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TMI Blog2023 (7) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... ly but not certainly, or perhaps . Further, as per Macmillian Dictionary, word may be is used for showing that one is not sure whether something is true or whether something will happen. The adjudicating authority has committed an error to re-classify the goods imported vide the 3 bills of entry on the basis of a test report which on the face of it is non-conclusive. It is settled principle of law that classification is a departmental function. It is also a settled law that onus to prove a fact is on the person who asserts the same. In the present case, the department has relied upon a test report, which does not conclusively show that the goods imported merit classification under heading proposed by the revenue. The stand of the department that language used in the impugned test report is a general practice, itself is objectionable inasmuch as no documentary evidences were adduced for deciding the issue of classification contrary to the classification claimed by the appellants in respect of the impugned goods. For a product to be considered as Diesel Oil, the same requires to fulfil all 21 parameters mentioned in IS 1460:2005. In the present case, the Custom House Laboratory vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Dubai, on perusal of the said dairy, it is found that the same nowhere mentions about receipt or sale of HSD by the Appellants. Furthermore, the foreign supplier of the Appellants is Skynet and as per their invoices, all payments were made in favour of the supplier in Singapore and not Dubai - the said Diary cannot be relied upon to dispute the classification of goods. The classification of goods imported under the 3 live bills of entry and 51 past Bills of Entry have been wrongly rejected. The question of valuation will have to be allowed in favour of the Appellant as the same was disturbed by the department on the ground that goods imported were Diesel Oil and not Mineral Spirit. It is made clear that none of the evidences relied upon by the department, to allege the mis-classification and under valuation resorted to by the appellants, stand the scrutiny of Law - It is opined that the department failed to substantiate the allegations by cogent and legally admissible evidences. Hence, under the facts and in the circumstances of the case, there are no hesitation in allowing the appeals in favour of the appellants. Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 5967331, 5967362 and 5967418, all dated 13.04.2018 filed by the Appellants were put on hold. These goods were examined and the samples drawn from 3 containers out of the 10 containers were sent to CRCL, Customs House Laboratory, Chennai for testing. The goods imported by the three bills of entry dated 13.04.2018 were seized vide Panchnama dated 23.04.2018, under belief that the same being Diesel were mis-declared as Mineral Spirit. The goods were sent to the Chemical Examiner, CRCL, Customs House Laboratory, Chennai for testing, who vide test report dated 20.04.2018 and dated 16.04.2019, based on testing 6 parameters concluded that 'the samples are other than Mineral Spirit and may be considered as 'Diesel Oil''. The 6 parameters, tested by the CRCL Customs House Laboratory are as follows: 1. Density @ 15 degree C 2. Flash Point (PMCC) 3. Kinematic Viscosity @ 40 degree C 4. Distillation @ 350 degree C (Percentage recovered (v/v)) 5. Percentage of Ash 6. Acidity- Inorganic 3.3 Concurrently, enquires were conducted by the DRI and search operations were carried out at various places. The department arrested the proprietor of Appellant's firm and his son Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms Valuation (Determination of value of imported goods) Rules, 2007; (iv) the subject seized goods should not be confiscated under Sections 111(d), 111(e),111(f) 111(l) and 111(m) of the Customs Act, 1962 (for short, referred to as the "Act of 1962"); (v) Penalty should not be imposed under Section 112 and Section 114AA of the Act of 1962. (B) With regard to the consignments imported in the past by the Appellant vide 51 B/Es: (i) the declared description of the goods as 'Mineral Oil' should not be rejected and held as 'Diesel Oil-High Speed Diesel Oil'; (ii) the classification of the imported goods should not be rejected and re-classified as CTH 27101930 of the Tariff Act; (iii) the value of the goods improperly imported should not be determined as per Rule 9 of the Customs Valuations (Determination of value of imported goods) Rules, 2007; (iv) the quantity of 4330.345 MTs and 37.100 MTs of goods viz. Diesel Oil- High Speed Diesel Oil valued at Rs.13,49,08,070/- and Rs. 9,50,860 should not be held liable for confiscation under Sections 111(d), 111(e), 111(f), 111(l) and 111(m) of the Act of 1962; (v) the differential duty should not be demanded from them under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he live consignment, on the basis of the test reports dated 20.04.2018 and 16.04.2019 as the same could not be relied upon. The Custom House Laboratory has conducted tests in relation to only 6 parameters out of the required 21 parameters as per IS 1460:2005. Therefore, the conclusion that the imported goods is not 'Mineral Spirts' but 'Diesel Oil' is based on incomplete testing. (b) The issue is settled by the decision of Tribunal in following cases (a) Deep Water Specific 1 Inc, Transocean Offshore Deepwater Drilling Inc v CC, Vijaywada, 2019 (4) TMI 1704; (b) Transocean Discoverer LLC v Commissioner, 2015 (7) TMI 816; (c) CGG Marine v Commissioner, 2016 (6) TMI 709; (d) Schlumberger Solutions Pvt Ltd v CC (import), 2016 (11) TMI 170 (e) Commissioner