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2021 (12) TMI 633 - AT - CustomsClassification of imported goods - Reformate - classification was rejected and goods classified under CTH 2710 12 19 - whether the goods to be classified under CTH 2710 12 19 or under CTH 2707 50 00? - HELD THAT - 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 - if the product Reformate is classifiable under the four digit Heading CTH 2707, it would not be really material to determine as to under which eight digit Sub-Heading it can be classified because the duty rate structure is the same for all the Sub-Heads. The Adjudicating Authority, therefore, committed an error in thereafter holding that the product Reformate would be classifiable under CTH 2710 12 19. Whether the product Reformate merits classification under CTH 2707 50 00? - HELD THAT - 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. Whether the product Reformate would merit classification under CTH 2710? - HELD THAT - Reformate is a highly rich aromatic product containing 80% or more aromatic content. It cannot, therefore, be covered under category (C) and accordingly, from the purview of CTH 2710 as well. This is for the reason that all the products covered by category (C) must contain, in addition to the substances added, at least 70% of petroleum oils covered by categories (A) and (B). Thus, even if the substances added for making the preparations are considered to be all aromatic in nature, the preparations, by virtue of at least having 70% of categories (A) and (B) oils therein must have 35% non-aromatic constituents (70% of 50%). Thus, the aromatic content at best would be 65% in the preparation of the kind covered under category (C). Reformate, however has 80% aromatic contents and, therefore, cannot be considered under category (C) - from a plain language of the expression preparations not elsewhere specified or included, containing by weight of 70% or more of petroleum oils, these oils being the basic constituents of the preparations , it is evident that even if it is assumed that Reformate is a preparation, still it will not be classifiable under CTH 2710 as the said Heading specifically excludes preparations which are elsewhere specified or included. It needs to be remembered that Reformate is specifically covered under CTH 2707 and at 8-digit level under CTH 2707 50 00. Whether Reformate can be classified under CTH 2710 12 19 as other motor spirit ? - HELD THAT - 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. 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 25 C - 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 25 C. Reformate would merit classification under CTH 2707 50 00 and not under CTH 2710 12 19 - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of Reformate under Customs Tariff Heading (CTH) 2707 50 00 vs. CTH 2710 12 19. 2. Confiscation and penalty under section 111(m) and section 28(1) of the Customs Act 1962. Issue-wise Detailed Analysis: 1. Classification of Reformate: The appellant, Reliance Industries Ltd., classified imported Reformate under CTH 2707 50 00, while the Adjudicating Authority reclassified it under CTH 2710 12 19. The key points of contention were: - Appellant's Argument: - Reformate is classifiable under CTH 2707 as per Harmonised System of Nomenclature (HSN) Explanatory Notes, which include products obtained by processing petroleum. - The requirement of distilling 65% or more by volume at 250°C is met as Reformate distills 100% by that temperature. - Reformate should not be classified under CTH 2710, as it is specifically covered under CTH 2707. - Reformate does not meet the criteria for "Motor Spirit" under CTH 2710 12 19. - Adjudicating Authority's Findings: - Accepted that "similar products" under CTH 2707 include those obtained by processing petroleum. - Rejected classification under CTH 2707 50 00 due to the distillation temperature discrepancy. - Held that Reformate is similar to Motor Spirit and classified it under CTH 2710 12 19. - Tribunal's Analysis: - The HSN Explanatory Notes to CTH 2707 include products obtained by processing petroleum, supporting the appellant's classification. - The term "at 250°C" should be interpreted as "by 250°C," aligning with the show cause notice's interpretation for CTH 2710. - Reformate meets the criteria for CTH 2707 50 00, supported by the Notification No. 12/2014 and the Finance Minister's budget speech reducing customs duty on Reformate to 2.5%. - Reformate is not a preparation under CTH 2710 as it is obtained by chemical transformation, not by adding substances to oils. - The product does not meet the definition of "Motor Spirit" under CTH 2710 12 19, as it does not satisfy all parameters of IS 2796. 2. Confiscation and Penalty: - The Adjudicating Authority ordered confiscation of imported Reformate under section 111(m) and demanded customs duty with penalty under section 28(1) of the Customs Act, with applicable interest under section 28AA. - The Tribunal found no willful misstatement or misdeclaration by the appellant, thus extended period and mandatory penalty were not applicable. - The Tribunal set aside the confiscation order as the classification under CTH 2707 50 00 was upheld. Conclusion: The Tribunal concluded that Reformate merits classification under CTH 2707 50 00 and not under CTH 2710 12 19. The impugned order dated 15.10.2020 was set aside, and the appeal was allowed.
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