TaxTMI 
TaxTMI 
2025 (6) TMI 610
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....ineral 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 Policy ITC (HS) 2017, 'Diesel' falling under CTI 2710 1930 is allowed to be ....
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....llant 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 recovered from the residential premises of the proprietor of the appellant, (f) diary of 2018....
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....d 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 16.05.2018 as the same could not be relied upon. The Custom House Laboratory has conducted tests in relation to only 6 parameters out of the required 21 parameters as per IS 1460:2005. T....
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....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 perusal of case file, certain undisputed facts as highlighted by the Advocate for the appellant and not disputed by AR for the Revenue are summarised herein below: (i) Mineral Spirit is freely importable and classifiable under CTH ....
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.... 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, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished....
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....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 heading shall be determined according to the terms of those sub headings and any related sub headings Notes and, mutatis mutandis, to the above rules, on the understanding that only sub headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires. THE GENERAL EXPLANATORY NOTES TO IMPORT TARIFF 1. Wh....
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....nder 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) of the First Schedule to the Customs Tariff Act, 1975. Rule 1 of the GIR provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes and thus, gives precedence to this while classifying a product. Rules 2 to 6 provide the general guidelines for classification of goods under the appropriate subheading. In the event of the goods cannot be classified solely on the basi....
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..... 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 mineral hydrocarbon oil, having the following characteristics: 1. Density@15˚C - 0.8350 g/cc 2. Flash Point (PMCC) - 66˚C 3. Kinematic viscosity@40˚C - 3.5 CST 4. Distillation at 350˚C % recovered (v/v) - 90% 5. % Ash - Nil 6. Acidity - inorganic - NIL Based on the above tested parameters, the sample under reference is other than Mineral Spirit. The sample may be considered as Diesel oil. Sealed remnant returned. Yours faithfully, Sd. (V. SURESH) JOINT DIRECTOR" 8.6 The extract of the va....
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....eported 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 alone, the impugned order revising the classification of impugned goods, confirming the adjudged demands and consequent confiscation of imported goods, imposition of penalty on the appellants is not legally sustainable. 9. In this regard, we find that the Hon'ble Supreme Court of India, in an identical set of facts, in Special Leave Petition (Civil) No. 6470 of 2022 with S.L.P. (Civil) Nos. 6472 of 2022 and 32623 of 2024, in the case of Gastrade International Vs. Commissioner of Customs, Kandla vide judgement delivered on 28.03.2025 have held that since oil in question does not fully satisfy the specifications of HSD in terms of IS 1460:2005, the correct test to determine the classification of imported goods being most akin to HSD or not, have not been applied. The extract of the relevant paragraphs in said judgement is given below: "2. The issue....
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....ated 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 of the aforesaid 14 parameters, namely, flash point and distillation range, the same are not in conformity. Thus, it cannot be said there is substantial compliance with the parameters of IS 1460:2005. (v) Flash point, though may not be the most important parameter, yet, its importance in determining the nature of the Automotive oil cannot be ignored. Flash point being a very important criteria to classify petroleum products, non-compliance of the samples on this parameter would make the classification doubtful. (vi) Evasive answers and non-clarification on certain aspects of the flash point of the samples by the expert Dr. Gobind Singh certainly cast a serious doubt on the samples being identified as that of HSD. The expert himself also has not said that the samples are of HSD except for stating that the samples conform to certain specifications of the IS 1460:2005. (vii) In view of the ambigu....
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.... 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 laboratory test in three premier laboratories, these laboratories did not give conclusive finding that the product is indeed HSD and the expert also could not give a definitive opinion. Further after such a long passage of time we are doubtful whether the oil in question would still retain many of the characteristics and properties which were present at the time of import for an effective testing as aforesaid. Hence, we do not consider it appropriate to direct further testing of the imported product/oil at this point of time and such a retest may be rendered a futile exercise. In our opinion, in the facts and circumstances, it would be more appropriate to give the benefit of doubt to the appellants because of the inconclusive evidence, rather than directing for a fresh testing and seeking fresh expert opinion, as a onetime measure. 88. Before parting with these appeals, we deem it necessary to issue certain ancillary directions. We are of the view that non-examinat....
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....hs 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 Custom House Laboratory vide aforesaid test reports have tested only 6 parameters. Hence, in other words, the Custom House Laboratory has not tested all the 21 parameters required in terms of IS 1460: 2005. We are of the view that without testing all the aforesaid parameters, the test reports cannot be considered to reclassify the imported goods as Diesel Oil. In this context, the Tribunal in the following cases have consistently taken a view that all the parameters stated under the Indian Standard needs to be tested for goods to be considered under that particular heading: xxx xxx xxx xxx 22. In view of the above, the case of the department for the live consignment and for the past consignment should fail on the above ground itself, as the primary evidence in the form of test reports cannot be relied upon by the department as held in the preceding paragraphs. With respect to the goods imported by 51 bills of entry, the same in any event are well supported by independent test reports, wh....
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....s 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 Madras High Court in the case of Senior Intelligence Officer, Director General of Goods and Services Tax Intelligence v Shri Nandi Dhall Mills India Private Limited 2022 (3) TMI 444 (Mad) held that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment. Though, the judgement was pronounced in respect of GST, it goes to indicate that acceptance by the appellant during the course of recording the statement is not just enough and the same has to be confirmed by adducing independently corroborative evidence. The whole case cannot rest simply on the basis of a retracted statement. In the present case, we have perused the invoices on the basis of which the goods were cleared by the Appellants to its purchasers on payment of GST. The same have shown the goods as 'Mineral spirit' and the department has accepted the same. Even the purchasers who appeared for cross exami....
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....t 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 to be Mineral Spirit. The said reports have not been questioned by the department in the SCN or the impugned order and therefore the question of Appellant's importing any other goods other than Mineral Spirit in the 51 bills of entry does not arise. In any event, the invoices in question are for 'Ultra Low Sulfur gas oil; or 'gas oil'. Adjudication authority in the impugned order in para 5.6.8 has accepted that 'Ultra Low Sulfur gas oil; or 'gas oil' is not the same as 'HSD'. Hence, for this reason as well, we are of the view that no reliance can be placed on the aforesaid invoices for demanding duty. 26. On reliance placed by the adjudicating authority on the diary of 2016 as it stated Dubai payment/Dubai hawala to hold that the Appellants received HSD from Dubai, on perusal of the said dairy we find that the same nowhere mentions about receipt or sale of HSD by the Appellants. Furthermore, the foreign supplier of the Appellants is Skynet and as per their invoices, all payments were made in favour of the supplier in Singapo....