2019 (9) TMI 704 - AT - Central Excise

Classification of goods - Light Diesel Oil (LDO) - the entire case is based on the opinion of the chemical examiner based on the internal test report of the appellants - Revenue neutrality - HELD THAT - For the purpose of classification of the goods under the heading 2910 1940 as LDO, the product needs to answer to the definition of LDO appearing in para (f) of the supplementary notes to Chapter 27 Central Excise Tariff Act, 1985. While the IS parameters for LDO were changed in 2008, the said definition was not amended by Revenue. Post 2008 IS 1460 2000 apply solely to HDO and for the purpose of LDO, a different IS was introduced, namely IS-15770 2008. It is seen that the Revenue has not drawn any samples and has relied on the internal reports of the appellants to arrive at the conclusion that the product SRGO answers to the parameters prescribed under IS 1460 2000. While it is wrong to test the product LDO against the parameters prescribed in IS 1460 2000 which applies solely to HDO after 2008, it is seen that the test reports of the appellant do not cover a large number of parameters prescribed in IS 1460 2000. The same also applies to the parameters available in IS 15770 2008. The argument of the appellants that the Revenue has failed to substantiate its claim that the SRGO cleared by them is LDO, is unsubstantiated. Unless all parameters mentioned in IS 1460 2000 or IS 15770 2008 are tested and conformed to specifications. Revenue neutrality - HELD THAT - The appellant have contended that after clearance of SRGO, the same is levied Central Excise duty as LDO in their other plants after the same is processed. In these circumstances, the situation is Revenue neutral. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand of Central Excise duty and imposition of penalty based on classification of petroleum product as SRGO or LDO.

Analysis:
The appellant, a petroleum products manufacturer, challenged the demand of Central Excise duty and penalty imposed by Revenue, arguing that the product cleared by them as SRGO was classified as LDO based on internal test reports. The appellant contended that the Revenue's classification was based on outdated standards, specifically IS 1460:2000, which no longer applied to LDO post the introduction of IS 15770:2008. The appellant highlighted that the internal reports did not cover all parameters specified in IS for LDO testing, and no samples were taken by the Chemical Examiner for testing. The appellant emphasized the need for conformity to IS specifications for classification, pointing out the Revenue's failure to establish the product's alignment with IS standards.

The Tribunal analyzed the classification requirement under Central Excise Tariff Act, noting that LDO must conform to IS 1460:2000 standards. However, post-2008, IS 1460:2000 applied solely to HDO, and a new standard, IS 15770:2008, was introduced for LDO. The Tribunal observed that the Revenue's reliance on internal reports for classification was flawed, as the reports did not cover all parameters specified in IS standards for LDO. The Tribunal emphasized the necessity for testing and conformity to IS specifications to establish classification. Additionally, the Tribunal considered the appellant's argument regarding Central Excise duty levied on processed SRGO as LDO in other plants, leading to a revenue-neutral situation. Consequently, the Tribunal found merit in the appeal and allowed it, emphasizing the need for proper testing and conformity to IS standards for accurate classification.

In conclusion, the judgment highlighted the importance of adherence to updated IS standards for classifying petroleum products like SRGO and LDO under Central Excise duty regulations. The case underscored the significance of comprehensive testing and conformity to specified parameters to determine accurate classification, ensuring compliance with regulatory standards and avoiding erroneous imposition of duties.