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TMI Blog2022 (2) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of assessment. In such circumstances, the appeal squarely falls within the ambit of section 130 of the Act and has, therefore, rightly been filed before this Court - the assessees have sought to create a ghost that the matter relates to the determination of the rate of duty and value of goods for the purposes of assessment by advancing specious arguments, even when the basic requirements for taking the appeal out of the ambit of section 130 of the Act are not satisfied - According to the Tribunal, although the 14 tests undertaken by the three laboratories might have revealed that the sample is High Speed Diesel, yet the tests cannot be said to be conclusive as regards the nature of the subject goods. In the first blush, it would appear that what has been decided by the Tribunal could be termed as a question of fact. Whether the subject goods fall within one category or the other would essentially be a question of fact. However, even while deciding the same, if the Tribunal overlooks certain basic principles of law applicable to the case on hand and records a finding which could be termed as perverse, then definitely, such decision of the Tribunal would give rise to a quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used as fuel. The modus operandi adopted thus appears to be that High Speed Diesel imported under the guise of Base Oil SN 50 is being diverted as fuel by routing such goods through the purported manufacturers who claim to manufacture Bio-Diesel B100. The substantial questions of law are answered in favour of the Revenue and against the assessees - appeal allowed - decided in favor of Revenue. - R/TAX APPEAL NO. 297 OF 2021, 298 OF 2021, 299 OF 2021 WITH CIVIL APPLICATION (FOR STAY) NO. 1 OF 2021 - - - Dated:- 20-1-2022 - HONOURABLE MR. JUSTICE J.B.PARDIWALA AND HONOURABLE MS. JUSTICE NISHA M. THAKORE MR DEVANG VYAS, ADDITIONAL SOLICITOR GENERAL OF INDIA WITH MR DHAVAL D VYAS FOR THE APPELLANT MR D K TRIVEDI AND MR HARDIK P MODH ADVOCATES FOR THE RESPECTIVE OPPONENTS JUDGMENT PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA 1 Since the issues raised in all the captioned Tax Appeals are the same and the challenge is also to a common order passed by the Tribunal, those were taken up for hearing analogously and are being disposed of by this common judgement and order. 2 All the three Tax Appeals under Section 130 of the Customs Act, 1962 (for short, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Kandla, who, vide order in original dated 3rd December 2019, reclassified the imported goods under the CTH 27101930 as HSD and confiscated the imported goods with an option to re-export on payment of fine / penalty by the respondents companies and individual Directors of the Companies under Section 112(a) of the Customs Act. The order in original also imposed penalty on the individual Directors under Section 114AA of the Act. Further, various penalties came to be imposed under Section 112(a) and Section 114AA on the foreign suppliers and their representatives. 8 The respondents herein being aggrieved and dissatisfied with the order in original passed by the Commissioner of Customs, Kandla, challenged the same by filing appeals before the CESTAT, Ahmedabad. The Tribunal, as referred to above, allowed the appeals and took the view that the goods imported was not High Speed Diesel, but was just a Base Oil thereby set aside the redemption fine and penalties imposed. 9 The Revenue, being dissatisfied with the impugned order passed by the Tribunal, is here before us with these appeals. 10 All the captioned Tax Appeals came to be admitted vide order passed by this court dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is per se prohibited (except to be imported by the State Trading Enterprise). In other words, the very import of the HSD is prohibited. Any goods, which are prohibited from being imported, are liable to be straightway confiscated with imposition of appropriate fine and penalty. In such circumstances, there is no question of any determination as regards the rate of duty of customs or the value of goods for the purposes of assessment. 15 The argument of Mr. Vyas is that the Court may not go by the operative part of the order in original. The plain reading of the operative part of the order in original may in the first blush give an impression that the Commissioner has classified the imported goods under the respective tariff item. The argument of Mr. Vyas is that there is no classification for the purposes of determination of rate of duty, the classification is only for the purposes of identity of the two disputed products. 