2024 (9) TMI 187 - AT - Customs

Classification of imported goods - classifiable under Chapter Heading 2710 1990, as Other as declared by the importer or under Chapter Heading 2710 1290 as Light oils and preparations, as claimed by the Revenue - correctness in setting aside the order of re-export and in allowing the goods to be cleared for home consumption - imposition of penalty for violation of the provisions of the Petroleum Act, 2002. Whether the goods imported are appropriately classifiable under Chapter Heading 2710 1990, as 'Other' as declared by the importer or under Chapter Heading 2710 1290 as Light oils and preparations , as claimed by the Revenue? - HELD THAT - It is apparent that the petroleum products which get distilled by 90% or more by volume at 210 C are light oils and preparations' for the purpose of Chapter 27 sub-heading 2710 12. The tests are to be conducted as per the Methods prescribed in the Note 4. It is observe that none of the reports have specified exactly what percentage of the goods are distilled at 210 degrees, for meeting the requirements as specified under Chapter Note 4 of Chapter 27. The IOCL report specifies 90% distillation at 204 degree and the CRCL, New Delhi report says that more than 90% distilled at 210 degree. However, the method of testing was not declared in CRCL New Delhi report. We observe that the goods being volatile in nature, the quality of the samples deteriorate over a period of time. The test report received from the sample drawn immediately after import will display the correct features than the test conducted on the sample drawn earlier and tested after 12 months. The CRCL, Delhi report is not a reliable report as it is based on the samples which were drawn 12 months before. The report received from CRCL, Kolkata will have the correct features as this test was done on the samples drawn immediately after import of the goods. The test report received from CRCL, Kolkata categorically states that the samples do not meet the criteria of light oil and its preparations. It is found that the adjudicating authority has not given any valid reason to reject this report. The Ld. Commissionr (Appeals) has given a categorical finding and classified the impugned goods under the chapter heading 27101990. The reasoning given by Ld. Commissioner (Appeals) to arrive at the classification is more appropriate and there are no reason to interfere with the same. Accordingly, the classification of the goods approved in the impugned order is upheld and it is held that the goods imported are appropriately classifiable under Chapter Heading 2710 1990 as declared by the importer. Whether the impugned order is correct in setting aside the order of re-export and in allowing the goods to be cleared for home consumption? - Whether the Appellant-importer is liable for imposition of penalty for violation of the provisions of the Petroleum Act, 2002? - HELD THAT - Under section 3 of the Foreign Trade (Development and Regulation) Rules, the provisions are to be made for prohibiting, restricting or otherwise regulating. Since the original authority allowed for re-export and appellate authority allowed for home consumption, the goods were not prohibited goods. Once the goods are allowed for clearance for home consumption, the same could not be confiscated under 111(d) and so penalty was also not imposable. Further, we observe that the Appellant-importer had PESO license to import Petroleum Class A and for storage of the goods and PESO doesn t approve all the drums. Thus, the submission of the Appellant-importer agreed upon that the violation, if any, is only procedural in nature, which has also been rectified latter by getting the permission for import of 'Other than bulk' also. It is a settled law that the substantial benefit cannot be denied for procedural violations. There is no violation of the provisions of Petroleum Act, 2002 in this case - the goods are not liable for confiscation and hence, the redemption fine imposed in the impugned order for allowing clearance of the goods for home consumption is not sustainable - there is no violation of Petroleum Act, the order of the Ld. Commissioner (Appeals) in allowing the goods for clearance to home consumption upheld - no penalty imposable on the Appellant-importer under section 112(a)(i) of the Customs Act, 1962 and hence the penalty set aside - there is no merit in the appeal filed by Revenue and hence the same is liable for rejection. The appeal filed by the Appellant-importer is allowed.

Summary

Issues Involved:
1. Classification of the imported goods.
2. Legality of the order for re-export and clearance for home consumption.
3. Imposition of penalty for violation of the Petroleum Act, 2002.

Issue-Wise Detailed Analysis:

1. Classification of the Imported Goods:
The primary issue was whether the imported goods were classifiable under Chapter Heading 2710 1990 as "Other," as declared by the importer, or under Chapter Heading 2710 1290 as "Light oils and preparations," as claimed by the Revenue.

Analysis:
- Initially, samples were tested by CRCL, Kolkata, which reported that the goods did not meet the criteria of light oil and its preparations.
- IOCL's report also failed to provide a specific name for the petroleum product.
- CRCL, New Delhi, later opined that the goods met the parameters of light oil and its preparations, but this was contested by the importer due to the long delay in testing.
- The Tribunal noted that the CRCL, New Delhi report was based on samples drawn 12 months earlier, which could have deteriorated due to the volatile nature of the goods.
- The Tribunal found the CRCL, Kolkata report more reliable as it was based on fresh samples and concluded that the goods did not meet the criteria of light oil and its preparations.
- The Tribunal upheld the classification under Chapter Heading 2710 1990, as declared by the importer, agreeing with the Commissioner (Appeals).

2. Legality of the Order for Re-export and Clearance for Home Consumption:
The second issue was whether the order for re-export should be set aside and the goods allowed for home consumption.

Analysis:
- The adjudicating authority had ordered re-export on payment of redemption fine due to alleged violations of the Petroleum Act, 2002.
- The Commissioner (Appeals) allowed clearance for home consumption, maintaining the penalty for procedural violations.
- The Tribunal observed that the importer had a valid PESO license and had subsequently obtained permission to import non-bulk quantities.
- The Tribunal held that the violation was procedural and not substantive, and since the goods were not prohibited, they were not liable for confiscation under Section 111(d) of the Customs Act, 1962.
- The Tribunal upheld the order of the Commissioner (Appeals) allowing clearance for home consumption, setting aside the redemption fine.

3. Imposition of Penalty for Violation of the Petroleum Act, 2002:
The third issue was whether the penalty imposed for violating the Petroleum Act, 2002 was justified.

Analysis:
- The adjudicating authority imposed a penalty under Section 112(a)(i) of the Customs Act, 1962, for procedural violations, including importing in drums without specific approval.
- The Tribunal noted that the importer had rectified the procedural issues by obtaining the necessary permissions and licenses.
- The Tribunal held that since the goods were not prohibited and the violations were procedural, the penalty was not justified.
- The Tribunal set aside the penalty imposed under Section 112(a)(i) of the Customs Act, 1962.

Conclusion:
1. The goods imported are appropriately classifiable under Chapter Heading 2710 1990, as declared by the Appellant-importer.
2. The order of the Commissioner (Appeals) allowing the clearance of the goods for home consumption is upheld.
3. The penalty imposed on the Appellant-importer for violation of the provisions of the Petroleum Act, 2002, is set aside.
4. The appeal filed by the Appellant-importer is allowed, and the appeal filed by the Revenue is dismissed.

(Order pronounced in the open court on 29.08.2024)