TMI Blog2023 (10) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... from bitumen mineral crude. Thereafter the test report obtained by the DGCEI on their simultaneous investigation dated 28-9-2007 issued by the same laboratory but through its Senior Chemical Examiner (Grade I) Dr T A Sreenivasa Rao states that the sample is in the form of dark coloured free flowing liquid. It is composed of crude mineral hydrocarbon oil. - both the test reports obtained by the DGCEI as compared by them categorized the product ARH C Oil in the category of crude oil. We therefore find that the DGCEI in their file noting found the product to be composed of crude mineral hydrocarbon oil. Accordingly all the above 3 test reports i.e. 2 from the Central Excise Laboratory Vadodara and 1 from Caleb Brett found the samples to be clearly of Crude oil and not other petroleum product. On detailed analysis, it is found that not only the explanatory note to Ch 2709 covers the appellant s residue bottom oil to be same as crude oil but the Note to Ch 2710 only covers within its ambit products and preparations which by weight have more than 70 % of petroleum oil or oils from bituminous minerals. And in fact there is a clear exclusion to products below 70% of such weight cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been remanded 3 times by this tribunal and lastly the case was heard and allowed by way of remand of all 4 SCN s vide Order dated 11-4-2022 passed by this Bench, specifically directing Cross Examination of the Chemical examiner which was denied earlier. 2.1 He submits that upon this remand, finally after some deliberation the Cross examination of the Chemical Examiner (MR G P Sharma) was duly conducted on 11-4-2022, by the Advocate of the Appellants. He submits that the net result of the cross-examination of the said chemical examiner is clearly now in favour of the appellant, as he was not able to entirely support his own Opinion dated 5-1-2007 for his Test Report dated 3/10/2006, suggesting the impugned product to be classifiable as other petroleum product. Essentially he was also not able to disprove the other 3 test reports clearly existing in this case in favour of the Appellant already. It is also submitted that the role of the Chemical Examiner is only to give opinion on the test result and not classify the goods himself. 2.2 He also submits that the personal hearing of the adjudication upon this remand was granted by the adjudicating authority on 7-3-2023, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.8 The Learned Counsel for the Appellant also took us through the Tariff heading 29 along with the explanatory notes to Chapter 29. 2.9 He submits that the Ld Commissioner is in clear error to find, only upon the opinion of the Chemical Examiner (Grade II Mr G P Sharma) and not above 3 clear test reports to seek a different classification. He submits that all these test reports of the product sample are that the same is a derivative of Petroleum Crude oil . It therefore only warrants clear classification only under CETH 27090000 which defines other oils and not under CETH 27101990 suggested by the Revenue, which are for petroleum products derived from other than Crude. Hence the entire attempt to seek to classify products obtained from Crude and bituminous minerals under Chapter 27101990 which is for other than Crude is a clear case of seeking to do mis-classification when the exact chapter exists to define these products under Central Excise Tariff item 27090000. 2.10 Shri Dave, referring to the explanatory notes and its interpretation is given in paragraphs 50.5 to 50.8 of chapters 2709 2710 submits that admittedly when even the explanation clearly suggests these pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes (Supra). He submits that when all test reports of the products are that the same is a derivative of Petroleum crude oil there cannot be any other classification. It therefore only warrants clear classification only under 27090000 which defines other oils and not under 27101990 which are for others i.e. products derived other than from Crude. Hence the entire attempt to seek to classify products obtained from crude under chapter 2710 which is for other than Crude under the impugned order, is a clear case of seeking to do mis-classification, when the exact chapter exists to define these products under Chapter 27090000. 2.16 He further submits that equally the adjudicating authority has erred in paragraph 51 of his findings under the Order-In-Original, that the decision of Punjab Aromatics V/s State of Kerala Appellant s own case as issued by the Gujarat VAT Tribunal, would not apply here, even when it was similarly found that the process of re-heating and removing of water impurities as in their case, would not amount to manufacture. Hence yet to hold that the resultant comingled crude oil and ARH C oil is now a different product, after removing the water content fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely no dispute that this distillation/dehydration process is carried out, not for the entire quantity, but only for the miniscule quantity (2 to 5% of the whole quantity) of crude oil, which is the bottom water obtained through the aforesaid decantation process. The remaining 95 to 98% of the quantity of crude oil which is obtained through decantation by removal of water, is not subjected to this second part of the process i.e. distillation. 