16 In such circumstances referred to above, Mr. Vyas would submit that the appeals filed by the Revenue are maintainable before this High Court and the Revenue need not invoke Section 130E of the Act for the purpose of filing appeal those before the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise directly and proximately as to the rate of duty or the value of the goods. 18 Navin Chemicals Mfg (supra) has been referred to and relied upon by the Supreme Court in the case of Steel Authority of India vs. Designated Authority Directorate General of Anti-Dumping and Allied Duties [2017 (349) ELT 193 (SC)]. 19 We are of the view that the question as regards the maintainability of the appeals before us should be answered in favour of the Revenue. For the reasons, we shall assign hereinafter: 20 Section 130 of the Customs Act, 1962 reads thus: 130. Appeal to High Court .-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. (2) The Principal Commissioner of Customs or Commissioner of Customs] or the other party aggrieved by any order passed by the Appellate Tribunal may file an appeal to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding those who first heard it. (9) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908) relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section. 21 At this juncture reference may be made to Section 130 of the Customs Act, which to the extent the same is relevant for the purpose, provides that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment, if the High Court is satisfied that the case involves a substantial question of law. On a plain reading of the above provision, it is apparent that what is excluded from the jurisdiction of the High Court are orders relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment. In the present case, the proceedings right from the inception relate to the question as to whether the imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order had held that issue before Tribunal was with regard to confiscability of import cargo due to alleged mis-declaration of description in IGM. The decision of Tribunal was also with regard to finding that there was no misdeclaration as IGM contains only broad description and goods cannot be confiscated because of this alleged misdeclaration. Clearly no issue pertaining to rate of duty and valuation for purpose of assessment of import cargo involved in instant issue which relate to description of goods in IGM and consequent confiscability. Appeal to High Court was held maintainable and cost of 25,000/- imposed on applicant for filing frivolous application. 25 Thus, the question No.3, as framed above, is answered in favour of the Revenue and against the assessees. 26 The aforesaid now takes us to consider the other two questions of law. The adjudicating authority vide its Order-in-Original dated 3rd December 2019 took the view considering the Test Analysis Report that the subject goods imported by the assessees is not Base Oil, but the same is High Speed Diesel. Let us see how the adjudicating authority has dealt with this issue. We quote the following findings recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum flash point of HSD should be 35 C by Abel method and minimum 66 C by PMCC method and on the other hand refers to Section 2 of the Petroleum Act, 1934 to say that to be HSD the flash point should be below 65 C. On perusal of classification in class A , B C under Petroleum Act, 1934 it is seen that HSD is given as a example under class B of Petroleum Products. It is true if the flash point of HSD is below 65 C, it would fall under class B products. But flash point of HSD can be above 65 C as per IS standards, in that it would fall in class C category and may also go out of ambit of petroleum Act, 1934 if the flash point goes above 93 C. To understand more on importance of flash point or otherwise, I have searched the literature available on the subject. The literature downloaded from the reputed websites is as under: Wikipedia Flash point: The flash point of a volatile material is the lowest temperature at which vapours of the material will ignite, when given an ignition source. The flash point is a descriptive characteristic that is used to distinguish between flammable fuels, such as petrol (gasoline in the US), and combustible fuels, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es roughness or diesel knock. The effects of diesel knock are similar to the effects of knocking in gasoline engines, viz. a loss of efficiency and power output and possibility of mechanical damage to the engine if knocking is prolonged. CETANE NUMBER The most accurate method of assessing the ignition quality of diesel fuel is by measuring its cetane number in a test engine, the higher the cetane number the higher the ignition quality. The cetane number of fuel is defined as a percentage of cetane, arbitrarily given a cetane number of 100, In a blend with alphamethyl-naphthaline (cetane number-0), which is equivalent in ignition quality to that of the