2023 (8) TMI 404 - AT - Central Excise

Classification of goods - CMO (Crude Mineral Oil) Residue - classifiable under the Chapter Heading 27090000 as contended by the Appellant or under 27139000 as contended by the department - HELD THAT - Regarding the Test conducted by National Testing Laboratory, Kolkata, we observe that the Test was not conducted by following the procedure. No sample (sealed and signed) was ever made available to the Appellant so that they could get the same tested from a reputed and recognized laboratory. Their request for re-test from a reputed laboratory was not considered by the department. Since the Test was not conducted by following the procedure, it is held that the classification of the goods cannot be determined on the basis of the Test Report. Sub Heading 27139000 is a residual entry covering 'other residue of petroleum oils or oils obtained from bituminous minerals , Whereas 270900 is a specific entry which covers petroleum oils obtained from mineral oils' as well as from 'crude oil'. It is on record that CMO residue is obtained as remnant on distillation of crude oil, which is specifically mentioned in the subheading 270900 and not under 27139000. As per General Rules of Interpretation of the Tariff, a specific heading must be always preferred over a general heading while classifying the goods. Accordingly, it is held that CMO Residue is rightly classifiable under the subheading 270900 as claimed by the Appellant. This view has been supported by the decision of the Tribunal in the case of Bajrang Petrochemicals Pvt. Ltd. 2017 (11) TMI 596 - CESTAT ALLAHABAD where it was held that Residual Crude Oil is classifiable under Tariff Item No. 2709.00.00. The goods CMO Residue is rightly classifiable under the Chapter heading 270900. Accordingly, the demand of duty in the impugned order is not sustainable - Appeal allowed.

Summary

Issues involved:
Classification of goods - CMO (Crude Mineral Oil) Residue - Chapter Heading 27090000 vs. 27139000.

Comprehensive Details:

Classification of Goods:
The Appellant imported Crude Mineral Oil (CMO) for manufacturing Light Diluted Oil (LDO) and cleared the CMO Residue under Tariff Sub heading No. 27090000. A Show Cause Notice was issued alleging mis-classification under Chapter Heading 27090000 instead of 27139000. The Appellant contended that CMO Residue, obtained as waste during distillation of crude oil, should be classified under 27090000 based on chemical tests. The department relied on a test report to classify it under 27139000. The Appellant's request for re-test was not considered. The Appellant also cited tribunal decisions supporting their classification under 27090000.

Analysis and Decision:
The Tribunal observed that the Test conducted by the National Testing Laboratory was not done following proper procedure, and no sample was provided to the Appellant for independent testing. The classification of goods cannot rely solely on this test report. The Tribunal emphasized that classification should be based on Tariff Headings, Chapter Notes, and General rules of Interpretation. Sub Heading 27139000 covers 'other residues' while 27090000 specifically mentions 'petroleum oils obtained from crude oil'. As CMO Residue is a remnant of crude oil distillation, it falls under 27090000. The Tribunal supported this view with a precedent decision regarding Residual Crude Oil classification under 27090000.

Final Decision:
Based on the above analysis and precedent, the Tribunal held that the CMO Residue is rightly classifiable under Chapter Heading 27090000. Consequently, the demand for duty, interest, and penalty in the impugned order was deemed unsustainable, leading to the appeal being allowed in favor of the Appellant.

This summary provides a detailed breakdown of the issues, arguments presented, analysis conducted, and the final decision rendered by the Appellate Tribunal CESTAT KOLKATA in the case involving the classification of CMO Residue.