TMI Blog2021 (9) TMI 1267X X X X Extracts X X X X X X X X Extracts X X X X ..... h 14 parameters were tested as per IS 1460:2005 but in absence of testing of remaining 8/7 parameters it cannot be concluded that the goods is HSD. Upper limit of flash point - HELD THAT:- In the present case even though the Flash point tested was above 93 C on that basis the goods cannot be classified as HSD. We also observed that the department with the pre- determined mind got the goods tested for HSD. Whereas in the first attempt since the goods was declared as base oil the sample should have been tested with parameters of base oil also and if the parameters are not meeting for the base oil than only the department should have resorted to carry out the test for classifying the goods either under HSD or any other classification. In the case of GULF FIRST PETRO PRODUCTS INDIA P. LTD. VERSUS CC., ST. EX., COCHIN [ 2015 (2) TMI 297 - CESTAT BANGALORE] , the dispute was whether the goods are base oil or lubricating oil on the chemical test by the customs laboratory. The flash point of the imported product was found to be above 94 C as per chapter note 27 lubricating oil means any oil which is ordinarily used for lubrication excluding hydrocarbon oil which has its flash poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three cases is common and the goods is in the form of comingled oil in a common storage, for the ease of reference we are taking the facts from the appeal of M/s Rajkamal Industrial Pvt. Ltd. The appellant had imported base oil SN50 vide vessel Al Heera and had filed bills of entry by classifying the above product under CTH 27101960. On an intelligence that the product is HSD and not base oil, the DRI officers boarded the vessels and drew the representative samples from each of the 10 tanks contained in the vessel vide panchnama dated 05/05/2018 and sent one set (10 bottles) of sample to Customs lab at Vadodara vide Test Memo 1 to 10 dated 07/05/2018. The said imported goods were seized by the DRI vide Seizure Memo dated 15.05.2018. The Chemical Examiner at Customs Lab Vadodara vide his test reports dated 10/05/2018 had communicated that the samples have characteristics of HSD/Automotive Fuel Oil confirming to IS 1460:2005 and the samples were other than Base Oil. The appellant requested for retest of the samples at Central Revenues Control Laboratory (CRCL), New Delhi or Indian Institute of Petroleum, Dehradun and accordingly the second set of samples (10 bottles) were sent to C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Customs, Kandla in exercise of the powers vested with him under the first proviso to Section 110(2) of the Customs Act extended the time limit for issuance of SCN in respect of seized goods for a further period of 6 months upto 3/5/2019 and the same was communicated to the appellant vide letter dated 26/10/2018. The appellant had preferred an appeal against the said letter before this Tribunal who heard the matter finally on 12/3/2019 and vide their Final Order No. A/10953/2019 dated 3.6.2019 set aside the impugned order and allowed the appeal. 1.4 In the meanwhile, the Directorate General of Revenue Intelligence (DRI) issued the SCN dated 22/4/2019 on the appellant proposing to classify the imported goods under CTH 27101930 as High Speed Diesel (HSD) and to confiscate the imported goods which were seized vide panchanama dated 15.5.2018 under Section 111(d) (m) of the Customs Act and to impose penalty on the appellant under Section 112(a) and (b) of the Act. The notice also proposed to impose penalties under Section 112(a) (b), Section 114AA and Section 117 of the Customs Act on the directors of the appellant, on the foreign suppliers M/s. Kelorex Energy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he characteristics of HSD/Automotive Fuel Oil and it is other than base oil. In the second test report dated 3.7.2018, of the chemical examiner, CRCL, New Delhi, the samples were tested only for 10 parameters and on that basis itself it has been concluded that the samples conforms to HSD/Automotive Fuel as per IS:1460:2005 and it is other than base oil. He submits that neither it has been clarified by the above laboratories as to why only 8/7 or 10 parameters were tested nor it has been substantiated as to how it can be concluded that the imported oil is only HSD on the basis of 8/7 or 10 parameters alone. Further it has also been stated in the test report that the imported oil in question is other than Base oil but without discussing as to how it was ascertained that the imported oil is not Base Oil. In the Third test report dated 14/8/2018, the Central Laboratory, IOCL, Mumbai, who have carried out the test on the basis of the direction the Hon'ble High Court of Gujarat, also have tested the samples only for 14 out of 21/22 parameters and it was stated that they do not have facility for testing the balance parameters. It is clearly mentioned that the samples tested met the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be used a HSD or Automotive Fuel in internal combustion engines but neither the DRI nor the Adjudicating Authority is able to establish that the imported products can be used as HSD or automotive fuel. As such the ratio of the above decision is applicable in this case also and in the absence of conclusive evidence to hold that the imported product is HSD and can be used a automotive fuel, the imported base oil cannot be reclassified as HSD with incomplete test reports alone. 