test fuel. VISCOSITY Defined simply, viscosity means resistance to flow or movement. in metric system, centistoke is the unit for its measurement. It is function of the time taken in seconds for a given volume of oil to flow through a calibrated viscometer under specified conditions. Viscosity depends on temperature and decreases as temperature increases, so no numerical value has any meaning unless the temperature is specified. CARBON RESIDUE Different fuels have different tendencies to crack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of galvanized containers for the storage of diesel fuels is not recommended. ASH CONTENT Ash is a measure of the incombustible material present in a fuel and is expressed as a Percentage of the weight of the fuel sample. In the case of distillate fuels, it usually Consists of rust, tank scale or sand which settles out readily. Blends of distillate and residual fuel, e.g. LDO may additionally contain metal oxide derived from oil soluble and Insoluble metallic compounds: Ash is significant because it can give rise to deposit problems such as abrasion, malfunctioning of injectors and high temperature corrosion, Particularly with residual fuels. SEDIMENT AND WATER These are absolutely undesirable contaminants and should be as low as possible. The higher the specific gravity and viscosity of a fuel, the greater the quantity of water and sediments, it can hold in suspension. Large quantities of sediment can affect the combustion of a fuel, and if abrasive, may cause excessive wear of closely fitting parts of fuel pumps and injectors. It may also clog filters and build up deposits in tanks and piping. POUR POINT The pour point of a fuel is the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base oil has no bearing on performance but has bearing on safety in handling only and that is why only minimum value has been specified in IS1460:2005 specifications. I find support to this finding from the cross-examination of Dr. Gobind Singh, DGM(Lab), IOCL by the noticee. On a specific question on what is the maximum and minimum flash point for considering the sample as HSD, the expert has replied that only the minimum limit prescribed is 35 C and there is no maximum limit prescribed in the standard. On another question by the noticee whether in case the flash point exceeds above 100 C etc., does it still pertains to HSD, the expert replied that as above 35 C whatever the flash point is, it does not matter. 29. It is found that over and above the report of IOCL, the department is having analysis report of CRCL and after analysis, a clear-cut opinion has come on record that the so called base oil imported is definitely HSD. It is also found that there is no product described by the noticee as Base Oil SN50 in its import documents and therefore, such description is a deliberate attempt to mislead the department and to suppress the actual imported restricted goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. M/s Rajkamal were not aware on what basis the trader has issued the analysis report indicating the parameters of the Base Oil SN 50 . 32.1. I also find that M/s Rajkamal, purportedly did not place any written order for the goods Base Oil SN50 and could not produce any authentic or authoritative literature about what is Base Oil SN50 . The trader who purportedly supplied the so called Base Oil SN50' to them did not provide the name of refinery where the same was manufactured so that details of the product could be had directly from source. 32.2. I also find that Shri Hitesh Mehta of M/s. Renish Petrochem FZE, Dubai, UAE had chartered the vessel MT AL HEERA. Further, Shri Meet B. Mehta, Director of M/s Rajkamal, Ahmedabad in his statement has stated that Mr. Hitesh Mehta is his paternal uncle and is the owner of M/s Renish Petrochem FZE, UAE. Hence it is evident that Shri Meet B. Mehta, Director of M/s Rajkamal, Anmedabad, was well aware about the nature of the goods, its specifications and its actual suppliers, however they have intentionally kept the department in the dark and have at no stage revealed the details. 33. I find that in this case, certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... none of the laboratories were able to test the samples for ail 21/22 parameters prescribed in IS 1460:2005 and no test was conducted to decide whether product is a base oil. The department has not adduced any document to support or substantiate their claim that the imported products are HSD. As held by this tribunal in the aforesaid case, in this case also though it is claimed that the imported product is HSD and not the base oil but the laboratories were not able to test the sample of all the 21/22 parameters under IS 1460:2005 as they did not have the requisite facility for testing. In our view the custom department ought to have established that the imported base oil can be used as