of Customs v Roshan Petrochem, Final Order No. 40047-40050/2022 dated 04.02.2022. (c) That out of the 6 parameters tested in the aforesaid test reports, 3 parameters i.e., Density, Flash Point and Distillation, fulfil the parameters of 'Mineral Spirit', hence even as per the test reports, the goods can be considered as 'Mineral Spirit'. (d) That assuming without admitting that 6 parameters are vital for determining that the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in law as the same was contradictory to the test reports and Board Circulars mentioned above. (i) The adjudicating authority erred in relying upon the purported statements of the proprietor of the Appellant and the Co- Appellant as the same were contradictory to the documentary evidences i.e., invoices, past test reports and were extracted under threat. In any event, it was submitted that the statements have been retracted at the first available opportunity before the Magistrate, which is evident from the bail orders. (j) The adjudicating authority erred in placing reliance on invoices, which were printed from email id of [email protected] in the computer seized by the DRI during investigation inasmuch as the same was done without following the procedure mentioned in Section 138C of the Act of 1962. (k) In any event, the documents retrieved from the email id does not further the case of the department. The foreign supplier of the Appellants is Skynet and the remittance for goods supplied i.e., 'Mineral Spirit' to the Appellants was made to Skynet in Singapore as in evident from their invoices. However, all the invoices that were retrieved from the aforesaid mail id were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingapore and not in Dubai. 8. Shri Manoj Kumar, learned Authorised Representative, appearing for Revenue submitted that the impugned order passed by Learned Additional Director General was proper and needs no interference. Furthermore, he submitted as under: (a) Test Reports dated 20.04.2018 and 16.04.2019 issued for live consignments are correctly relied upon to confirm that the Impugned goods are 'Diesel Oil' and not 'Mineral Spirit'. (b) Cross examination of Mr V. Suresh, Joint Director of Customs House Laboratory, Chennai, clarifies that the samples were tested for vital parameters of Mineral Spirit as per IS 1745: 1978 as also for vital parameters of Diesel Oil as per IS 1460:2005 and results showed that the product is Diesel Oil. (c) the adjudicating authority rightly held that the aforesaid test reports are categorical in light of the confessional statements of the Appellants. (d) invoices of M/s Gulf Petrochem, Sharjah retrieved from mail id [email protected], show that Appellants have received Ultra Low Sulfur Gasoil which is nothing but Diesel Oil. (e) Decision of Hon'ble Gujarat High Court in the case of Rajkamal Industrial Pvt. Ltd. was relied upon to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not disputed by AR for the Revenue are summarised herein below: (a) Mineral Spirit is freely importable and classifiable under CTH 27101990 of the Tariff Act. (b) Test reports dated 20.04.2018 and 16.04.2018 issued for the live consignment only tested 6 out of the 21 parameters prescribed under IS 1460:2005 for concluding that the goods may be considered as Diesel oil. The test reports uses the term 'may be' while concluding the goods to be Diesel Oil. (c) The said test reports do not state that the said goods are HSD. It is the submission of the Appellant that there is huge difference between HSD and diesel oil, as diesel oil in itself is of two variants viz. HSD or LDO. (d) The test of live consignments was conducted by Customs Laboratory, Chennai prior to 07.06.2019 when they did not have equipment/facility for conducting test for HSD, as per the Board Circular No. 43/2017 dated 16.11.2017 read with Board circular No. 15/2019 dated 07.6.2019. (e) For the past imports, goods were assessed and cleared on the basis of the test reports which categorically state that the imported goods are nothing but mineral spirit and the said test reports have neither been disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale. Few buyers retracted their statements during cross examination before the Learned Additional Director General by stating that their statements were recorded under duress and what was purchased and sold by them was not Diesel Oil. Balance buyers/purchasers did not appear for cross examination. (o) Foreign supplier of the Appellants i.e., Skynet is not related to Appellants and there is no statement or evidence of any hawala transaction. 13. During the course of hearing, Learned AR was directed to reply to the undisputed facts and from the reply filed by the department, we note that apart from tax invoices issued by Gulf Petrochemical and statements, no other document like diary 2018 belonging to 'Trigel Petrochem P Ltd'., Master Quality Slip Pad has been relied upon by him. In short, the submissions made by the Appellant on undisputed facts have not been controverted by the department before us. In any event, since the said documents have been relied upon in the impugned order, it will be important for us to see if the same can be relied upon in support of the findings on mis-classification of goods as Mineral Sprit instead of High Speed Diesel. 14. To determine the charact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the department that language used in the impugned test report is a general practice, itself is objectionable inasmuch as no documentary evidences were adduced for deciding the issue of classification contrary to the classification claimed by the appellants in respect of the impugned goods. 