2022 (8) TMI 557 - AT - Customs

Absolute Confiscation - Superior Kerosene Oil or Low Aromatic White Spirit - restricted item or not - to be classified under Custom Tariff Heading No. 27101990 or under Custom Tariff Heading No. 27101910 of the first schedule of Custom Tariff Act, 1975? - penalty - HELD THAT - The goods imported by the appellant have been absolutely confiscated on the ground that the same is Superior Kerosene Oil and not Low Aromatic White Spirit as declared by the appellant. The Superior Kerosene Oil is a restricted item therefore the same was absolute confiscated. In this regard the department has conducted the chemical test of the product for which the representative sample was drawn and sent to the chemical examiner, Custom House Laboratory, Kandla. The chemical examiner instead of answering the query that whether sample confirmed the description of goods as Low Aromatic White Spirit. The chemical examiner reported that parameter meets the requirement of Kerosene as per IS- 1459 2016. There may be a possibility that on the basis of the parameters tested by the chemical examiner the same also match with the parameter of the product imported by the appellant. Therefore, it was important on the part of the chemical examiner to first check as per the query raised by the custom that whether the sample conformed to the description of the goods as Low Aromatic White Spirit or not - to arrive at the conclusion that the product is Superior Kerosene Oil there are 8 Parameters which needs to be tested but as per the test report only 3 Parameters were tested. For this reason the test report of chemical examiner reporting the product as Kerosene cannot be taken as conclusive. Moreover, the appellant have rightly pointed out that the Adjudicating Authority has based this finding only on 1 parameter i.e. Distillation out of 8 Parameters for holding that goods are SKO. Wavier of detention and demurrage charges - HELD THAT - The department must give effect of the above order for wavier of detention and demurrage charges. The department could not establish that the goods in question is SKO therefore, the classification claimed by the appellant needs to be maintained. The impugned order is set aside and giving effect of this order the department shall vacate the absolute confiscation and penalty imposed is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of imported goods.
2. Validity of the test report.
3. Confiscation and penalty.
4. Waiver of detention and demurrage charges.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The appellant, M/s. Oil Energy, imported 117.86 MT of Low Aromatic White Spirit, classified under customs tariff heading 27101990, but the Adjudicating Authority reclassified it as Superior Kerosene Oil (SKO) under heading 27101910. The appellant contested this reclassification, arguing that the test report was inconclusive and defective, as it did not test all the necessary parameters to distinguish between Low Aromatic White Spirit and SKO. The tribunal found that only 3 out of 8 required parameters were tested, and the Adjudicating Authority relied solely on the distillation parameter, which was insufficient to conclusively determine the goods as SKO.

2. Validity of the Test Report:
The appellant argued that the chemical examiner's report was flawed as it did not address the query of whether the sample was Low Aromatic White Spirit. The tribunal noted that the chemical examiner reported the sample meeting the requirements of Kerosene as per IS-1459:2016, but this was based on limited testing. The tribunal emphasized that all 8 parameters must be tested to conclusively determine the classification. The tribunal referred to previous judgments, including the Rajkamal Industries case, which applied the principles of "reasonable doubt" and "preponderance of probability," and found that the limited testing did not satisfy these criteria.

3. Confiscation and Penalty:
The Adjudicating Authority ordered the confiscation of the goods and imposed a penalty under sections 111(d), 111(m), 111(o), and 112(a)(1) of the Customs Act, 1962. The tribunal found that the department's reliance on an incomplete test report to classify the goods as SKO was not justified. Consequently, the tribunal set aside the confiscation and penalty, maintaining the classification claimed by the appellant.

4. Waiver of Detention and Demurrage Charges:
The appellant sought a waiver of detention and demurrage charges due to the illegal confiscation. The tribunal referred to the case of Shri. Jethanand Rohra and M/s. Jaymco Polymers Pvt. Ltd, where it was held that waiver of such charges is appropriate when goods are seized and confiscated without fault of the appellant. The tribunal directed the department to issue the necessary certificate for waiver and to deliver the goods to the appellant promptly.

Conclusion:
The tribunal concluded that the department failed to establish that the goods were SKO due to incomplete testing. The classification claimed by the appellant was maintained, and the impugned order was set aside. The tribunal also ordered the waiver of detention and demurrage charges and directed the release of the goods to the appellant. The appeal was allowed with consequential reliefs in accordance with the law.