2.3 He submits that the Hon ble Supreme Court has been repeatedly holding that the onus is on the department to prove that the goods are classifiable under a particular tariff entry and the following are some the citations in this regard: 1. Hindustan Ferodo Ltd. 1997 (89) ELT 16 2. Garware Nylons Ltd. 1996 (87) ELT 12 3. Calcutta Steel Industries- 1989 (39) ELT 175 He also placed reliance on the decision of the larger bench of this Tribunal in the case of Brindavan Beverages Pvt. Ltd. reported in 2019 (29) GSTL 418. 2.4 He further submits that for fuel oils, there is a BIS standard namely IS: 1593. As per the said standard, 9 characteristic requirements are prescribed. He submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead it is construed as Heavy Oils. Further the Commissioner in the impugned order holds that HSD falls under the category of Class B petroleum products i.e., having a flash point of sixty-five degree centigrade or less. Despite the above test report as well as the Commissioner's finding, it is not known as to how the Commissioner has finally concluded that the imported oil in question having a flash point of 112 degree centigrade (heavy oil) is HSD class B petroleum. This is contradicting both, the test reports as well as his understanding and reasoning. In view of the above, the impugned order holding the imported base oil as HSD meriting classification under CTH 2710 1930 is not sustainable at all and merits to be set aside. For the same reason, the imported goods are not confiscable and the redemption fine and penalties imposed are not sustainable. He submits that even though the appellants have strong prima facie case on merits in their favour but they are prepared to re-export the goods. 2.6 Though the learned counsel in his submission raised the issue about jurisdiction that DRI is not proper officer for issuing the show cause notice, but on the query from the bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also referred to the cross examination of Shri Gobind Singh, Manager, IOCL who tested the goods at the time of adjudication in the case of Rajkamal Industrial Pvt. Ltd. He also submits that the samples drawn from the impugned goods tested at IOCL shows flashpoint of the impugned goods at above 112oC. IS 1460:2005 provides that the minimum flashpoint for Abel method requires 35oC whereas Pensky Martens closed cup method requires minimum 66oC. Since the product in dispute exceeds threshold limit of flashpoint as prescribed under IS 1460:2005, IOCL certified that the product as HSD. 2.12 He referred to the Petroleum Act, 1934. As per the meaning of Petroleum as defined under Section 2 of the Petroleum Act which means any liquid Hydrocarbon or mixture of hydrocarbon and any inflammable mixture (liquid, viscos or solid) containing in any liquid Hydrocarbon. He submits that any petroleum product exceeding the threshold limit of 93oC, it should not be called petroleum item. He also referred to the work order under the Petroleum Act Explosive Safety Organization (PASO)- Ministry of Commerce and Industry and submits that in the present case, flashpoint of the disputed goods is above 93oC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of Dr. Gobind Singh, DGM (Lab.), IOCL held on 07.11.2019 wherein the experts sates that the test was conducted in accordance with parameter prescribed under (IS:1460:2005); that the samples meets the standard set vide the 14 parameters; laid out in (IS:1460:2005); that in their laboratory there is facility of testing only 14 parameters that based on 14 parameters tested. The goods are HSD that only minimum flash point mentioned in parameter and there is no maximum limit prescribed in the standard for flash point; that flash point is not the only parameter used for measuring the sample as per (IS:1460:2005). He submits that the entire submission of the appellant only harps on the parameter relating to flash point. The appellant is silent on the fact that the report of the IOCL gives finding on 13 other parameters. There is no averment raised by the respondent that in respect of 13 parameters which has been tested (other than flash point) the characteristics does not fulfill the requirement. Further, even if in respect of the flash point the appellant s averment does not stand on legal test; The DGM of IOCL clearly states that the parameter only gives the minimum flash point. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is not otherwise permissible under the provision of Customs Act. 4.1 We find that entire case was decided on the basis of test conducted initially by the Central excise and Customs Laboratory at Vadodara and CRCL New Delhi. Subsequently on the intervention of Hon ble Gujarat High Court in the petition filed by the appellant and as per direction of Hon ble High Court the test was conducted at IOCL, Mumbai. As per IS 1460:2005 there are 21 Parameters and as per amended IS 1460:2017 it is 22 parameters. However, IOCL Lab tested 21 parameters as per IS 1460:2005. The adjudicating authority decided the confiscation on the basis of test report given by IOCL laboratory. Therefore, relevant test report of IOCL Laboratory is scanned below:- From the above report it is observed that the test was conducted as per specification of IS: 1460:2005 as amended by IS: 1460:2017. There are total 21/22 parameters which are the requirement for testing of the goods to determine that the goods are HSD. However, out of 21/22 parameters only 14 parameters were tested and for the remaining parameters it is clearly stated in the report that the IOCL has no facility for testing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. On the one hand, from the trade and market enquiries made by the Department, from the report of the Chemical Examiner, CRCL and from HSN, it is' quite clear that the goods are classifiable as Denatured Salt falling under Chapter Heading No. 25.01. The Department has not shown that the subject product is not bought or sold or is not known or is dealt with in the market as Denatured Salt. Department s own Chemical Examiner after examining the chemical composition has not said that it is not denatured salt. On the other hand, after examining the chemical composition has opined that the subject matter is to be treated as Sodium Chloride. From the above judgment of the Apex court it is the settled position that the burden of proving the classification is on the department and not on the assessee. Similar view was taken by the Hon ble Supreme Court in the case of PUMA AYURVEDIC HERBAL PVT LTD 2006 (196) ELT 3(SC) wherein para 8 the Hon ble Supreme Court opined as under : 8 . On the other hand the revenue led no evidence of any sort to rebut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L Laboratory is not conclusive the appellant have cross-examined. Shri Gobind Singh, DGM (Lab), who tested these goods at the time of adjudication. He stated that this 8/7 parameters were not tested in the laboratory of IOCL because IOCL did not have such facility to examine this goods. He didn t even know the Function/ importance of 8/7 parameters provided under IS- 1460:2005. Relevant extracts of the question placed before Shri Gobind Singh and his answered are as under: Questions Answers Table 1 of IS: 1460:2005 provides total 21 parameters are to be tested for ascertaining whether the samples meet with the criteria of HSD? The samples meets with the specification of IS; 1460:2005 for the parameters tested at our laboratory which are 14 parameters tested as per our lab capabilities. Does it mean that the other parameters are not important for ascertaining or deciding whether the samples meet with the criteria of HSD? Already provided in the report that in the lab the samples were tested as per IS :1460:2005 and there is facility available only for testing 14 parameters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petroleum act explosive safety organization (PASO- Ministry of Commerce And Industry) provided types of petroleum products which fall under petroleum class A, B and C. By the PASO HSD has been specified under petroleum class b it means flash point of 23 C and above but below 65 C would be considered as HSD if 21/22 parameters provided under IS 1460:2005 are complied. In the present case the flash point of the disputed goods is above 93 C for this reason also the goods cannot be classified as HSD. The learned AR countering the above submission argued that classification of the goods for purpose of the customs has to be strictly made on the basis of definition provided in Customs Tariff Act and no resort can be made of any other Act such as Petroleum Act. We find that since the test report by IOCL is incomplete and inconclusive, in such case it is just and proper in the interest of justice to refer to other statutory authority to determine the nature of goods as HSD. Therefore, the aforesaid submission of the learned AR is not tenable in the given facts of the present case. 4.8 In the cross examination when Shri Gobind Singh, DGM (Lab) of IOCL was asked the question related to fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis the goods cannot be classified as HSD. We also observed that the department with the pre- determined mind got the goods tested for HSD. Whereas in the first attempt since the goods was declared as base oil the sample should have been tested with parameters of base oil also and if the parameters are not meeting for the base oil than only the department should have resorted to carry out the test for classifying the goods either under HSD or any other classification. 