2025 (3) TMI 132 - AT - Customs

Classification of imported Mixed Hydrocarbon Oil - to be classified under Customs Tariff Item (CTI) 27011990 or as Automotive Diesel Fuel under CTI 27101944 - applicability of the relevant import conditions prescribed under ITC-HS policy of FTP - restricted item or not - HELD THAT - From the specific report of the samples of the impugned goods it transpires that the imported goods under dispute are mixture of hydrocarbon oil though containing diesel fraction does not fulfil the standard requirements as specified under IS 1460 2005 to be considered as Automotive Diesel Fuel. In view of the above specific factual record establishing that the classification of impugned goods cannot be categorised under CTI 2710 1944 inasmuch as these goods do not fulfil the criteria mentioned for Automotive Diesel Fuel as per IS 1460 2005 the conclusion arrived at in the original order and which is confirmed in the impugned order by the authorities below does not stand the scrutiny of law. There are force in the argument advanced by the learned Advocate for the appellants that statements given by the appellantsimporter alone cannot form the basis to confirm the charge of misclassification and to re-classify the goods from Mixed Hydrocarbon oil to Automotive Diesel Fuel . The law is well settled in these matters as the Hon ble Supreme Court in the case of H.P.L. Chemicals Limited (supra) have held that classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading or tariff item different from that claimed by the assessee the Department has to adduce proper evidence and discharge the burden of proof. From the test report given by the CRCL laboratory and from relevant tariff entries in First Schedule to the Customs Tariff Act it is quite clear that the goods are classifiable as other residuary goods including Mixed Hydrocarbon oil under CTI 2719 1990 and not as Automotive Diesel Fuel under CTI 2710 1944. Department s own Chemical Examiner of CRCL laboratory after examining the chemical composition of the representative samples of imported goods has said that it is not fulfilling the requirements of Automotive Diesel Fuel. On the other hand after examining the chemical composition he has opined that the impugned is to be treated as mixture of hydrocarbon oil. It is also a settled position of law that merely because an assessee has under the stress of investigation signed a statement admitting tax liability it cannot lead to self-assessment or self-ascertainment. In the case of Vinod Solanki Vs. Union of India 2008 (12) TMI 31 - SUPREME COURT the Hon ble Supreme Court has ruled that the initial burden to prove that the confession was voluntary is upon the department andthat evidence brought by confession if retracted must be corroborated by other independent and cogent evidence. It is made clear that none of the evidences relied upon by the department to allege the misclassification and mis-declaration of the description resorted to by the appellants stand the scrutiny of Law. The department failed to substantiate the allegations by cogent and legally admissible evidences. Hence under the facts and in the circumstances of the case there are no hesitation in allowing the appeal in favour of the appellants by setting aside the impugned order. Conclusion - i) The classification of goods must be based on conformity to relevant standards and supported by evidence. ii) The classification of the goods under CTI 27101990 as Mixed Hydrocarbon Oil upheld. The appeal is allowed by setting aside the impugned order.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

The correct classification of the imported goods under the Customs Tariff Act, 1975, specifically whether they should be classified as 'Mixed Hydrocarbon Oil' under CTI 27011990 or 'Automotive Diesel Fuel' under CTI 27101944.
The applicability of relevant import conditions prescribed under the ITC-HS policy of the Foreign Trade Policy (FTP).
The validity of the reclassification, confiscation, and penalty imposed by the customs authorities without issuing a show cause notice (SCN) to the appellants.
The reliance on statements obtained from the appellants and their admissibility in the absence of corroborative evidence.

ISSUE-WISE DETAILED ANALYSIS

1. Classification of Imported Goods

Legal Framework and Precedents: The classification of goods under the Customs Tariff Act is guided by the General Rules for Interpretation (GIR) and the General Explanatory Notes (GEN). The classification dispute centers on whether the goods fall under CTI 27101944, which requires conformity to IS 1460 standards, or under CTI 27101990 as 'Mixed Hydrocarbon Oil'.
Court's Interpretation and Reasoning: The Tribunal emphasized that the classification must be based on the chemical composition and conformity to IS standards. The CRCL test reports indicated that the goods did not meet the IS 1460 standards for Automotive Diesel Fuel, supporting the appellants' classification under CTI 27101990.
Key Evidence and Findings: The CRCL test reports were pivotal, showing that the imported goods were a mixture of mineral hydrocarbon oil with a diesel fraction but not conforming to IS 1460 standards.
Application of Law to Facts: The Tribunal applied the GIR and GEN to determine that the goods did not meet the criteria for classification as Automotive Diesel Fuel under CTI 27101944.
Treatment of Competing Arguments: The Tribunal found the department's reliance on statements and documents insufficient to override the test reports and the lack of conformity to IS standards.
Conclusions: The Tribunal concluded that the goods were correctly classified under CTI 27101990 as 'Mixed Hydrocarbon Oil'.

2. Validity of Reclassification and Penalty without SCN

Legal Framework and Precedents: The Customs Act requires a show cause notice for reclassification and penalty imposition. The burden of proof lies with the department to justify reclassification.
Court's Interpretation and Reasoning: The Tribunal noted the absence of a show cause notice and the lack of evidence to support the department's reclassification and penalty imposition.
Key Evidence and Findings: The department failed to provide corroborative evidence for the statements obtained from the appellants, which were not voluntary.
Application of Law to Facts: The Tribunal found the department's actions procedurally flawed and unsupported by evidence.
Treatment of Competing Arguments: The Tribunal dismissed the department's arguments due to the lack of procedural compliance and evidence.
Conclusions: The Tribunal set aside the reclassification and penalty due to procedural deficiencies and lack of evidence.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue."
Core Principles Established: The classification of goods must be based on conformity to relevant standards and supported by evidence. Procedural compliance, such as issuing a show cause notice, is essential for reclassification and penalty imposition.
Final Determinations on Each Issue: The Tribunal allowed the appeal, setting aside the impugned order, and upheld the classification of the goods under CTI 27101990 as 'Mixed Hydrocarbon Oil'.