TaxTMI 
TaxTMI 
2024 (9) TMI 187
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....ome consumption as against re-export as ordered by the adjudicating authority. As the issue involved in both the appeals arose against the same Order-in-Appeal, they were taken up together for disposal by a common order. 2. The facts of the case are that the Directorate of Revenue Intelligence (DRI), Kolkata Zonal Unit vide letter dated 28.09.2020 had informed the Principal Commissioner of Customs (Port), Custom House, Kolkata that Intelligence gathered by them indicates that "Mineral Hydrocarbon Oil" (MHO) under classification 2710 1990 imported by the Appellant-importer has been mis-declared and hence the consignments imported by the Appellant-importer are required to be examined 100% in the presence of DRI officers. 2.1. The Appellant-importer had imported consignments of Mineral Hydrocarbon Oil (Other than transformer oil) from Bahrain and filed a Bill of Entry 8789922 dated 12.09.2020 classifying the impugned goods under Tariff Item No. 2710 1990 for clearance for home consumption. The goods imported were examined under Panchnama, on 100% basis by the Shed Officers posted in CFS - Century Ply JJP, Kolkata in the presence of officer of SIB (Special Investigation Branch), DRI ....
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.... the petroleum product. 2.6. Anupam Aash, Quality Control Manager, IOCL, Haldia Refinery vide his Test Report dated 16.03.2021 reported as follows: 2.7. The IOCL has reported that the imported refinery product as 'Naphtha mixed with Kerosene', but has not provided the any specific name. Hence, it was felt that the test report of IOCL was of no help in reaching a conclusion regarding the classification of the impugned goods. 2.8. The copies of the Test Reports of IOCL, Haldia and CRCL, Kolkata were forwarded to the Joint Director, CRCL, New Delhi vide letters dated 17.03.2021 and 19.03 2021, with a request to provide their opinion/ clarification on the said reports for the purpose of ascertaining appropriate classification vis-a-vis Import Policy. Further, they were also requested to confirm whether the goods fall under the specified descriptions which are to be imported through STE as per latest ITC (HS) Import Policy of DGFT (Directorate General of Foreign Trade). 2.9. CRCL, New Delhi vide letter dated 31.03.2021 has opined that as per tested parameters, the sample is 'light oil preparation'. 2.10. 'Light Oil Preparation' except Naphtha are allowed to ....
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....Haldia and CRCL. New Delhi, the Department held the view that the goods imported by the Appellant-importer can be categorized as 'light oils and preparations' in terms of Sub- Heading Note 4 of Chapter 27 of the Customs Tariff Act, 1975. Accordingly, the department concluded that the goods imported by the Appellant-importer are appropriately classifiable under the Chapter heading 2710 1290. 2.14. The importer has classified the goods under Tariff Item No.27101990 which are freely importable, whereas 'light oils and preparations' are classifiable under the chapter heading 2710 12 and except Naphtha, all other light oils and preparations are allowed to be imported only by STE or persons authorised by DGFT. As the importer is neither STE nor authorised by DGFT, the department held the view that the Appellant-importer has violated the provisions of Import Policy and various provisions of Petroleum Act, 1934. 2.15. Accordingly, a Show Cause Notice dated 06.01.2022 was issued to the Appellant-importer, which was adjudicated by the adjudicating authority vide the impugned order dated 10.03.2023, wherein the Ld. adjudicating authority has passed the following order: "(i....
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....that the imported goods are not 'light oil and preparations'. IOCL Haldia vide its report dated 08.03.2021, apart from other parameters specified the recovery of more than 90% at 204 degree. The department sent the two reports of CRCL, Kolkata and IOCL, Haldia to Delhi CRCL, who declared that the goods are 'light oil and preparations' without even testing the same. The Appellant-importer submits that they requested for re-drawl of samples, as the testing was done after 5 months but the department again sent duplicate/triplicate samples and the CRCL Delhi vide its report dated 24.11.2021 i.e. after more than 12 months from the drawal of the samples, opined that the goods are light oil and preparations. The Appellant-importer submits that the reports of IOCL and CRCL, New Delhi differ on many parameters. Regarding evaporation, the IOCL test indicates evaporation of 90% at 204 degree whereas the CRCL Delhi report shows the evaporation of 90% at 210 degree; in both the reports, there is no mention of any method of testing adopted by them. The CRCL tested the IBP ranging from 58 to 76 and FBP from 223 to 236 whereas CRCL Delhi tested the IBP as 75 and 109 and FBP as 254 ....