18. The reliance placed by the adjudicating authority on the cross-examination of the Joint Director is equally erroneous and deserves to be rejected. The Learned AR in his submissions has placed reliance on the cross-examination of the Joint director to submit that the test report issued by him was conclusive. If the argument of the Learned AR is accepted, then the same will result in permitting the Joint Director to better or improve upon the faulty or inconclusive test report issued by him at the stage of cross-examination. In our view, the same cannot be permitted. It is not in dispute that the test reports in question were not withdrawn by the department and/or re-issued. The department cannot be permitted to improve upon the test report after more than one year of its issuance and that too by way of cross-examination inasmuch as the test reports as it stands, uses the words 'may be' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before providing a non-conclusive opinion that the goods may be treated as Diesel Oil. Out of the 6 parameters tested, 3 parameters i.e., Density, Flash Point and Distillation match the IS standard of 'Mineral Spirit'. Further, parameter relating to minimum distillation percentage for HSD as per IS 1460: 2005 is 95%. In the test reports the distillation percentage of the samples was found to be 90% i.e., less than 95%. Hence, even out of the 6 parameters tested by the Customs Laboratory, 3 parameters match the standards provided for Mineral Spirit and 1 parameter does not confirm to the standards prescribed in IS 1460: 2005 for HSD. Supplementary note (e) of chapter 27 states that for the goods to be considered as HSD, all the parameters stated in IS 1460:2005 needs to be satisfied. Even if, we consider the test report to be correct, the distillation parameter required for HSD does not match with the distillation parameter of the imported goods. For the above reasons, we are of the considered view that the test reports dated 20.04.2018 and 16.04.2019 cannot be relied upon to reclassify the goods from Mineral Spirit to HSD. The goods imported by the Appellant cannot be treated as Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case the goods were tested by Customs laboratory alone who were not equipped to test the sample for HSD during the time there were tested as clarified in terms of aforesaid Board circulars. The goods were tested for 14 parameters. The goods were tested for only 6 parameters and even out of 6 parameters 3 parameters match with that of 'Mineral Spirit' as observed above and parameter for distillation did not confirm the prescribed parameter for HSD as observed above. Hence, the test reports were not conclusive as held by us. 22. In view of the above, the case of the department for the live consignment and for the past consignment should fail on the above ground itself, as the primary evidence in the form of test reports cannot be relied upon by the department as held in the preceding paragraphs. With respect to the goods imported by 51 bills of entry, the same in any event are well supported by independent test reports, which conclusively prove that the goods are Mineral Spirit. Neither have the department challenged the contents of the said Test Report nor have they provided any contrary test report to the one produced by the Appellant. In view thereof, the Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court has ruled that the initial burden to prove that the confession was voluntary is upon the department and that evidence brought by confession if retracted, must be corroborated by other independent and cogent evidence. The Hon'ble Madras High Court in the case of Senior Intelligence Officer, Director General of Goods and Services Tax Intelligence v Shri Nandi Dhall Mills India Private Limited 2022 (3) TMI 444 (Mad) held that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment. Though, the judgement was pronounced in respect of GST, it goes to indicate that acceptance by the appellant during the course of recording the statement is not just enough and the same has to be confirmed by adducing independently corroborative evidence. The whole case cannot rest simply on the basis of a retracted statement. In the present case, we have perused the invoices on the basis of which the goods were cleared by the Appellants to its purchasers on payment of GST. The same have shown the goods as 'Mineral spirit' an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he live consignments as all the invoices were issued prior to 13.04.2018. With respect to past consignments, we have noted above that the same were assessed and cleared on the strength of proper certificates/test reports certifying the goods to be Mineral Spirit. The said reports have not been questioned by the department in the SCN or the impugned order and therefore the question of Appellant's importing any other goods other than Mineral Spirit in the 51 bills of entry does not arise. In any event, the invoices in question are for 'Ultra Low Sulfur gas oil; or 'gas oil'. Adjudication authority in the impugned order in para 5.6.8 has accepted that 'Ultra Low Sulfur gas oil; or 'gas oil' is not the same as 'HSD'. Hence, for this reason as well, we are of the view that no reliance can be placed on the aforesaid invoices for demanding duty. 26. On reliance placed by the adjudicating authority on the diary of 2016 as it stated Dubai payment/Dubai hawala to hold that the Appellants received HSD from Dubai, on perusal of the said dairy we find that the same nowhere mentions about receipt or sale of HSD by the Appellants. Furthermore, the foreign supplier of the Appellants is Skynet and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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