TaxTMI 
TaxTMI 
2025 (11) TMI 133
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....hy. 1.2 Customs Appeal No. C/40025/2021 has been filed by the Revenue assailing the above impugned order dated 19.10.2020 for setting aside the penalty imposed under Section 114AA ibid in de-novo proceedings vide Order-in-Original No. 14/2019 passed by Joint Commissioner of Customs, Trichy. 1.3 Both the above said appeals involving the same impugned order dated 19.10.2020 and being connected are taken up together for disposal by this common order. 2.1 The Assessee was reportedly engaged in manufacture of lubricants and also trading of oils had self-assessed imported goods declared as Carbon Black Feed Stock (CBFS) under Customs Tariff Head (CTH) 28030090. The Department drew representative samples to verify the non-hazardous nature of the imported goods which upon testing was initially confirmed as 'base oil' by the Central Revenue Control Laboratory (CRCL) and vide report dated 10.06.2014, it was suggested that the samples tested could be termed as CBFS only if it was used for manufacture of carbon Black. 2.2 Meanwhile the importer approached the Chennai High Court claiming demurrage against delay caused in clearance and the Court vide order dated 22.07.2014, directed ....
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....er Section 114AA ibid and reduced the redemption fine to Rs.2 Lakhs. 2.5 Aggrieved by the impugned order, the Assessee has filed the present appeal before this Forum. 3.1 The Ld. Counsel Mr. Hari Radhakrishnan appearing for the Assessee reiterated the grounds of appeal and submitted that the impugned order has erred in upholding the re-classification and demand of differential duty when it had overlooked the fact that the de-novo proceedings had ignored test reports dated 10.09.2014 which mentioned that the imported goods were off-specification goods, however, if used for manufacture of carbon black it may be termed as CBFS. 3.2 It was averred that the impugned order failed to consider the statements of the Chemical Examiner during his cross-examination, wherein it was mentioned that CBFS can be used for manufacturing of various chemicals and that it is incorrect to say that if it is not used for manufacture of carbon black it cannot be termed as CBFS. 3.3 It was averred that there was no report to say that the oil is RPO and the Chemical Examiner also informed the Authority that since there is no Indian Standard for CBFS it is not possible to test the oil. 3.4 It wa....
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....import is not covered under Section 114AA of the Customs Act, 1962 and hence, penalty under Section 114AA of the Act, is without jurisdiction. 3.8 It was averred that the imposition of penalty is disproportionate to the alleged offence and applying the principle of proportionality, the adjudicating authority ought not to have imposed a maximum penalty stipulated in Section 114AA of the Customs Act, 1962. 4. Ms. O.M. Reena, the Ld. Authorised Representative for the Department affirmed the findings in the impugned order and submitted that the Assessee had mis-declared their imports with an intent to evade payment of customs duty and hence the demands confirmed were sustainable and penalty imposable on the Assessee under Section 112(a) and Section 114AA ibid. Hence it was prayed for dismissal of the appeals filed by the Assessee. 5. We have carefully considered the submissions made by both the sides and also evidences available on records. 6. The issues that arise for determination in these appeals are: - i. Whether the Assessee had mis-declared the imported goods as Carbon Black Feed Stock (CBFS) or not? ii. Whether the classification adopted by the Asse....
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....013 GESU 1355632 (Barrel No. 22) Test Memo No. 1(2)/2014-15 (CIU) It has got the characteristic of Base Oil. It is other than CBFS/ RPO. No literature/ evidence for grading of Base Oil is available in this Laboratory. It is non-hazardous in nature in reference to H.W.M.R 2008. The sample u/r does not fall under the category of "waste oil/spent oil" or lubricant. 3. 4149734 dt. 21.12.2013 GESU 1355632 (Barrel No. 63) Test Memo No. 1(3)/2014-15 (CIU) The sample confirm to the requirement of Petroleum based process oil for rubber industries as per IS 15078:2001. However, if used for manufacturing of carbon black it may be termed as CBFS, which may be ascertained at your end. No literature/evidence for grading of RPO/CBFS is available in this Laboratory. It is non-hazardous in nature in reference to H.W.M.R 2008. The sample u/r does not fall under the category of "waste oil/spent oil" or lubricant. 4. 4149734 dt. 21.12.2013 GESU 1355632 (Barrel No. 85) Test Memo No. 1(4)/2014-15 (CIU) The sample does not confirm to the requirement of kinematic viscosity at 100 Deg C and density at 15 Deg C for Petroleum based process oil for rubber indust....
