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TMI Blog2021 (12) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... lso been demanded under section 28(1) of the Customs Act with applicable interest under section 28AA of the Customs Act. 2. The appellant imported "Reformate" under three Bills of Entry and classified the same under CTH 2707 50 00 as "other aromatic hydrocarbon mixtures". The applicable custom duties was 2.5% BCD + 14% CVD + 3% Cess + 4% SAD and the goods were cleared for home consumption on payment of duty at the rates applicable to CTH 2707 50 00. The appellant claimed that the Reformate so cleared was used at the plants of the appellant, either as a feedstock for manufacture of aromatics such as Xylene, Benzene etc. or as a blend stock for blending with Motor Spirit. The details of the Reformates so imported are as follows:- S. No. Bills of Entry No. Date Item Description CTH Quantity in MTS Assessable Value in Rupees 1. 7113801 17.10.2016 Reformate-AFS 2707 50 00 9,091.514 33,53,44,076.16 2. F-251 07.10.2016 Reformate 2707 50 00 35,877.064 97,48,06,563.46 3. F-35 28.04.2017 Reformate 2707 50 00 6,000 23,84,94,847 3. Reformate is a mixture of predominantly aromatic C5-C11 hydrocarbon compounds which are obtained by a process of catalytic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --- Motor Spirit: 2710 12 11 ---- Special boiling point spirits (other than benzene, toluol) with nominal boiling point range 55-115ºC Kg 10% 2710 12 12 ---- Special boiling point spirits (other than benzene, benzol, toluene and toluol) with nominal boiling point range 63-70ºC Kg 10% 2710 12 13 ---- Other special boiling point spirits (other than benzene, benzol, toluene and toluol) Kg 10% 2710 12 19 ---- Other Kg 10% 2710 12 20 --- Natural gasoline liquid (NGL) Kg 10% 2710 12 90 --- Other Kg 10% 2710 19 -- Other: 2710 19 10 --- Superior kerosene oil (SKO) Kg 10% 2710 19 20 --- Aviation turbine fuel (ATF) Kg 10% 2710 19 30 --- High speed diesel (HSD) Kg 10% 2710 19 40 --- Light diesel oil (LDO) Kg 10% 2710 19 50 --- Fuel oil Kg 10% 2710 19 60 --- Base oil" Kg 10% 2710 19 70 --- Jute batching oil and textile oil. Kg 10% 2710 19 80 --- Lubricating oil Kg 10% 2710 19 90 --- Other Kg 10% (emphasis supplied) 6. According to the appellant Reformate is classifiable only under CTH 2707, as the Harmonised System of Nomenclature [HSN] Explanatory Notes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point, Flash point, RON, MON and AKI are "very similar" to those of Motor Spirit. Accordingly, Reformate is usable as a fuel in spark ignition engines just as Motor Spirit; and d) The Public Sector Undertakings such as IOCL, Numaligarh Refinery Ltd., BPCL and HPCL have classified Reformate under CTH 2710 12 19. 9. The appellant filed a detailed reply to the show cause notice and some of the main submissions are as follows: (i) The HSN Explanatory Notes to Heading 2707 clarifies that in addition to distillates of coal tar or mineral tar, the said heading covers 'similar products' which are obtained by processing of petroleum. The assumption in the show cause notice that only distillates of coal tar or mineral tar are covered by Heading 2707 is, therefore, based on a mis-reading of the Explanatory Notes to HSN. Accordingly, Reformate is appropriately classifiable under the four-digit Heading 2707, particularly when it is not disputed that the weight of its aromatic constituents exceeds that of the non-aromatic constituents; (ii) The requirement in CTH 2707 50 00 that the product should distil 65% or more by volume at 250ºC, is fully met as Reforma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parlance' test, but the same has only persuasive value since world over, classification of commodities are uniformly based on HSN.; (vi) Several Public Sector Undertakings were importing and classifying Reformate under CTH 2710 12 19 and the same cannot be overlooked or ignored; and (vii) There is no willful mis-statement or mis-declaration and, therefore, neither the extended period is applicable nor is the imposition of mandatory penalty attracted. However, by claiming wrong classification, the appellant has rendered the goods liable to confiscation. 11. Shri Vipin Kumar Jain learned counsel appearing for the appellant made the following submissions: (i) The product Reformate merits classification only under the four digit CTH 2707 as the HSN Explanatory Notes to CTH 2707 clarifies that the said heading covers, in addition to distillates of coal tar or mineral tar, "similar products" obtained by processing of petroleum or by any other process; (ii) Though the Adjudicating Authority accepted this contention of the appellant, which finding has not been assailed by the Revenue, but the Adjudicating Authority committed a mistake is not acceptin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; H.P.L. Chemicals Ltd. vs. Commissioner of C. Ex. Chandigarh [2006 (197) E.L.T. 324 (S.C.)]; b) Swarna Oil Services, SM Trading Company vs. Commissioner of Customs, Mundra [2020 (6) TMI 70 - CESTAT Ahmedabad]; and c) Larsen and Toubro Ltd. vs. Commissioner of Customs, Mundra [Customs Appeal Nos. 10832 and 10833 of 2020 decided on 24.05.2021]. 