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TMI Blog2024 (9) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal filed by the Appellant-importer is allowed. - SHRI ASHOK JINDAL, MEMBER (JUDICIAL) AND SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL) Shri Rajesh Chhibber, Advocate for the Assessee/Importer Shri Subrata Debnath, Authorized Representative for the Revenue ORDER There are two appeals filed by M/s. Krishna Technochem Private Ltd. (the Appellant-importer ). Customs Appeal No. 76079 of 2023 has been filed by the Appellant-importer against the Order-in-Appeal No. KOL/CUS(Port)/KS/806/2023 dated 16.10.2023 passed by the Commissioner of Customs (Appeals), Kolkata, against imposition of Redemption Fine for allowing clearance of the impugned goods for home consumption. The Appellant-importer also prayed for setting aside the penalties imposed. Customs Appeal No. 75923 of 2024 has been filed by the Revenue against the same Order-in-Appeal. Revenue appeal has been filed against allowing clearance of the impugned goods for home consumption as against re-export as ordered by the adjudicating authority. As the issue involved in both the appeals arose against the same Order-in-Appeal, they were taken up together for disposal by a common order. 2. The facts of the case are that the Directorate of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide their letter dated 19.02.2021, clarified that (i) The sample u/r does not meet the criteria of the goods as Petroleum Hydrocarbon Solvents (IS1745:1978)/ Motor Gasoline/ E20 Fuel/ M15 Fuel/ SKO/ Kerosene intermediates/ ATF/ Aviation Gasoline/ Automotive Diesel Oil/ Diesel Fuel Blend (B6-B20)/ HF HSD/ LDO/ Waste Oil as laid down in Indian Standard. There is no available literature / specifications for description Gas Oil and Vacuum Gas Oil. (ii) The description of the goods as Mineral Hydrocarbon Oil was already ascertained, if required, the samples may be sent to IOCL/HPCL/BPCL/IIP Dehradun for specific name as desired and further stated that executive decision may be taken at the end of the Commissionerate. 2.5. As advised by CRCL, Kolkata, samples were sent to IOCL, Haldia vide letter dated 08.03.2021, with a request to conduct detailed analysis and to provide specific name of the petroleum product. 2.6. Anupam Aash, Quality Control Manager, IOCL, Haldia Refinery vide his Test Report dated 16.03.2021 reported as follows: 2.7. The IOCL has reported that the imported refinery product as 'Naphtha mixed with Kerosene', but has not provided the any specific name. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding losses) distil at 210 C according to the ISO 3405 method (equivalent to the ASTM D 86 method). 2.13. From the plain reading of the above definition, 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. In the instant case, the retest report dated 24.11.2021 revealed that the distillation recovery at 210 C is more than 90%. IOCL's report revealed that 90% of the goods were distilled at 204 C. On the basis of these test reports, the departmental officers opined that at 210 C, more than 90% of the goods were distilled. The CRCL, Kolkata has not provided the distillation detail at 210 C. However, CRCL, New Delhi has reported that the goods are light oils and preparations'. As per the test report of IOCL, Haldia and CRCL. New Delhi, the Department held the view that the goods imported by the Appellant-importer can be categorized as 'light oils and preparations' in terms of Sub- Heading Note 4 of Chapter 27 of the Customs Tariff Act, 1975. Accordingly, the department concluded that the goods imported by the Appellant-importer are appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and commission rendering the goods liable to confiscation under Sections 111(d) 111(m) ibid. 2.16. Aggrieved against the impugned order, the Appellant-importer has filed appeals before the Commissioner (Appeals). The appellate authority agreed with the contention of Appellant-importer on classification of goods under heading 27101990, but maintained confiscation and penalty for import of goods for violation of Petroleum Act, 2002. However, he allowed the goods for clearance to home consumption on payment of fine and penalty as imposed by the original authority. Against this order of the Commissioner (Appeals), both the Appellant-importer and Revenue filed appeals before this Tribunal. 