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....is their contention that the confiscation and penalty on this count does not survive. Even otherwise, the Appellant-importer submits, confiscation under 111(d) could be made only for prohibited goods. Under Rule 3 of Petroleum Rule 2002, there were conditions for import in a particular manner and as such there was no prohibition; under section 3 of the Foreign Trade (Development and Regulation) Rules, the provisions are to be made for prohibiting, restricting or otherwise regulating. It is contended that since the original authority allowed for re-export and appellate authority allowed for home consumption, the goods were not prohibited goods; once the goods are not considered as prohibited goods, the same could not be confiscated under 111(d) and so penalty was also not imposable. Further, the Appellant-importer had PESO license to import Petroleum Class A and for storage of the goods and PESO doesn't approve all the drums. The Appellant-importer also submits that even if the stand of department is accepted, no differential duty has been demanded; the violation could be procedural in nature not depriving department of its revenue; it is submitted that it is a settled law that the ....
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....e above Chapter Heading. The ld. adjudicating authority has also ordered confiscation of the goods imported vide Bill of Entry 8789922 dated 12.09.2020. However, he allowed the importer to re-export the goods upon payment of redemption fine of Rs.10,00,000/-. He also imposed a penalty of Rs.7,00,000/- for the various offences committed. 6.2. On appeal, the Ld. Commissioner (Appeals) held that the imported goods are appropriately classifiable under Chapter Heading 2710 1990, as declared by the importer. He set aside the order passed by the ld. adjudicating authority allowing re-export of the goods on payment of redemption fine. The Ld. Commissioner (Appeals) has allowed the imported goods to be cleared for home consumption. However, the penalty imposed under Section 112(a) of the Customs Act, 1962 for violation of the provisions of the Petroleum Act, 2002 has been upheld vide the impugned order. Aggrieved by the impugned order, the Appellant-importer has filed this appeal against the imposition of penalty. The Revenue is in appeal against the setting aside of the order of the ld. adjudicating authority for re-export and allowing the goods to be cleared for home consumption. 7. Thu....
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....clusion that the goods are liable for classification under the CTH 2710 1290. We observe that the report of IOCL Haldia was sent to CRCL Delhi for clarification, who clarified the impugned goods to be light oil without carrying out any testing. We observe that the department did not take action for almost 9 months and sent two duplicate samples to CRCL Delhi vide letter dated 09.08.2021. CRCL, New Delhi vide its report dated 24.11.2011 gave the opinion that the samples sent are light oil and preparations and accordingly, the adjudicating authority classified the goods to be light oil under the CTH 2710 1290. We observe that there was no mention of method of testing of the old samples lying with the department drawn after 12 months. The Appellant-importer submitted that the department has not followed the instructions issued by Board vide Circular No. 30/2017-Cus. Dated 18th July, 2017, for re-testing the samples. For the sake of ready reference the contents of the said circular is extracted below: Circular: 30/2017-Cus, dated 18-Jul-2017 Samples Guidelines for re-testing of samples Circular No. 30/2017-Cus, dated 18-7-2017 F.No. 450/15/2017-Cus. IV Government of India M....
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.... shall be marked as "immediate" before sending to the laboratory. In a case it may so happen that fresh samples have to be drawn, then such sampling should be done in the presence of the importer or his representative/customs broker. e. The requests for re-test of samples on the ground that the original sample was not representative should be entertained only if the consignment is still in Customs control. At the time of drawing the samples, the importer or his representative shall be present and certify that the samples drawn are representative f. The competent authority shall consider the results of the re-test without prejudice to the results of the first test in case there is a variation in the results of the first test and the re-test, the competent authority shall take the decision relying upon either of the tests specifying the grounds in writing for the decision so taken in case the competent authority is unable to decide whether to rely upon the first or the re-test results, then it may order a second re-test provided the consignment is still within the customs control. However, this option should not be resorted to in every case of variation between the first test and....
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....the goods to be light oil and preparations. We agree with the submission of the Appellant-importer that the goods being volatile in nature, testing of samples drawn 12 months before would not give the desired results. The department could have drawn fresh samples for testing, as the goods are still available with customs. Thus, we observe that the Ld. Commissioner (Appeals) has rightly rejected the Test Report of CRCL, New Delhi. 7.1.4. We observe that the Ld. Commissioner (Appeals) has relied upon the Note 4 to Chapter 27 for classifying the impugned goods under the CTH 27101990. The Ld. Adjudicating authority also relied upon the same Note 4 to classify the impugned goods under the Chapter Heading 2710 1290 For the sake of ready reference the said Note 4 is reproduced below: "Note 4. For the purposes of sub-heading 2710 12, light oils and preparations" are those of which 90% or more by volume (including losses) distil at 210 C according to the ISO 3405 method (equivalent to the ASTM D 86 method)" 7.1.5. From the plain reading of the above definition, it is apparent that the petroleum products which get distilled by 90% or more by volume at 210°C are 'light oils and prepar....