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....lassify the goods contained in 311 barrels as base oil under CTH 2710 1960 and proposed to reclassify the goods in 669 barrels as rubber process oil under CTH 2007 5000 and consequential demand of differential duty and imposition of penalty under Sections 112 and 114AA of the Customs Act, 1962 was proposed. The Original Adjudicating Authority confirmed the demands and imposed penalties under Sections 112(a) and 114AA ibid which was challenged before the Hon'ble High Court which ordered for re-adjudication after allowing the cross examination of CRCL official. The denovo proceedings also confirmed the duty demand and imposed penalties. On appeal, the Lower Appellate Authority refused to interfere with the reclassification and value enhancement. However, the Commissioner (Appeals) set aside the penalty imposed under Section 114AA of the Customs Act and also reduced the redemption fine to Rs. 2,00,000/-. 10. On the issue of classification and enhancement of the values, the Original Adjudicating Authority has recorded the following: - "45. It is pertinent to mention here that the samples were drawn as per the Hon. High Court Direction after taking Inventory of the Cargo in ....
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....bon Black Feed Stock either nationally and internationally and the same is based on its end-use especially when it is used in the production of Carbon Black. However, there exists a definition for Base Oil or Petroleum based process oil for Rubber Industries. 47. Section V of Indian Customs Tariff Act 1975, relates to Mineral products consisting of Chapters 25 to 27. While Chapter 25 pertains to salt, sulphur, earths and stones; plastering materials, lime and Cement, Chapter 26 relates to Ores, slug and ash. Chapter 27 is pertaining to Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes. 48. Section VI of Indian Customs Tariff Act, 1975 relates to Products of the Chemical on allied Industries and Chapter 28 deals with Inorganic chemicals; organic or inorganic compounds of precious metals, or rare-earths metals, of radioactive elements or of radioactive elements or of isotopes. 49. From the above classification of goods, Chapter 28 deals with Inorganic Chemicals and only organic compounds of precious metals. Hence, the importers classification of the organic product under Chapter 28 is wrong. The Tariff / He....
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....e Oil, Rubber Process Oil and off-specification products (CBFS) whereas importer has claimed the entire quantity imported as 'Carbon black feedstock'. The CRCL has stated there was no Indian standard for CBFS and can be termed as 'CBFS' ONLY if used in the manufacture of Carbon Black. The importer was not able to produce a written purchase order to prove their claim that they had placed order only for CBFS. The importer had stated that they had placed order orally for CBFS. The CRCL in their letter dated 04.04.2014 have mentioned that the CBFS is not a specific product but a terminology used in commerce for those raw materials which are used in the manufacture of Carbon Black and that such feed stocks are mainly composed of aromatic constituents. CBFS does not have any specification in Indian standards. It may be seen that the imported items were assorted items of 'Base Oil' (lubricant), Rubber Process Oil and 'off-specification' CBFS all of which were 'down stream' petroleum based lubricants 6.4. In the two Bills of Entries, the importer had classified the goods under Customs tariff sub-heading as 2803 0090 which is 'Carbon (Carbon blac....
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....d from bituminous minerals (other than crude) and preparations not elsewhere specified or included. As such, the classification adopted by the assessee for imported item under CTH 2803 is wrong. From Carbon Black Feed Stock, Carbon Black is manufactured which is classifiable under CTH 2803. 14. Thus, the classification adopted by the Departmental Authorities for the imported oils under CTH 27101960 as Base Oil and under CTH 27075000 as RPO/Off Specification is required to be affirmed in view of many chemical test reports as mentioned supra. We have taken note of the chemical test reports indicating that some of the imported Oils can be called as 'Carbon Black Feed Stock, if it is used for manufacturing of Carbon Black. Further, in terms of Rule 3 to General Interpretative Rules for Customs Tariff, goods are to be classified under the Chapter Heading which is more specific and precise. The Heading which provides for more specific description has to be preferred to General description. In case of mixtures, the material which provides the essential character to the goods would be the determining factor for classification. The said Rule is extracted below for ease of reference: - ....
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....ported goods or even its nomenclature whether as RPO or Off Specification or CBFS will not be determining factors either for classification or valuation in the background of the facts obtaining in this case as discussed supra. We do not find any merit in the Assessee's contention that the Lower Adjudicating Authority had adopted the higher of the NIDB Data as the basis was intimated to the Assessee on enhancement of the values and it was only one Bill of Entry each for Base Oil and RPO. On the issues of confiscation and penalty, some of the chemical test reports clearly indicate that Off Specification Oils can be treated as CBFS if used for the manufacture of Carbon Black. The Assessee is found to be a trader and also reportedly involved in the manufacture of lubricants. It was repeatedly submitted that the imported oils were meant for their actual use and not for sale. As such alleging that the importer had intentionally mis-declared the description and classification to evade Customs Duty is not supported. As such, confiscation and penalty imposed are not sustainable. 16. In the Appeal No. C/40025/2021, the Revenue came in appeal against the impugned Order-in-Appeal No. 68/202....