AI Drafter 
TaxTMI 
TaxTMI 
2025 (6) TMI 610
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....l in Dubai on profit sharing basis. The appellants started importing 'Mineral Spirit Grade C' from M/s Vivan FZE, Hamriyah Free Trade Zone, Sharjah starting in the year 2017. The goods were sold as 'Mineral Spirit' by the appellants to Real Fuel Tech and in turn, Real Fuel Tech sold the same to different buyers. The appellants had imported 'Mineral Spirit' by classifying it under Customs Tariff Item (CTI) 2710 1990 and filed Bills of Entry (B/Es) No. 5951436 and 5951437 both dated 12.04.2018 for 4 containers; though B/E was yet to be filed, but IGM No.2192870 dated 19.04.2018 was filed for 6 containers, for a total quantity of 37.520 MTs contained in ten 20 feet containers, exported from United Arab Emirates (UAE). The Directorate of Revenue Intelligence, Hyderabad Zonal Unit (DRI) had collected an intelligence which indicated that the appellants are involved in smuggling of diesel falling under Customs Tariff Item (CTI) 2710 1930 into India, by mis-declaring the goods as 'Mineral Spirit' through two commercial entities viz., Aditya Marine and SAF Petroleums, Kakinada. Further, the intelligence also indicated that as per the import policy prescribed under Schedule I -- Import Polic....
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....e after hearing the rival submissions was pleased to grant bail to the appellant vide order dated 19.05.2018. Statements of some of the Purchasers of the 'Mineral Spirit' were also recorded during the course of investigation by the DRI. 3.2 On completion of investigation, Show Cause Notice (SCN) dated 17.04.2019 were issued to both the entities viz., Aditya Marine and SAF Petroleums, jointly and severally, wherein the Department had proposed to reject the classification of goods imported under the aforesaid 2 live Bills of Entry, and in respect of goods imported in the past vide 21 Bills of Entry, the department had proposed reclassification of the same from 'Mineral Spirit' to 'High Speed Diesel' (HSD) falling under CTH 27101930 of the Tariff Act, on the basis of the evidences: viz., (a) the test reports issued by the Customs Laboratory, Chennai relating to the live Bills of Entry, (b) statements of the appellants, (c) statements of the purchasers, (d) invoices issued by Gulf Petrochem FZC to Skynet relating to the sale of ultra low sulfur gas oil/ gas oil recovered from the mail ID of the appellants from the CPU seized by DRI, (e) diary for the year 2016 recover....
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.... (vii) penalty should not be imposed on them under Section 112, Section 114A, Section 117 and Section 114AA of the Act of 1962. 3.4 The said SCN dated 17.04.2019 was adjudicated by the learned Additional Director General (Adjudication) vide common Order-in-Original No. 65/SA(65)/ADG(ADJ.)/DRI, MUMBAI/2020-21 dated 09.11.2020 confirming all the proposals made in the SCN. Being aggrieved with the impugned order dated 09.11.2020, the appellants have filed these appeals before the Tribunal. 4.1 Learned Advocate for the appellants at the outset submitted that the impugned order dated 09.11.2020, passed as a common order in adjudication of the SCN dated 17.04.2019 against M/s SAF Petroleums and Shri Mohommed Abdul Khader Ansari Vs. ADG (Adjudication) was set aside by the Tribunal in their favour vide Final Order No. A/86141-86142/2023 dated 17.07.2023 [2023 (7) TMI 774 - CESTAT Mumbai]. Therefore, he pleaded that the issue is no more res integra and on such basis alone, their appeal shall be allowed. 4.2 Further, learned Advocate also stated that the adjudicating authority had wrongly rejected the classification of the live consignment, on the basis of the test reports dated....
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....arned Advocate pleaded that the appeals filed by the appellants may be allowed. 5. On the other hand, learned Authorised Representative (AR) appearing for Revenue, reiterated the findings made by the learned ADG in the impugned order and stated that on the basis of the detailed investigation and findings made, the impugned order is sustainable. Therefore, he stated that the appeals filed by the appellants may be dismissed. 6. We have heard both sides, examined the case records and the additional submissions made during the course of hearing, paper books submitted by both sides. 7. The issue involved herein is to decide the classification of goods imported by the appellants as to whether, the same merits classification under Customs Tariff Heading (CTI) 2710 1990 described as 'Mineral Spirit' as claimed by the appellants; or, is it classifiable under CTI 2710 1930 described as 'High Speed Diesel Oil (HSD)' as determined in the impugned order, for deciding on appropriate levy of customs duty on the basis of appropriate valuation of goods and to decide whether the restrictions/ conditions for import as per ITC-HS of the FTP are applicable on the impugned goods. 8.1 On peru....
