2020 (8) TMI 656 - AT - Customs

Principles of Natural Justice - Classification of imported goods - Naptha - cross examination of the Chemical Examiner - lacunas in the testing procedure emerged from the cross examination - introduction of new witness - primary defense of the appellant before original adjudicating authority was that as per Note 4 to Chapter 27 of the Customs Tariff Act, 1975, for the purpose of classification of the good under sub heading 2710 11 light oils and preparations the testing is to be carried out in the method prescribed under ASTM D 86 - HELD THAT - From the cross-examination of Shri. Dilip Mehta, Assistant Chemical Examiner it the apparent that he has not conducted the test himself and the test was conducted by Shri. T.K. Myelvalganan Chemical Assistant Grade-I cross examination of the Chemical Examiner Grade-I shows that while he kept insisting that the ASTM D 86 method was followed. When asked to substantiate it, he would refer to some records and logs. No records were produced, no log book was produced. Even after the entire excise the cross examination done by Revenue the impugned order could only come to the conclusion that thus during the cross examination the noticee have not be able to bring out the fact of Chemical Examiner had not followed the ASTM D 86 method . On the strength of above assertion the impugned order come to the conclusion that the ASTM D 86 method was followed. Thus, it is apparent that Commissioner after examining all the facts of the case and the cross examination of Assistant Chemical Examiner Chemical Assistant Grade-I could only reach to a conclusion that the appellant have failed to establish of ASTM D 86 method was not followed. Thus, we find the impugned order cannot be sustained in the present form. It is seen that during cross examination of the Chemical Assistant Grade-I has clearly stated that log books and the registers are maintained in their laboratory, however, appellants chose not to ask for the same and Revenue chose not to produce the same - The entire purpose of remanding the case is defeated if the facts are not brought out completely. In view of above we set aside the order and remand the matter for fresh adjudication after fresh cross examination of the Chemical Assistant Gr.-I, the person who actually undertook the tests. He will produce all the lab records necessary to ascertain actual reading recorded and equipment used during testing and to prove his assertions. Appeal allowed by way of remand.

Issues Involved:
1. Classification of imported goods as 'Naphtha' under CTH 2710 11 19.
2. Compliance with ASTM D86 testing method.
3. Validity of cross-examination of Chemical Examiner and Chemical Assistant.
4. Reliance on test reports from IOC Limited and Reliance Industries Limited.
5. Imposition of redemption fine and penalties.

Detailed Analysis:

1. Classification of Imported Goods:
The appellants imported 'Naphtha' and classified it under CTH 2710 11 19, claiming benefits under Notification No. 21/2002-Cus. The revenue contended that the goods did not meet the criteria for 'light oils and preparations' as per Note 4 to Chapter 27 of the Customs Tariff Act, 1975, which requires 90% or more by volume to distill at 210°C using the ASTM D86 method. The revenue argued that the imported goods should be classified under CTH 2710 19 90 as 'other' and imposed a higher duty rate.

2. Compliance with ASTM D86 Testing Method:
The core issue was whether the ASTM D86 method was followed during the testing of the imported goods. The Tribunal had earlier remanded the case for cross-examination of the Chemical Examiner to verify the testing method. During cross-examination, Shri. Dilip Mehta, Assistant Chemical Examiner, admitted to not being aware of the ASTM D86 method's specifics, including the grouping and proper use of thermometers. This raised doubts about the compliance with ASTM D86.

3. Validity of Cross-Examination of Chemical Examiner and Chemical Assistant:
The Tribunal's remand order directed the cross-examination of the Chemical Examiner. However, the adjudicating authority introduced Shri. T.K. Myelvalganan, Chemical Assistant Grade-I, for cross-examination, arguing that he conducted the tests under Shri. Dilip Mehta's supervision. The appellants protested this introduction, claiming it was beyond the Tribunal's remand scope. The Tribunal found that since the test report was signed by both Shri. Dilip Mehta and Shri. T.K. Myelvalganan, cross-examination of both was relevant.

4. Reliance on Test Reports from IOC Limited and Reliance Industries Limited:
The appellants argued that the test reports from IOC Limited and Reliance Industries Limited were unreliable as these entities are business competitors. Additionally, these reports did not explicitly state that the ASTM D86 method was followed. The Tribunal noted that these reports could only serve as supportive evidence and not as the sole basis for classification.

5. Imposition of Redemption Fine and Penalties:
The appellants contended that the redemption fine was imposed arbitrarily without considering the margin of profit and that penalties were unjustified. They argued that they had entered a contract specifying the import item, and any discrepancy in the imported goods' nature could not be attributed to them. The Tribunal did not delve deeply into this issue, focusing instead on the procedural lapses in testing and cross-examination.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for fresh adjudication. The adjudicating authority was directed to conduct a fresh cross-examination of the Chemical Assistant Grade-I, who actually undertook the tests, and to produce all necessary lab records to ascertain the actual readings and equipment used during testing. The appeals were allowed by way of remand.

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