2024 (11) TMI 884 - AT - Customs

Classification of imported goods - Low Aromatic White Spirit classifying the same under the Customs Tariff Item No. 2710 1990. v/s Kerosene classifiable under CTH 2710 1910 - Allegation of mis-declaration - goods were confiscated u/s 111 (m) and Section 111(d) of the Customs Act, 1962 for mis-declaration and violation of the siprovions of Para 2.20 of the Foreign Trade Policy read with the rules made under the Petroleum Act, 1934 read with the Petroleum Rules, 2002 and the Customs Tariff Act, 1975 HELD THAT - We observe that no test has been conducted to find out whether the goods imported by the appellant meets the requirement of Low Aromatic White Spirit as claimed by the appellant. The claim of the appellant cannot be rejected without testing whether the goods imported by the appellant satisfy the requirements for Low Aromatic White Spirit , which is similar to light oils and preparations . From the literature submitted by the appellant, we observe that Low Aromatic white Spirits (LAWS) is a specific high value segment of non-fuel petroleum products. These are manufactured by refractionation of wide boiling refinery products like, gasoline fraction. This is further subjected to 'Dearomatization' process to make aromatic free to specified aromatic content, products. Products of different aromatic content as required by application could be made by blending aromatic free products to base fraction or partially dearomatized stocks. With regard to Nomenclature and classification, we find that these products widely vary in boiling range, hydrocarbon group composition, depending upon the end use, storage, safety, environmental and health considerations. Petroleum products are complex mixtures of hydrocarbons and the products are designed based on application requirements. Therefore overlapping of boiling range, compositions and physical characteristics amongst various products is common. For the purpose of international trade and movement, the World Customs Organization (WTO) has classified goods under the Harmonized System Nomenclature (HSC). Each material is assigned a unique eight digit code number, reflecting some basic characteristics. For instance number '27' refers to 'Chapter', '10' to 'Petroleum Oils'. The next two digits '12' refers to hazardous nature. Flash point lower than ambient temperature API Class 'A' material. 19 refers to fire safe API Class 'B' and 'C' materials. The next two digits refer to specific products like '10' for 'kerosene' '20' for 'ATF' and '90' for minor products like LAWS. HSN Code for the Low Aromatic White Solvent (LAWS) is 27101990. We observe that high flash solvents, both low aromatic or high aromatic, come under HSN classification 2710 1990, technically as well as in industry practice. In view of the above discussions and based on the technical literature produced by the appellant, we hold that the Low Aromatic White Spirit imported by the appellant having the same characteristics as required under the standard IS 1459 2018, are rightly classifiable under the CTH No. 2710 1990. The goods imported by the appellant are Low Aromatic White Spirit , as claimed by the appellant and the same are appropriately classifiable under the Customs Tariff Item No. 2710 1990. Adjudicating authority has reclassified the goods imported by the appellant as Kerosene under the Tariff Item No. 2710 1910. Kerosene, classifiable under CTH 2710 1910, could be imported only by State Trading Enterprises (STEs) or the agencies approved by DGFT, in terms of the Foreign Trade Policy, 2015-20. As the goods imported by the appellant are Low Aromatic White Spirit and classified under the CTH 2710 1990, there is no violation of the Foreign Policy 2015-20. Accordingly, we hold that the goods are not liable for confiscation under Section 111 (m) and Section 111(d) of the Customs Act, 1962 for mis-declaration and violation of the provisions of Para 2.20 of the Foreign Trade Policy read with the rules made under the Petroleum Act, 1934 read with the Petroleum Rules, 2002 and the Customs Tariff Act, 1975. Thus, the question of allowing re-export of the goods on payment of redemption fine under Section 125 of the Act does not arise. As the allegation of mis declaration is not sustained, the penalty imposed under Section 112(a)(i) of the Customs Act, 1962 is also not sustainable and accordingly, we set aside the same.

Summary

Issues Involved:

1. Classification of the imported goods as 'Low Aromatic White Spirit' or 'Kerosene'.
2. Compliance with the Foreign Trade Policy and the Petroleum Act.
3. Validity of the CRCL Test Report.
4. Confiscation and penalty under the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Classification of the Imported Goods:

The primary issue in this case revolves around the classification of the imported goods. The appellant classified the goods as 'Low Aromatic White Spirit' under Customs Tariff Item No. 2710 1990, while the Department reclassified them as 'Kerosene' under CTH 2710 1910 based on the CRCL Test Report. The Tribunal observed that the Test Report from CRCL, Kolkata, which suggested the goods had characteristics of 'Kerosene', was not conclusive. The report did not test all necessary parameters as per IS 1459:2018, such as Colour, Copper Strip Corrosion Test, and Distillation Test. The Tribunal noted that the goods failed to meet the specification required for Kerosene in these aspects. Additionally, the appellant provided a precedent where similar goods were classified under CTH 2710 1990, supporting their claim.

2. Compliance with the Foreign Trade Policy and the Petroleum Act:

The Department argued that 'Kerosene' could only be imported by State Trading Enterprises or agencies approved by DGFT, according to the Import Policy. However, since the Tribunal concluded that the goods were 'Low Aromatic White Spirit', there was no violation of the Foreign Trade Policy. Consequently, the classification under CTH 2710 1990 meant there was no breach of the Petroleum Act or the related rules.

3. Validity of the CRCL Test Report:

The Tribunal critically evaluated the CRCL Test Report and found it inadequate for classifying the goods as 'Kerosene'. The report did not adhere to all the parameters outlined in IS 1459:2018, leading to an inconclusive classification. The Tribunal emphasized that without a comprehensive test, the classification could not be changed based solely on the partial findings of the CRCL report.

4. Confiscation and Penalty under the Customs Act, 1962:

Given the Tribunal's conclusion that the goods were 'Low Aromatic White Spirit' and not 'Kerosene', the basis for confiscation under Section 111(m) and Section 111(d) of the Customs Act, 1962, was invalid. The alleged mis-declaration was not sustained, and therefore, the penalty imposed under Section 112(a)(i) was also set aside. The Tribunal held that the goods were not liable for confiscation, and the question of re-export on payment of redemption fine did not arise.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal filed by the appellant. The goods were classified as 'Low Aromatic White Spirit' under CTH 2710 1990, and there was no violation of the Foreign Trade Policy or the Petroleum Act. The penalty and confiscation orders were also annulled, providing relief to the appellant.