) to Chapter 27 and when it is neither Base oil/nor jute batching oil and textile oil, nor lubricating oil, it may be in the "other" category, for which detailed classification is 2710 19 90 or it may be further in the category of waste oil. However, from the facts on record, we refuse to confirm its classification under the category 2710 19 90 or as waste oil also unless there is sufficient material and further both the sides are given opportunity to give their submissions on the said classifications. In the case record, there is no reference to any other classification, other than Chapter Heading 2710 19 50 and 2709 00 00. 5.3 Consequently, Revenue has failed to substantiate its stand for classification of the subject item in Chapter Heading 2710 19 50 as fuel oil especially in the face of the definition and meaning given for the item "fuel oil" in the supplementary Note (g) to Chapter 27 as discussed above. In the result, all the demands classifying the item as fuel oil 2710 19 50 are hereby dropped....
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....aleb Brett found the samples to be clearly of Crude oil and not other petroleum product. 20. We find that the revenue in spite above clear position, had issued the notices only upon the further Opinion obtained by the Department to the 1st Test Report dated 3.10.2006 issued by the Chemical Examiner, Mr G P Sharma, Regional Laboratory Vadodara. Mr G P Sharma had upon being asked to clarify suggested in his letter dated 5-1-2007 that: a. The Product in question is not a Crude mineral hydrocarbon oil. b. The Product is a derivative of Petroleum Crude Oil and such product cannot be categorized in CH 27090000 of the CET. Accordingly it was only upon this further opinion and not the test reports that the department issued the notices and seeks to classify the product as derivative of Other Petroleum products under CH 2710191990. 21. However we find that the Chemical Examiner firstly himself cannot classify the goods in question as is done by him. He can only give his opinion. Equally we find that the Department cannot ignore the 3 test reports and seek to classify the product differently merely on such opinion of the Chemical Examiner without further evidence. ....
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....ods and not on classification of goods. [para 8.1] Also in the case of R.C.F. LTD. Versus COMMISSIONER OF CUSTOMS, NHAVA SHEVA reported in 2005 (189) ELT 215 (Tri Mum) it was held as under: Muriate of potash - Test by Fertilizer Control Lab and statement of foreign supplier indicating it to be only Muriate of potash and not Industrial Grade Potassium Chloride - Same confirmed by Dy. Chief Chemist of Customs Laboratory in his cross-examination - HELD: In absence of its definition of composition, it was to be understood as per people dealing with it - Benefit of Notification No. 11/97-Cus. allowed. [para 2] Samples - Testing - Two samples drawn from same lot - Different results given by a professional laboratory and Customs House Laboratory - HELD : Results of former to be given preference as latter is only a general purpose laboratory. [para 2.1] 23. We also find that the Senior Chemical Examiner (Grade I) Dr Rao had clearly tested and opined that the product comes in the category of Crude oil. So had been the test report of Caleb Brett. In fact the test report of Caleb Brett clearly found that the sample does not match with any of the finished petroleum prod....
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....ained from bituminous minerals which are not covered by more specific heading". 30. Equally under Part II Note (b) there is a clear exclusion to "products and preparations containing less than 70%by weight of petroleum oils or similar oils from bituminous minerals". 31. Hence we find on detailed analysis that not only the explanatory note to Ch 2709 covers the appellant's residue bottom oil to be same as crude oil but the Note to Ch 2710 only covers within its ambit products and preparations which by weight have more than 70 % of petroleum oil or oils from bituminous minerals. And in fact there is a clear exclusion to products below 70% of such weight content. 32. Also the 1st test Report dated 3/10/2006 of CRC Vadodara shows ARH - C Oil to be mixture of "Crude Mineral Hydrocarbon having Flash Point below 25% C obtained from Bitumen Mineral Crude. However thereafter only the Opinion of Chemical Examiner cannot decide classification, when the same is also contradictory to his own report dated 3/10/2006. 33. Also the Test report dated 28/09/2007 by the Chief Examiner (Grade I) of the very same Vadodrara Laboratory clearly shows ARH-C Oil as Crude mineral Hydrocarbon Oil. ....