12. Shri P.R.V. Ramanan, learned special counsel appearing for the Department, made the following submissions: (i) The product imported by the appellant is Heavy Reformate which is used as a blend stock and is thus required to be regarded as a preparation under the category of "Light Oils and Preparations" for processing motor spirit. Light Reformate is used as a feedstock for the manufacture of aromatics; (ii) The international practice of classification of Reformate is under CTH 2710; (iii) The appellant did not provide details of chemical products to satisfy the parameters of "Research Obtained Number [RON], Motor Obtained Number [MON] and Anti-Knocks Index [AKI] for 'motor spirit'; (iv) The appellant has not adduced any evidence to prove that the flash point of Reformate is not below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates of coal tar or mineral tar, similar products obtained by the processing of petroleum or by any other process. The relevant portion of Heading 2707 to Explanatory notes to HSN are: "27.07 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the constituents. xxxxxxxx This heading covers: (1) xxxxxxxx (2) Similar oils and products with a predominance of aromatic constituents obtained by the distillation of low temperature coal tar or other mineral tar, by the "stripping" of coal gas, by the processing of petroleum or by any other process." 16. The Adjudicating Authority dealt with this issue and accepted the contention of the appellant that the term "similar products" used in chapter Heading 2707 also includes products obtained by processing of petroleum as the said Explanatory Notes explain the classification of "similar products" obtained from distillation of coal tar and includes processing of petroleum. This part of the finding recorded by the Adjudicating Authority has not been assailed by the Department. 17. Thus, if the product Reform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the Notification No. 12/2014 dated 11.07.2014 and the budget speech of the Finance Minister made on 10.07.2014. The Finance Minister proposed to reduce the tax incidence on Reformate to 2.5% and immediately on the next date, the Customs Notification No. 12/2014 was issued providing for effective rate of basic customs duty on products classifiable under CTH 2707 50 00 as 2.5%. 23. This Notification dated 11.07.2014 seeks to amend the earlier Notification on 17.03.2012 and provides for effective rates of basic and additional duty for specified goods falling under Chapters 1 to 98. It was issued in exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act and the relevant portion of the Notification is reproduced below: "Notification: 12/2014-Cus. Dated 11.07.2014 Effective rates of basic and additional duty for specified goods falling under Chapter 1 to 98 - Amendment to Jumbo Notification No. 12/2012-Cus. In the said notification- (A) in the Table- xxxxxxxx (XV) after serial number 126 and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely:- "126A 2707 40 00 Naphthelene 5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the changes mentioned in the Annexure, cannot be used in any quasi- judicial or judicial proceedings, where only the relevant legal texts need to be referred to. 28. It is not possible to accept this contention of the learned special counsel appearing for the Department. The Notification dated 11.07.2014 was issued and it is the position emerging from the issuance of this Notification that has been clarified by the TRU Circular. Merely because the Circular states that the Annexure only provide a summary of the changes made and should not be used in any quasi- judicial or judicial proceedings would not in any manner dilute the position emerging from the Notification that has been explained in the Circular. 29. The third issue that arises for consideration is as to whether the product Reformate would merit classification under CTH 2710. 