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2019 (11) TMI 778 - HC - CustomsAdvance Authorization scheme - SION - allegation that the party had mis-declared that the exported product has been manufactured out of LSFO - exemption denied on the ground that the said import had been made in violation of para 4.1.15 of the Foreign Trade Policy - It was alleged that the respondent had not used LSFO as an input in the export goods but has used VGO (Vacuum Gas Oil) generated during the refining of crude oil and had subsequently imported permissible input LSFO without payment of customs duty HELD THAT:- Insofar as the parameter of acidity is concerned, there is no inorganic acid present in the crude oil. There is no addition, use or generation of inorganic acids like HCl, H2SO4, HNO3, etc., during the refining process. Thus, there is no possibility of inorganic acid being present in the stream. Moreover, the FCC feed boils in the range of 300o C – 570o C, whereas the boiling point of water is 100o C, thus, water would have evaporated earlier in the distillation process. Inorganic acids are water soluble and not oil soluble; hence, there is no possibility of presence of water soluble inorganic acids in the Feed. Ash percentage - HELD THAT:- Ash is composed of materials that cannot be burnt out during the distillation process. These solid materials (such as dust and other impurities) are likely to be found in the residue crucible of the distillation columns. As the FCC Feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, this residue will not be present in the Feed. The principal elements contributing to high ash contents of petroleum stocks are metallic salts and organometallic compounds. The FCC feed contains metals like Nickel, Sodium etc. in the 5-50 ppmw range (0.005%). Hence, ash content is never likely to be more than 0.1% by mass. Parameter of flash point - HELD THAT:- It is expected to generate sufficient vapours which form combustible mixture at around temperature of 150o C or more. Hence, the specification of minimum 66o C will necessarily be met. Parameter of sediment percentage by mass - HELD THAT:- As the FCC feed is composed wholly of intermediate streams drawn as side cuts (excluding the residue) from distillation columns, the residue will not be present in the Feed. Water content - HELD THAT:- The water would have evaporated earlier in the distillation process. Also the products are drawn as side cuts of distillation columns at high temperatures (approximately 230-380o C). Water would have evaporated earlier at around 100oC mark. Hence, water content is not expected in LSFO (FCC Feed). The respondent had, thus, duly explained how the VGO met with all the parameters laid down in IS 1593:1982 as well as the low sulphur content required for LSFO. On behalf of the revenue, nothing was pointed out as to why the explanation submitted by the respondent should not be accepted. The adjudicating authority has relied upon the submission of the respondent that LSFO and VGO have distinct use, marketability and description and has held that it is settled law that the said product would be regarded separate and distinct manufacturing product from each other for the purpose of customs law. It, accordingly, has turned down the submission of the respondent that VGO and LSFO are the same and has held that it would establish that the export goods, that is, motor spirit was actually manufactured out of VGO only and not LSFO as declared - the adjudicating authority has failed to consider the relevant material namely, the explanation submitted by the respondent explaining that all the seven parameters required for LSFO are duly satisfied in the case of VGO. Sweet VGO used in the manufacture of motor spirit meets with the specification of LSFO as prescribed by BIS: 1593-1982 - HELD THAT:- The question of breach of DGFT notification No.31(RE-2013)/2009-14 dated 01.08.2013 whereby Para 4.1.15 came to be inserted in the Foreign Trade Policy providing that the inputs actually used in manufacture of the export product should only be imported under the Authorisation and similarly inputs actually imported must be used in the export product, does not arise. This court finds no infirmity in the approach adopted by the Tribunal in accepting the explanation put forth by the respondent, which has a duly scientific basis - In the absence of any substantial question of law arising out of the impugned order passed by the Tribunal, the appeal fails and is, accordingly, dismissed.
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