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....1 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. (2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." "Section 1. Short title, extent and commencement. - (1) This Act may be called the Customs Tariff Act, 1975. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. Section 2. Duties specified in the Schedules to be levied. - The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules. xxx xxx xxx xxx THE FIRST SCHEDULE - IMPORT TARIFF (Refer Section 2) THE GENERAL RULES FOR THE INTERPRETATION OF IMPORT TARIFF Classification of goods in this Schedule shall be governed by the following principles: 1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, classifica....
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..... Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use. 6. For legal purposes, the classification of goods in the sub-headings of a hea....
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....ns is divided into Sections, Chapters and Sub- Chapters; (3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate the collection, comparison and analysis of trade statistics." 8.3 From plain reading of the above legal provisions, it transpires that in order to determine the appropriate duties of customs payable on any imported goods, one has to make an assessment of the imported goods for its correct classification under the First Schedule to Customs Tariff Act, 1975 in accordance with the provisions of the Customs Tariff Act by duly following the General Rules for Interpretation (GIR) and the General Explanatory notes (GEN) contained therein. The First Schedule to the Customs Tariff Act, 1975 specifies the various categories of imported goods in a systematic and well-considered manner, in accordance with an international scheme of classification of internationally traded goods, i.e., 'Harmonized Commodity Description and Coding System' (HS). Accordingly, goods are to be classified taking into consideration the scope of headings / sub-headings, related Section Notes, Chapter Notes and the General Rules for the Interpretation (GIR)....
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....SD', certain standard of measures as has been prescribed by Bureau of Indian Standards (BIS) is required to be fulfilled. BIS standards provide for product specifications on the basis of which the same can be classified under a particular entry. The disputed entries in the present case are of 'Mineral Spirit' and 'High Speed Diesel Oil'. BIS have prescribed Indian Standard for 'Mineral Spirit' as IS 1745:1978 and the same provides for 9 parameters. Once all parameters are fulfilled, the product can be called as 'Mineral Spirit'. Similarly, BIS have also prescribed Indian Standard for HSD as IS 1460:2005 providing for 21 parameters to be tested. Once all the parameters are tested and found as per the prescribed standards, the product can be classified as HSD. 8.5 In the present case, for live consignments, test reports are issued by the Customs Laboratory, Chennai. For example in the test report dated 16.05.2018, after testing 6 parameters has concluded that the goods imported by the appellants may be considered as Diesel Oil. The extract of the said report is as follows: "REPORT: The sample is in the form of light yellow coloured liquid. It is composed of miner....
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..../kg, Max 200 ISO 12937 xvii) Cold Filter Plugging Point (CFPP)^3), Max: a) Winter b) Summer 6°C 18°C [P : 110]/D 6371 xviii) Oxidation stability^9), g/m^3, Max 25 ISO 12205 or ASTM D 2274^9) xix) Polycyclic Aromatic Hydrocarbon (PAH), percent by mass, Max 11 IP 391 or EN 12916 xx) Lubricity corrected wear scar diameter (wsd 1.4) at 60°C, microns, Max 460 ISO 12156-1/Cor 1 xxi) Oxygen content10), percent by mass, Max 0.6 Annex B 8.7 On comparison of the legal requirement as per supplementary note (e) and BIS standards, and the test report given by the Customs laboratory, it is quite clear that firstly all the 21 test parameters which are required to be done for establishing the fact that a product is 'Diesel Oil/ HSD' have not been tested and reported by the Customs Laboratory. Further, one of the determining parameter i.e., distillation percentage recovered at 360˚C minimum at 95% has not been fulfilled, as test report dated 16.05.2018 state that it is only 90%. Therefore, we are of the prima facie view that on the basis of test report provided by the Customs Laboratory al....
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....fact with mathematical precision, held that the Department has been able to establish its case on the basis of preponderance of probability that the imported oil was not Base Oil but HSD, which could not have been imported by the appellants and upheld the order of the Adjudicating Authority. 80. However, this analysis and conclusions arrived at by the High Court are problematic for the following reasons: (i) There was no expert opinion at all that the samples which were tested were indeed of HSD. (ii) The opinion as contained in the test results was merely mentioning about conformity of the samples with certain specifications of IS 1460:2005 and not about conformity with all the specifications. (iii) Once the rule making authority had clearly delineated the requisite parameters for ascertaining the nature of the goods/substance, compliance/conformity with the stated parameters would be the requirement. (iv) There are 21 parameters laid down under IS 1460:2005 and none of the tests have shown compliance with all these parameters. The last and third test have reported compliance with 14 parameters, though as discussed above in respect of 2....