30. The show cause notice proceeds on the footing that the product is specifically covered under category (C) of the list of the primary products enumerated in the HSN Explanatory Notes to CTH 2710. According to the show cause notice, for a product to be covered under category (C), processing to an oil mentioned in category (A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature distillation of coal, by hydrogenation or by any other process (e.g., by cracking, reforming ets.). This heading includes xxxxxxxxxx Further, the heading does not include oils with a predominance by weight of aromatic constituents, obtained by the processing of petroleum or by any other process (heading 27.07). (C) The oils described in (A) and (B) above to which various substances have been added to render them suitable for particular uses, provided the products contain by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals as a basis and that they are not covered by a more specific heading in the Nomenclature. Examples of the types of products referred to are: (1) Petroleum spirit xxxxxxx (2) Lubricants xxxxxxx (3) Transformer and circuit-breaker oils xxxxxxx (4) Cutting Oils xxxxxxx (5) Cleansing oils xxxxxxx (6) Mould release oils xxxxxxx (7) Liquids for hydraulic brakes xxxxxxx" 33. The HSN Explanatory Notes to CTH 2710 make it clear that the preparations of a kind covered by category (C) are ones which are prepared by adding various substances to oils covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel under CTH 2707 50 00. 36. What also needs to be noted is that Heading 2710 consists of 3 parts namely: (i) Petroleum oils and oils obtained from bituminous minerals, other than crude; (ii) Preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; and (iii) waste oils. The expression 'products covered by the first part of this heading' in the Explanatory Note does not refer to or apply to all 'Primary Products' listed under categories (A), (B) and (C) but only to the first part of the Heading 2710 i.e., 'Petroleum oils and oils obtained from bituminous minerals, other than crude' which covers products (A) and (B). The products falling under category (C) are covered by the second part of the Heading 2710 and not the first part. Thus, the reference drawn to the aforesaid Explanatory Note by the Adjudicating Authority to justify classification of Reformate under CTH 2710 is not correct. The impugned order, thus, deserves to be quashed for this reason also. 37. The doctrine of last antecedent has also been completely mis- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be classifiable as a 'motor spirit' in terms of Supplementary Note (a). 43. The expression 'admixture with any other substance' in the definition of 'motor spirit' has to be taken as a substance other than mineral oil. This is what was observed by the Tribunal in Oil India Ltd. vs. Commissioner of Central Excise, Shillong [2002 (148) E.L.T. 802 (Tri.- Del.)] and Gail (India) Ltd. vs. Commissioner of C. Ex. & S.T., Vadodara-II [2019 (366) E.L.T. 146 (Tri.- Ahmd.) ]. The Civil Appeal filed by the Department against the decision of the Tribunal in Oil India Ltd. was dismissed by the Supreme Court both on the ground of delay as well as on the merits and the decision is reported in 2004 (170) E.L.T. A 116 (S.C.). 44. In Oil India Limited, the Tribunal held as follows: "There is also merit in the contention of the appellant that reference to admixture with any other substance is to be taken as substance other than mineral oil." 45. In Gail (India) Ltd., the Tribunal held as follows: "Thus, to qualify for the phrase 'suitable of use as motor spirit' the product needs to be tested in admixture with anything other than 'mineral oil'." 46. This apart, the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment also placed reliance upon the Customs Tariffs of UAE and Singapore to contend that the international practice of classification of Reformate is under CTH 2710. 52. What needs to be noted is that the Adjudicating Authority has observed that it would not like to place reliance on the classification practice followed in other countries, apart from USA and, therefore, reference to the Customs Tariff of UAE and Singapore would be beyond the scope of the impugned order. 53. Learned special counsel for the Department also contended that the appellant has not adduced any evidence to prove that the flash point of Reformate is not below 25ºC. 54. This contention is also not only beyond the scope of the impugned order, but even otherwise, it was for the Revenue to substantiate that the flash point of Reformate was below 25ºC. 55. Thus, for all the reasons stated above, Reformate would merit classification under CTH 2707 50 00 and not under CTH 2710 12 19. 56. The impugned order dated 15.10.2020 passed by the Adjudicating Authority, therefore, cannot not be sustained and is set aside. The appeal is, accordingly, allowed. (Pronounced on 15.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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