4.10 We have gone through the judgment of Gulf First Petro Product Pvt Ltd 2014 (310) ELT 393. In this case the dispute was whether the goods are base oil or lubricating oil on the chemical test by the customs laboratory. The flash point of the imported product was found to be above 94 C as per chapter note 27 lubricating oil means any oil which is ordinarily used for lubrication excluding hydrocarbon oil which has its flash point below 93.3 C. It was held by this tribunal that product having flash point above 94 C cannot be classified as lubricating oil and the classification as base oil has been maintained. In the present case also the flash point is 112 C applying the ratio of the aforesaid judgment the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless followed the product cannot be classified as HSD. IS 1460:2005 clearly prescribes the requirements, sampling procedure and test method of Automotive Diesel Fuel. It is applicable for automotive diesel fuel for use of Diesel engine vehicles designed to run on Automotive Diesel fuel. The standard prescribes 21/22 parameters for coming to conclusion that whether the product is HSD or not. In the present case admittedly all the 21/22 parameters were not tested therefore product cannot be called as conforming to IS 1460:2005 and consequently cannot be classified as HSD. 4.10 As regard the contention of the revenue that even if remaining 8/7 parameters are not tested the other parameters which were tested are sufficient to hold the classification as HSD. We find that in this tribunal judgment in the case of Petroplus International Marketing 2006 (205) ELT 1041 CESTAT Bangalore, while dealing with the issue as to whether the imported product is super kerosene oil (SKO) or Aviation turbine Fuel (ATF) . It was held that all the 28 parameters prescribed for testing ATF have to be met with before concluding that the same is ATF and since ATF and SKO have several common parameter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into India, it appears that DRI has not reckoned with the BIS Standard for fuel oil and the parameters prescribed for it. We have also observed in our above discussion why the DRI only opted to test the product for HSD and not first got the product tested as base oil. However, in our above discussion we opined that in absence of testing of all the 21/22 parameter the product cannot be classified as HSD as the same is not in confirmation to IS 1460:2005. 5. Without prejudice to our above finding, we are of the views that even if the product is base oil or otherwise but since it was not proved by the department beyond doubt that the impugned goods are HSD; the case of department got failed. This view has been taken by this tribunal in the case of P.K Exim wherein vide order No A/12326/2021 dated 31.08.2021 passed the following order. It is a settled position that if the goods are not classifiable under the chapter heading proposed by the revenue thereafter whether the goods is classified under the chapter heading claimed by the assessee is correct or not, the case of the department will fail. This gets support from the following judgments: PEPSICO HOLDINGS PVT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the appellant for classification of goods as base oil under CTH 271019160 is maintained. The appellant have submitted that irrespective decision of classification they seek permission to re- export of goods. Though we have decided the classification as claimed by the appellant in their favour but as per the concession made by the appellant we allow the appellant to re-export the goods. 5.3 The appellant also argued that in the facts of the case the demurrage and detention charges needs to be waived. In this regard we find that as per above finding since the case of the department is not sustained the appellant s claim is Prima facie correct for waiver of demurrage and detention charges. However, the appellant is at liberty to raise this issue before the appropriate authority who, in the light of this decision may consider this aspect leniently. 5.4 Since we have decided this case on merit, we are not addressing the issue of the jurisdiction for issuance of Show Cause Notice as pointed by the Learned Authorized Representative. 5.5 As per our above discussion since we hold that goods is not classifiable as HSD as claimed by the revenue, the redemption fine and penaltie ..... 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