2019 (4) TMI 1704 - AT - Customs

Import of goods - whether the appellant has imported HSD or MGO? - HELD THAT - It is an accepted principle that he who asserts must prove and the department asserts in this case that the product is HSD and not MGO but has failed to prove so. The imported fuel deserves to be classified as MGO as claimed by the appellant and duty charged appropriately as the test report by the chemical examiner has not tested all the parameters which are required to classify the same as HSD and has also not indicated that the material is not MGO. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of imported fuel as High Speed Diesel (HSD) or Marine Gas Oil (MGO) for customs duty exemption.

Analysis:
The appellants, engaged in offshore petroleum drilling, imported rig and vessels for operations under a sub-contract with Oil & Natural Gas Company (ONGC). The Director General of Hydrocarbons issued Essentiality Certificates for the rig and vessels, mentioning the quantity of Marine Gas Oil (MGO) on board, eligible for customs duty exemption. Upon arrival at Kakinada Port, the rig and vessels were converted from foreign run to coastal run. Customs laboratory testing of fuel samples declared as MGO by the appellants revealed characteristics of High Speed Diesel (HSD), leading to denial of exemption and confirmation of differential duty. The first appellate authority upheld this decision, prompting the appellants to appeal. The central issue revolved around whether the imported fuel was HSD or MGO.

The test report indicated that the sample sent was HSD, but did not explicitly state that it was not MGO as claimed by the appellants. The appellants argued that the fuel should be considered MGO unless proven otherwise by the department. They highlighted that the test report only mentioned characteristics of HSD without conclusively denying MGO classification. Reference was made to the Indian Standards specification for HSD and the incomplete nature of the test report, which did not assess all parameters required for HSD certification. The appellants contended that based on the tested parameters overlapping between HSD and MGO, the fuel could be classified as MGO.

Citing a previous favorable decision in a similar case, the appellants emphasized the department's failure to prove the imported fuel as HSD. The departmental representative reiterated the lower authority's findings. After considering arguments from both sides, the Tribunal ruled in favor of the appellants. The Tribunal emphasized the principle that the burden of proof lies with the party asserting a claim, noting the department's failure to conclusively establish the fuel as HSD. As the test report did not cover all parameters required for HSD classification and did not negate MGO classification, the imported fuel was deemed to be MGO as claimed by the appellants. Consequently, the impugned orders were set aside, and all four appeals were allowed.

In conclusion, the Tribunal's decision hinged on the department's inability to substantiate the imported fuel as HSD, leading to the classification of the fuel as Marine Gas Oil (MGO) for customs duty purposes. The judgment underscored the importance of meeting all parameters for classification and the burden of proof in asserting a contrary classification.