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....ity. xxx xxx xxx xxx 85. The oil in question does not fully satisfy the specifications of HSD in terms of IS 1460:2005. Hence, the correct test will be whether the oil/article in issue is most akin to HSD or not for which appropriate scientific evidence in the form of laboratory test reports and opinion of the scientific experts will be of utmost relevance. 86. For the reasons discussed above, as the results of the test are inconclusive, so being the opinion of the expert, we are unable to agree with the conclusion of the High Court. Under the circumstances, the option before this Court is, either to send the imported product again for further tests and obtain the expert opinion atleast to the effect that the imported product is 'most akin' to HSD even if it does not fulfil all the parameters under IS 1460:2005 or give a benefit of doubt to the appellants and close the proceedings against the appellants by quashing the impugned orders, since the Revenue/Customs Authority cannot take action against the appellants based on inconclusive evidence. 87. As far as the first option is concerned, as noted above, though the questioned product was sent for ....
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.... for proper testing in all the parameters in future. 89. For the reasons discussed above, we allow these appeals by setting aside the impugned common judgment and order dated 20.01.2022 passed in Revenue Tax Appeal No. 297 of 2021, Revenue Tax Appeal No. 298 of 2021 and Revenue Tax Appeal No. 299 of 2021. 90. Appeals are accordingly disposed of in the aforesaid terms." 10. We further find that on the common SCN dated 17.04.2019 and the impugned order dated 09.11.2020, this Tribunal in the case of SAF Petroleums (supra) have examined the various evidences relied upon in the SCN, test reports, statements given by appellants etc., in greater details. After detailed discussion on each of these aspects, the Tribunal have held that the none of the evidences relied upon by the department, to allege the mis-classification and under valuation resorted to by the appellants, stand the scrutiny of law and have set aside the impugned order dated 09.11.2020. The relevant paragraphs of the said Final order "20. In any event, for a product to be considered as Diesel Oil, the same requires to fulfil all 21 parameters mentioned in IS 1460:2005. In the present case, the ....
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....ce on statements of buyer, proprietor of the Appellant, co-Appellant and cash book maintained by few suppliers to support the order passed by Adjudicating authority. We have already held that test reports, cross-examination of Joint director, RTI reply from CPIO cannot be relied upon to confirm the charge of misclassification. In relation to the other evidences, we note that the statements of proprietor of the Appellant and his son (co-appellant) were retracted by them on the first available opportunity before the Magistrate, which is evident from the respective bail orders. Hence, these retracted statements cannot form the basis to confirm the charge of misclassification. The law is well settled that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability, it cannot lead to self- assessment or self ascertainment. In the case of Vinod Solanki [2009 (223) E.L.T. 157 (S.C.)], the Hon'ble Supreme Court has ruled that the initial burden to prove that the confession was voluntary is upon the department and that evidence brought by confession if retracted, must be corroborated by other independent and cogent evidence. The Hon'ble Madr....
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....ale of Gas Oil or Ultra Low Sulfar gas oil. On perusal of the records, we find that there is no invoice relating to sale of these 'Gas Oil' or 'Ultra Low Sulfur gas oil' from Skynet to Appellants nor is there any invoice from Skynet to Appellants for sale of HSD. The Department neither questioned Gulf Petrochem FZC nor Skynet to ascertain as to whether they supplied 'Gas oil' or Ultra Low Sulfur gas oil' to the Appellants instead of Mineral Spirit. We are of the view that in absence of any invoice from Skynet showing sale of goods other than Mineral Spirit and also in absence of aforesaid supplier being questioned, the invoices issued by Gulf Petrochem FZC cannot be relied upon to hold mis-declaration and consequent confirmation of the duty demand. 25. Furthermore, the invoices issued by Gulf Petrochem FZC relates to period prior to 13.04.2018 i.e., date prior to filing of live bills of entry. Hence, the said invoices cannot relate to the live consignments as all the invoices were issued prior to 13.04.2018. With respect to past consignments, we have noted above that the same were assessed and cleared on the strength of proper certificates/test reports certifying the goods....