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....til at 210 °C, however, the IOCL Test Report dated 16.03.2021 has mentioned that the impugned goods are 90% distilled at 204 °C, which negates the impugned goods to be covered under the said definition since the primary & paramount condition has not been fulfilled. It is observed that the adjudicating authority has relied upon the test report of CRCL, Delhi and did not take cognizance of the test reports of CRCL, Kolkata and IOCL, Haldia on its own discretion arbitrarily. It failed to observe the comments/observation of CRCL, Kolkata, wherein it has mentioned the impugned goods as Mineral Hydrocarbon Oil' and further mentioned that samples of the impugned goods be sent to IOCL/HPCL/BPCL/IIP for identifying the specific name of the goods. The excerpts of the CRCL, Kolkata letter dated 19.02.2021 are as under:- ".... The description of the goods as "Mineral Hydrocarbon Oil was already ascertained, if required, the samples may be sent to JOCL/HPCL/BPCL/IIP Dehradun for specific name as desired and further stated that executive decision may be taken at your end." I also find that reports of CRCL (Kolkata) & IOCL (Haldia), and CRCL (Delhi) suffer from inherent contr....
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....the basis of analytical observations, it is observed that the CRCL, Kolkata and IOCL report are conclusive to determine the impugned goods to be falling under "petroleum Class A ^ prime prime but report of CRCL, Delhi is inconclusive in this regard. Further, as per Chapter Note of Chapter 27 of the Customs Tariff, for the purposes of subheading 2710 12, "light oils and preparations" are those of which 90% or more by volume (including losses) distil at 210 deg * C according to the ISO 3405 method (equivalent to the ASTM D 86 method). In this regard, IOCL report determines that 90% distillation happens at 204 deg * C but CRCL, Delhi did not determine the temperature at which the 90% distillation takes place but report that the more than 90% recovery happens at 210 deg * C which seems to nothing but an attempt to affirm the case against the importer in the instant the case, which perceives to be a prejudiced action hampering the interest of natural justice. 7.4 As such, under the above given circumstances, I find that the adjudicating authority wrongly re-determined the impugned goods as "Light oils and preparations, when the IOCL report elaborately defined the distillation perc....
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....r violation of the provisions of the Petroleum Act, 2002 or not. 8.1. We observe that the Appellant-importer imported the goods in used and reusable drums having capacity of 215-225 litres. As per Rule 2(1)(xix), petroleum in bulk means petroleum contained in a tank irrespective of the quantity of petroleum contained therein. The goods imported by the Appellant-importer in drums do not fall under the ambit of 'bulk' and the same are classified as 'Other than bulk' The Appellant-importer was having a PESO license valid up to 31.12.2025 for import of 1200.KL petroleum Class A - 1050 KL in bulk, Class B - 100 KL in bulk and Class C - 50 KL in bulk and Nil for petroleum 'Other than bulk'. Thus, the department opined that the PESO license in their possession does not adequately cover the import made under the bill of entry referred above, which renders the goods liable for confiscation. For confiscation of the goods, the findings given by the Ld. adjudicating authority is reproduced below: "61. Rules 4 & 5 of the Petroleum Rules, 2002 applicable in the present cases of import prescribe that:- ......... I find that Rule 4(1) of the Petroleum Rules, 2002 ....
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....etroleum A, B & C in bulk. In the instant case, the goods were imported in drums having capacity of 220 Litres. We observe that the Appellant-importer were having license to import and store the goods in their own name. Further, we observe that the Appellant-importer has applied for amendment in PESO license and the concerned authority vide letter dated 14.06.2022 has granted license to import the goods other than bulk in class A Petroleum. We also observe that the goods are still lying seized and after 14.06.2022 the Appellant-importer is allowed to import in non-bulk quantity also. Accordingly, we hold that there is no violation of the provisions of the Petroleum Act, 2002 and hence the confiscation and penalty imposed on the Appellant-importer does not survive. Even otherwise, confiscation under 111(d) could be made only for prohibited goods. Under Rule 3 of Petroleum Rule 2002, there were conditions for import in a particular manner and as such there was no prohibition. Under section 3 of the Foreign Trade (Development and Regulation) Rules, the provisions are to be made for prohibiting, restricting or otherwise regulating. Since the original authority allowed for re-export and....