HSD/ Automotive fuel in internal combustion engines but the adjudicating authority could not establish that the imported product can be used as HSD or automotive fuel and he kept silence on this aspect. We find that the ratio of the above case is squarely applicable to this also and in absence of any conclusive evidence to hold that the imported product is only HSD and it can be used as Automotive Fuel, the imported base oi! in question cannot be reclassified as HSD. The aforesaid decision has been up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tests cannot be said to be conclusive as regards the nature of the subject goods. ANALYSIS : 29 In the first blush, it would appear that what has been decided by the Tribunal could be termed as a question of fact. Whether the subject goods fall within one category or the other would essentially be a question of fact. However, even while deciding the same, if the Tribunal overlooks certain basic principles of law applicable to the case on hand and records a finding which could be termed as perverse, then definitely, such decision of the Tribunal would give rise to a question of law. 30 Although the expression substantial question of law has not been defined in any Act or in any of the statutes where this expression appears, yet the true meaning and connotation of this expression is now well settled by various judicial pronouncements. It was observed by the Supreme Court in Sir Chunilal V. Mehta Sons Ltd. v. Century Spg. Mfg. Co. Ltd. [1962 AIR 1314 : 1962 SCR Supl. (3) 549] that a question of law would be a substantial question of law if it directly or indirectly affects the rights of parties and/or there is some doubt or difference of opinion on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance of M/s. Rajkamal Industrial Pvt Ltd reads thus: (Before the Principal Commissioner of Customs, Custom House Kandla) Cross Examination of Shri Gobind Singh, Manager (Lab), IOCL, Central Laboratory, Mumbai in the matter of SCN F. No.DRI/AZU/CI/INQ- 12(INT-2/2018 dated 22.04.2019 issued to M/s. Rajkamal Industrial Pvt Ltd Others by Shri Hardik Modh, Advocate. Q: What is your name? A: Dr. Gobind Singh. Q: Where have you been working and for how long? A: I have been working in IOCL at Sewree at Mumbai since 2012. Q: How many samples have you tested in respect of petroleum products? A: I have tested large number of samples running into hundreds of samples. Q: Are you aware of letter dated 04.08.2018 written by the Assistant Director of DRI whereby it was requested to Mr. Vivek W. Sawant, DGM, IOCL to test the samples as requested under test memo in accordance with the parameters prescribed under IS 1460:2005 for High Speed Diesel and to categorize the identity of the goods. Had you tested these good only to ascertain whether the parameters prescribed under Indian Standard IS 1460:2005 for High Speed Diesel? A: Yes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maximum and minimum flashpoint for considering the sample as HSD? A: Only the minimum limit is talked about that is 35 C and there is no maximum limit prescribed in the standard. Q: If case, the Flash Point exceeds above 100 C, 150 C, 200 C etc. , then does it still pertains to HSD standard? A: Can't comment as above 35 C whatever the Flash Point is, it does not matter. Q: Point No.1 of supplementary note of Chapter 27 of Customs Tariff Act provides that Jute Batching Oil , Textile Oil are Hydrocarbon Oils, which have their flash points on and above 93 C. In case flash point exceeds 93 C, what you call it? A: Can t comment. As flashpoint isn t the only parameter. We have tested the samples that were submitted to us as per IS 1460:2005. Q: IOCL supplies HSD to various parties. Have you ever come across any situation in which you have found the Flash Point of all these test reports above 93 C and considered as a HSD? A: Flash Point is not the only parameter which is used to measuring the sample as per IS 1460:2005. Q: Can you Say it is an automotive diesel? A: Already written in the lab report and we have tested the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 8 parameters, the facility is not available for which I can t comment. Q: Do you know the function/characteristics of the 8 parameters provided under IS 1406:2005 that have not been tested? A: As the 8 parameters have not been tested, I can t comment in respect of these parameters. Q: On perusal of report, have you concluded that it meets with the criteria of high speed diesel of IS 1460:200S? A: Again, it is submitted in the report that the samples tested for 14 parameters as per IS 1406:2005, at the lab which itself is for high speed diesel. Q; In respect of Flash Point, two methods are prescribed, Abel as well as PMCC. Remark No. 2 of test report provides that flash point was tested by Abel apparatus method but since it was more than 66 C, sample was tested