2023 (2) TMI 624 - HC - Customs

Non-Release of goods - Classification of imported goods - GTL Light Paraffin - to be classified under Tariff Heading 27101990 or not - whether is GTL Light Paraffin or it is Light Diesel Oil? - correctness of the expert two reports rendered by evenly placed Test Laboratories of Custom House Laboratory,Kandla and CECL, Vadodara - Seeking to clear the subject imported goods forthwith on payment of applicable duty. HELD THAT - It is clear from the reports, which have been produced from the Central Revenue Control Laboratory, PUSA, New Delhi that all the samples sent to ascertain eleven parameters by the Directorate of Revenue Intelligence are said to be the GTL Light Paraffin with a clear opinion that it is other than the Light Diesel Oil and other than Automotive Diesel Fuel or Diesel Fuel. The inquiry of the DRI and the serious concern on the part of the DRI of use of the imported material as a Automotive Diesel Fuel or Diesel Fuel or Light Diesel Oil had resulted into the seizure of the goods and also continuing with this inquiry. The import has been made in the month of September, 2022. There were two test reports, one from CRCL, Kandla is in favour of the petitioner, however, the Kandla Laboratory having expressed its limitation on opining on all eleven parameters, the matter had been referred to the CECL, Vadodara which opined other than what the CRCL, Kandla had and hence, the directions were issued by this Court for the report to be obtained from the Central Revenue Control Laboratory, New Delhi, it is being a appellate laboratory in all respect, its opinion shall need to weigh with the Court. We also notice that in case of M/s. Gujarat Ambuja Exports, whose cargo is said to have been commingled, release has already been given. The serious dispute had been raised with regard to the storage. Prima facie, the version put forth by the petitioner of commingling of the cargo on the strength of this material shall need to be accepted. More than that, the reports given by the Central Revenue Laboratory, New Delhi without semblance of doubt opines on the sample being the GTL Light Paraffin and not the Diesel Oil nor the Automotive Diesel Oil nor Light Diesel Oil. That being the case, the clearance of the balance quantity of 1360 MTs and as per the directions issued by this Court in the case of M/s.Alka Chemical Private Limited where also the issue was whether the sample was Light Diesel Oil or not. It is deemed appropriate to follow the same by permitting the release of the seized quantity of goods 1360 MTs GTL Light Paraffin stored in Tank Nos.57, 58 and 117 and 1366.83 MTs GTL Light Paraffin stored in Tank Nos.57, 58 with respondent No.4. This balance quantity of goods being 1360 MTs and 1366.83 MTs of GTL Light Paraffin are released on the writ applicant furnishing an appropriate undertaking to the Commissioner, Customs to the effect that the petitioner will cooperate with the inquiry. The inquiry shall proceed further as the importer has executed bond while getting the goods released. The request on the part of the respondent to insist on the bank guarantee is not to be acceded to considering the case of M/s. Gujarat Ambuja, in which, even no action has been initiated. The Court has already directed the petitioner to give an undertaking (before this Court) as well as furnish bond (before the Commissioner) which they are ready to furnish where its total asset can be declared by the petitioner. Petition disposed off.

Summary

Issues Involved:

1. Classification of imported goods (GTL Light Paraffin vs. Light Diesel Oil).
2. Validity of the seizure of goods.
3. Compliance with the Foreign Trade Policy.
4. Laboratory test reports and their implications.
5. Release of seized goods and conditions for the same.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The petitioner, a Government Recognized Star Export House, imported GTL Light Paraffin. Initial tests by CRCL, Kandla confirmed the goods as GTL Light Paraffin under Tariff Heading 27101990, which is free for import with a basic duty of 5% plus 10% social welfare surcharge. However, subsequent tests by CECL, Vadodara suggested the goods were Light Diesel Oil (LDO), classifiable under Tariff Item No.2710 1943, which can only be imported by State Trading Enterprises (STE) like HPCL, BPCL, or IBP. The petitioner disputed this classification, arguing that the goods originated from Shell Refinery, which does not manufacture LDO.

2. Validity of the Seizure of Goods:
The goods were seized under Section 110(1) of the Customs Act, 1962, based on the CECL, Vadodara report. The petitioner contended that the seizure was unjustified as the initial CRCL, Kandla report confirmed the goods as GTL Light Paraffin. The court noted that the seizure was influenced by the DRI's investigation and the conflicting test reports.

3. Compliance with the Foreign Trade Policy:
The respondent argued that the import of LDO by the petitioner violated the Foreign Trade Policy 2015-2020, which reserves the import of such fuels for STEs. The petitioner maintained that the goods were GTL Light Paraffin, not LDO, and thus did not require a special license.

4. Laboratory Test Reports and Their Implications:
The court considered multiple test reports:
- CRCL, Kandla: Confirmed the goods as GTL Light Paraffin.
- CECL, Vadodara: Classified the goods as LDO.
- CRCL, New Delhi: Conducted retesting as per court orders and confirmed the goods as GTL Light Paraffin, not LDO.

The court emphasized the importance of the CRCL, New Delhi report, being an appellate laboratory, which categorically confirmed the goods as GTL Light Paraffin.

5. Release of Seized Goods and Conditions for the Same:
Given the CRCL, New Delhi report, the court ordered the release of the seized goods. The petitioner was required to furnish an undertaking to cooperate with the ongoing inquiry and provide an End Use Certificate within two weeks. The court also allowed the petitioner to make a representation regarding storage charges to respondent No.4.

Conclusion:
The court ordered the release of the seized GTL Light Paraffin, subject to the petitioner furnishing an undertaking and cooperating with the inquiry. The court did not accede to the respondent's request for a bank guarantee, considering the petitioner's long-standing business operations and the precedent set in the case of M/s. Gujarat Ambuja Exports, where no action was initiated. The petition was disposed of with directions for the petitioner to provide an undertaking and bond, while the inquiry by the respondent could continue.