4.2 The aforesaid bottom water in the miniscule quantity (2 to 5%) is subjected to distillation for sole purpose of removal of water by evaporation and then this remainder quantity is again remixed with their basic raw material Comingled Crude Oil which is the blending process. He has again taken us through their entire processing of the same. 5. We have carefully considered the rival submissions and perused the records. The issue before us is for classification of the product ARH C Oil obtained from processing of appellant s raw material comingled crude oil condensate crude oil , whether falls under CETH 27090000 as sought by the Appellant and or the same would fall under CETH 27101990 as classified under the OIO by the Ld C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riods of demand, in which it was contended that tariff item 27090000 is exclusively for crude petroleum oils and crude oils obtained from bituminous minerals , whereas on the other hand tariff heading No. 27101990 is for other products which are processed/obtained/derived from the products falling under 27090000, i.e. crude petroleum oils and from crude oils obtained from bituminous minerals. 11. It also appears to be the contention of the department that crude oil is subjected to the processes, other than those mentioned in the HSN Explanatory Note of Ch 2709, which clarifies that natural/crude oil even if subjected to any one or more of the seven processes specified there in will remain classified under the heading 27.09. However since in the present case, the product is subjected to the processes of decanting, distillation/blending and since the processes of distillation and blending are not the specified processes, the disputed product cannot be considered and classified as falling under heading 2709. 12. At this stage we again take note of the entire process adopted by the Appellant as described in the appeal papers. The same is firstly Decanting of their raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he raw materials and our product i.e., Commingled Crude Oil and Petroleum Oil respectively. They have also enclosed test reports in support of the same. Further, vide their letter dated 30-3-2007, they have intimated the Superintendent that they processed Dehydrating Plant Flow Diagram, Plant Operating procedures and copy of invoice. It has been submitted by them that the Crude Oil received from the Tank Lorries were allowed to settle down and then unloaded to Crude Oil tanks. Then it is heated up to temperature of 150 C to vaporize the water in the Crude Oil; the water vapours evaporated from the Re-boilers are separated from the top. The separated water vapours are circulated through condenser. From the above said, it appears that the process undertaken is only Dehydration and not akin to Distillation. We find that in the above process, only water is removed from the Crude Oil and is collected and rechanneled. As normally understood, Distillation is the technique of heating a liquid to create vapour which is collected when cooled separate from the original liquid. It is based on the different boiling point or volatility and values of the components, the technique may be used to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing are those who have undergone any process other than those specified in the Explanatory Note to Heading 27.09. In view of the above, it is clear that for the products to fall under 27.10 they have to undergo the processes which are other than those listed under 27.09. We find that in the instant case, the processes undertaken by appellants are not those beyond the cases listed therein. Therefore, we have no hesitation in holding that the impugned product is rightly classifiable under CTH 2709 00 00. We also find that the case law submitted by the Learned Counsel for the appellants in this regard is squarely applicable. In yet another decision relied upon by the Learned Counsel for the Appellant in the case of Rudraksh Petroleum V/s CCE Indore (Supra) we find the same identical to this case. The issue before the Tribunal in this case was : 2. The matter here concerns mainly with the classification of the item namely Residual Crude Petroleum Oil (RCPO)/ Residual Fuel Oil (RFO)/ Residual Bottom Oil (RBO). The Commissioner through his respective impugned orders-in-original held the classification of the item commonly called RCPO/RFO/and RCBO under Chapter Heading 2710 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il. It has therefore been contended that the same has the characteristics of Fuel Oil . The department did not mention the flash point of fuel oil before concluding that RCPO has the characteristics of Fuel oil. The Flash point of Fuel oil is 66 centigrade hence obviously does not conform to the characteristics of residual crude petroleum oil. Besides, the Supplementary Note (g) under Chapter 27 denotes that : Fuel oil means any hydrocarbon oil conforming to the Indian Standards specification of Bureau of Indian Standards IS : 1593 : 1982 (Reaffirmed in the year 1997) . On the above fact of that case, the Tribunal found under paragraph 5 as under: 5. The main issue here is classification of the goods namely RCPO/RCBO/RWO. Supplementary Note (g) to the Tariff Heading 27 of Central Excise Tariff defines and gives meaning of fuel oil as follows : CHAPTER 27 Mineral Fuels, Mineral Oils and Products of their distillation; Bituminous Substances; Mineral Waxes Supplementary Note : In this Chapter, the following expressions have the meanings hereby assigned to them : (a) ..... ....... ...... (b) ..... ....... ...... (c) ..... ....... ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in the face of the definition and meaning given for the item fuel oil in the supplementary Note (g) to Chapter 27 as discussed above. In the result, all the demands classifying the item as fuel oil 2710 19 50 are hereby dropped. When the original demands are dropped on this account, the penalties imposed under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 are also hereby set aside. 16. We find that the product ARH C Oil obtained from similar processing (Decantation Dehydration/Distillation) by the Appellant from the bottom residue of 3 to 5% of their raw material comingled or condensate crude oil is not any new product identically, but crude oil only which merits classification under CETA Ch 27090000 as already held in above identical cases. 17. We at this stage now take note of the Test reports and the Explanatory notes (HSN) to CETA 27. We find that the 1st test report issued by the Regional Laboratory of Central Excise Customs, Vadodara dated 3-10-2006 as issued by Chemical Examiner Mr G P Sharma reports that the sample is in the form of free flowing liquid. It is a mixture of mineral hydrocarbon oil, having flash point below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. He can only give his opinion. Equally we find that the Department cannot ignore the 3 test reports and seek to classify the product differently merely on such opinion of the Chemical Examiner without further evidence. 22. We extract the decision of the bench of this Tribunal here besides as laid down in many cases as below: ESSAR OIL LTD. Versus COMMR. OF CUS. (PREVENTIVE), JAMNAGAR (Reported in 2015 (326) ELT 310 (Tri Ahmd) Final Order Nos. A/12311-12312/2014-WZB/AHD, dated 18-12-2014 in Application Nos. C/MA Extn/15593-15594/2014 in Appeal Nos. C/11971-11972/2013 Gas condensate - Qatar Low Sulphur Condensate (Qatar LSC) - Processes viz. de-calcination, de-salting, dehydration, stabilisation, elimination of very light fractions, cooling and de-pressurization, etc., for obtaining condensable hydrocarbons (C4 to C20) from wet natural gas does not take end gas condensates out of Heading 2709 of Customs Tariff Act, 1975 - Harmonized System Committee of World Customs Organization, Brussels on classification of gas condensates reported that gas condensates of Heading 2709 ibid are similar in composition to some of products of Heading 2710 ibid - Dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategory of Crude oil. So had been the test report of Caleb Brett. In fact the test report of Caleb Brett clearly found that the sample does not match with any of the finished petroleum products but comes in the category of Crude oil. Hence once these 2 reports coupled with the1st test report of Mr G P Sharma, when all showed the product sample to be in the category of Crude Oil, the examiner Mr Sharma could not have opined differently. 24. We find that upon our earlier remand order when Mr G P Sharma was cross examined by the Appellant before the adjudicating authority, where under for question No. 3 he replies that no test was conducted only clarificatory answer was given to letter dated 5/01/2007 . Under Q.4. He could not contradict his Senior s Report (Dr T A Sreenivasa Rao). 25. Importantly under answer to Question 8 that Whether by simple distillation of remaining quantity of 3 to 5 %, water is removed. Do you consider such distillation will change the basic characteristics of Crude Oil because water content is removed through distillation process? He clearly said it will not change . Equally under Questions 8 9. He gave contradictory answers. Under Q.11 12 he co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 3/10/2006. 33. Also the Test report dated 28/09/2007 by the Chief Examiner (Grade I) of the very same Vadodrara Laboratory clearly shows ARH-C Oil as Crude mineral Hydrocarbon Oil. Also the Comparison of both test reports obtained by the DGCEI at the same time and its analysis clearly show ARH-C (Residue Oil), to be same as commingled crude oil since both are composed of crude mineral Hydrocarbon oil and not of any finished petroleum product and they are clearly shown to be in category of crude oil based on which the Additional Director General of DGCEI also remarked that when 2 test reports are in the favor of the appellant how can the demand be even raised and case was dropped. 34. We also find from the relevant pages from the Petroleum Handbook which clearly define that upon distillation the distilled product remains the same as the principal product whereas water separated is distilled water. Admittedly in the Appellant s case also the balance 5% quantity of ARH-C oil (Residue) so obtained from distillation is again mixed with their raw material commingled crude oil. 35. We also find the issue clearly covered in the favour of the appellant in the cases of Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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