by PMCC. In which situation, sample of HSD is required to be tested at Abel method and PMCC method? A: If the temperature is above 66 C then PMCC is required and if the temperature is below 66 C than it is required to do with Able method. Q: Do you think so one of the ingredients for considering HSD is flashpoint? A: Can't comment on ingredients. The minimum temperature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he samples from DRI? A: 09.08.2018 Q: Have you yourself prepared the report? A: There is a procedure for that. The samples were received by concerned authority, after that I have tested and prepared the report and my senior has reviewed the report thereafter. Q: After how many days of the seizure of the sample by the DRI, the sample was received by you? Adjudicating Authority intervened and said that this is a matter of record and it is a sheer wastage of time of Adjudicating Authority and the person whose cross examination is being done. Q: What is the standard specification for testing the samples of HSD? A: IS 1460:2005 Q: How many parameters were tested for the samples? A: A total of 14 parameters were tested as prescribed in the standard as per the Lab capabilities Q: Did certain parameters were not tested due to the testing facility of other parameters not being available at the lab? A: Yes, as the lab is a marketing lab and it is not a refining lab. Q: Have you tested the sample as per IS 1460:2005? A: This sample has been tested as per the standard IS 1460:2005 and under this specification there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs. absolute certainty is a myth, and-as Prof. Brett felicitously puts it all exactness is a fake El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a- day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of' such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus, legal proof is not necessarily perfect proof.; often it is nothing more than a prudent man's estimate as to the probabilities of the case. 3.2 The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Batch v. Archer (1774) 1 Cowp. 63 according to the proof which it was in the power of one side to prove, and in the power of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true that by our law there is a higher standard of proof in criminal cases then in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. So also in civil cases there may be degrees of probability. Agreeing with this statement of law, Hodson, LJ said Just as in civil cases the balance of probability may be more readily fitted in one case than in another, so in criminal cases proof beyond reasonable doubt may more readily be attained in some cases than in others. (Hornal V. Neuberger P. Ltd, 1956 3 All ER 970, 977) . 38 In the case of Collector of Customs, Madras vs. D. Bhoormul (supra), the Court further held as follows : It cannot be disputed that in proceeding for imposing penalties, under Clause (8) of S.167 to which S. 178-A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property , though the latter is only a presumption of fact - Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice. 39 The concepts of reasonable doubt and preponderance of probability have been lucidly explained by the Apex Court in the case of State of Rajasthan vs. Mohan Lal [2009 (237) E.L.T. 435(S.C.)] as follows: 36. Doubts would be called reasonable if they are free from a zest for abstract speculation. Law cannot afford any favourite other than truth. To constitute reasonable doubt, it must be free from overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal are ex-facie illegal, perverse and such would give rise to a question of law. 42 The learned advocates appearing for the assessees vehemently submitted that even if on the same material, it is possible for this Court to take a different view, the same would not give rise to a substantial question of law. Both the learned advocates are right in their submission, but it is not just a question of taking a different view. We have interfered because we are not at all convinced with the findings recorded by the Tribunal. The Tribunal could be said to have ignored the material evidence in the form of the three test reports of three different laboratories certifying the sample to meet with the specification IS 1460 : 2005. The assessees have not been able to show anything on the basis of which we can take the view that if all the prescribed 22 tests are not carried out, the report would remain incomplete and would not be admissible in evidence or would not be conclusive of the nature of the sample. The question that is baffling us is that if these 14 tests indicate the sample to be one of High Speed Diesel, then should such evidence be discarded, ignored or overlooked only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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