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2023 (10) TMI 801 - AT - Central ExciseClassification of goods - ARH-C Crude Oil (Residue Oil obtained from distillation of Water in the Raw material Comingled Crude Oil purchased by the Appellant) - to be classified under heading CETH 27090000 or under CETH 27101990? - HELD THAT - The product ARH C Oil obtained from similar processing (Decantation Dehydration/Distillation) by the Appellant from the bottom residue of 3 to 5% of their raw material comingled or condensate crude oil is not any new product identically, but crude oil only which merits classification under CETA Ch 27090000. At this stage the Test reports and the Explanatory notes (HSN) to CETA 27 are noted. It is found that the 1st test report issued by the Regional Laboratory of Central Excise Customs, Vadodara dated 3-10-2006 as issued by Chemical Examiner Mr G P Sharma reports that the sample is in the form of free flowing liquid. It is a mixture of mineral hydrocarbon oil, having flash point below 25 Degree Centigrade. It is obtained from bitumen mineral crude. Thereafter the test report obtained by the DGCEI on their simultaneous investigation dated 28-9-2007 issued by the same laboratory but through its Senior Chemical Examiner (Grade I) Dr T A Sreenivasa Rao states that the sample is in the form of dark coloured free flowing liquid. It is composed of crude mineral hydrocarbon oil. - both the test reports obtained by the DGCEI as compared by them categorized the product ARH C Oil in the category of crude oil. We therefore find that the DGCEI in their file noting found the product to be composed of crude mineral hydrocarbon oil. Accordingly all the above 3 test reports i.e. 2 from the Central Excise Laboratory Vadodara and 1 from Caleb Brett found the samples to be clearly of Crude oil and not other petroleum product. On detailed analysis, it is found that not only the explanatory note to Ch 2709 covers the appellant s residue bottom oil to be same as crude oil but the Note to Ch 2710 only covers within its ambit products and preparations which by weight have more than 70 % of petroleum oil or oils from bituminous minerals. And in fact there is a clear exclusion to products below 70% of such weight content. The product ARH C Oil (Residue bottom Oil) obtained by such processing of the comingled/condensate crude oil is nothing but Crude oil itself and not any new product which accordingly merits classification under Chapter 27090000 as classified by the Appellant and not under Chapter 27101990 as done by the Revenue. The impugned order set aside - Appeal allowed.
Issues Involved
1. Classification of ARH-C Crude Oil. 2. Validity of Test Reports and Opinions. 3. Applicability of Judicial Precedents. 4. Interpretation of Explanatory Notes to Chapter 27. Summary of Judgment 1. Classification of ARH-C Crude Oil The dispute centers on the correct classification of ARH-C Crude Oil. The Appellant argued for classification under "Petroleum Oils and Oils obtained from bituminous minerals, crude - 27090000," while the Department contended it should be classified under "Other Petroleum Oils and Oils obtained from bituminous minerals (other than crude) - 27101990." 2. Validity of Test Reports and Opinions The Appellant highlighted that the case had been remanded multiple times, with a specific directive for the cross-examination of the Chemical Examiner, Mr. G.P. Sharma. The cross-examination revealed that Mr. Sharma could not fully support his own opinion, and other test reports favored the Appellant's classification. The Appellant also pointed out that the Chemical Examiner's role is limited to providing opinions on test results, not classifying goods. 3. Applicability of Judicial Precedents The Appellant cited several judicial precedents supporting their classification under 27090000, including decisions in MVR Chemicals & Oils vs. CCE Bangalore and Rudhraksh Petrochem Private Limited vs. CCE Indore. These cases established that processes like decantation and dehydration do not alter the essential character of crude oil. 4. Interpretation of Explanatory Notes to Chapter 27 The Appellant argued that their processes of decantation and dehydration are covered under the explanatory notes to Chapter 2709, which include processes that do not change the essential character of the product. The Department's interpretation that these processes would reclassify the product under Chapter 2710 was deemed incorrect. Tribunal's Findings The Tribunal found that the processes undertaken by the Appellant (decantation and dehydration) do not result in a new product but merely remove water and impurities from crude oil. The product remains crude oil, classifiable under 27090000. The Tribunal also noted that the Chemical Examiner's opinion could not override multiple test reports favoring the Appellant's classification. The Tribunal referenced several judicial precedents that supported the Appellant's position. Conclusion The Tribunal set aside the impugned order and allowed the appeal, confirming the classification of ARH-C Crude Oil under 27090000, with consequential relief to the Appellant.
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