2022 (2) TMI 258 - AT - Customs

Classification of imported goods - Petroleum Hydrocarbon Solvent - Superior Kerosene Oil or not - discharge of burden to prove - the department has challenged the classification only on the basis of one test report of the goods in question which was issued by CRCL Kandla - lack of judicial discipline - appellant submits that the impugned order in appeal was passed without considering facts and the submission and settled law in the present case - HELD THAT - As per the IS specification for Kerosene i.e. 1459 1974 total eight parameters need to be tested. However, in the test report of CRCL Kandla all the parameters were not admittedly tested - From the communication of the department, it is clear that the IIP Dehradun could not test the parameters of Kerosene. In this fact the test of parameters of Kerosene could not be done conclusively. Therefore, the department did not discharge the burden to prove their case of classification. There are force in the argument of the appellant that the goods imported by them are used as raw material in the manufacture of their final product i.e. solvent. In this regard the appellant post hearing submitted certain documents such as certificate issued by the appellant, invoices copies of their final product and the process flow diagram. From the documents it is established that raw material i.e. Petroleum Hydrocarbon Solvent imported by the appellant is their raw material which is used in the manufacture of their final product such as industrial solvent, thinner etc. This fact also strengthen the case of the appellant that the goods imported by them is not Superior Kerosene Oil. The declaration of the goods and classification made by the appellant in the bill of entry is correct and the department s claim of classification as Superior kerosene Oil could not be established - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of imported goods.
2. Adequacy of testing parameters.
3. Compliance with High Court directions.
4. Use of imported goods as raw material.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was the classification of the imported goods declared as "Petroleum Hydrocarbon Solvent" by the appellant under CTH 271019990. The department reclassified the goods as "Superior Kerosene Oil" under CTH 27101910 based on a test report from CRCL, Kandla. The appellant contested this reclassification, arguing that the goods did not meet all the specified parameters for Kerosene as per IS 1459:1974.

2. Adequacy of Testing Parameters:
The appellant argued that the CRCL Kandla test report did not test all the required parameters for Kerosene, specifically mentioning that only a subset of the eight necessary parameters was tested. This was corroborated by the tribunal's reference to the IS 1459:1974 standards, which mandate comprehensive testing across multiple parameters, including acidity, burning quality, color, copper strip corrosion, distillation, flash point, smoke point, and total sulfur content. The tribunal noted that the absence of complete testing rendered the classification by the department inconclusive.

3. Compliance with High Court Directions:
The Gujarat High Court had directed the department to send samples to the Indian Institute of Petroleum, Dehradun, for further testing. However, the institute reported back that it lacked adequate testing facilities for this type of work. This non-compliance with the High Court's directive further weakened the department's case, as it failed to conclusively determine the nature of the imported goods.

4. Use of Imported Goods as Raw Material:
The appellant presented evidence post-hearing, including certificates, invoices, and process flow charts, demonstrating that the imported goods were used as raw materials in the manufacture of industrial solvents, thinners, etc. This usage evidence supported the appellant's claim that the goods were not Superior Kerosene Oil but rather a different product used in industrial applications.

Conclusion:
The tribunal concluded that the department did not discharge its burden of proof to reclassify the goods as Superior Kerosene Oil. The lack of comprehensive testing and non-compliance with the High Court's directive were critical factors. Additionally, the evidence provided by the appellant about the use of the goods as raw material for industrial products further supported their classification. Consequently, the tribunal set aside the impugned order and allowed the appeal with consequential reliefs, affirming the appellant's original classification.