3. The Appellant-importer submits that seizure of the impugned goods was not legal as the report of CRCL, Kolkata categorically ruled that the imported goods are not 'light oil and preparations'. IOCL Haldia vide its report dated 08.03.2021, apart from other parameters specified the recovery of more than 90% at 204 degree. The department sent the two reports of CRCL, Kolkata and IOCL, Haldia to Delhi CRCL, who declared that the goods are 'light oil and preparations' without even testin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any container, other than those approved by the Chief Controller for specific purpose, shall not exceed 300 litres and it is an admitted fact that the drums in dispute were of capacity of 220 Litres and hence no approval was required; In any case it was contention of Appellant-importer that they were having license to import and store the goods in their own name and they were not aware of the so called restriction of import in drums in less than 100 Litres and they applied for amendment in PESO license . It is stated by the Appellant-importer that the concerned authority vide letter dated 14.06.2022 has granted license to import in goods 'other than bulk' in class A Petroleum; the goods are still lying seized and after 14.06.2022 the Appellant-importer is allowed to import in non-bulk quantity. Hence, it is their contention that the confiscation and penalty on this count does not survive. Even otherwise, the Appellant-importer submits, confiscation under 111(d) could be made only for prohibited goods. Under Rule 3 of Petroleum Rule 2002, there were conditions for import in a particular manner and as such there was no prohibition; under section 3 of the Foreign Trade (Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same under heading 27101990 along with supporting documents. DRI, Kolkata informed the Pr. Commissioner of Customs about misdeclaration of classification and the impugned goods were examined 100% . Seven samples were drawn and sent for testing to Kolkata CRCL to know whether the sample was light oil, its petroleum class and chemical name, to which it reported the goods to be MHO and Class A Petroleum but does not meet the criteria of light oil and its preparation. Subsequently, reports were received from IOCL and CRCL, New Delhi also. 6.1. We observe that on the basis of tests conducted at CRCL, Kolkata, IOCL and CRCL, New Delhi, the ld. adjudicating authority has considered the impugned goods as Light oils and preparations under Chapter Heading 2710 1290 and accordingly re-classified the goods under the above Chapter Heading. The ld. adjudicating authority has also ordered confiscation of the goods imported vide Bill of Entry 8789922 dated 12.09.2020. However, he allowed the importer to re-export the goods upon payment of redemption fine of Rs.10,00,000/-. He also imposed a penalty of Rs.7,00,000/- for the various offences committed. 6.2. On appeal, the Ld. Commissioner (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. However, the assessee have not accepted the aforesaid report of CRCL, New Delhi and asked for re-testing of the samples. The Ld. Joint Commissioner has allowed re-testing of the samples. Accordingly, representative samples available with the Department were sent to CRCL, New Delhi for re-testing. On the basis of the retest report received from CRCL, New Delhi, the Department has come to a conclusion that the petroleum products in this case get distilled by 90% or more by volume at 210 C and hence classified the impugned goods as Light oils and preparations falling under Chapter Heading 2710 1290. 7.1.1 The Appellant-importer has questioned the method of sampling and tests conducted by CRCL, New Delhi, on the basis of which the ld. adjudicating authority had come to the conclusion that the goods are liable for classification under the CTH 2710 1290. We observe that the report of IOCL Haldia was sent to CRCL Delhi for clarification, who clarified the impugned goods to be light oil without carrying out any testing. We observe that the department did not take action for almost 9 months and sent two duplicate samples to CRCL Delhi vide letter dated 09.08.2021. CRCL, New Delhi vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the first test. Customs officers may take a reasoned view in case the importer or his authorized representative Customs Broker is unable to do so for reasons beyond his control c. Where the Additional/Joint Commissioner of Customs grants an opportunity for a second test, he must clearly indicate in writing the name and address of the laboratory/institution where the second test can be carried out. Such referral for re-testing may be made only after being reasonably sure that the desired re- testing facilities exist at the laboratory/institution. d. Re-test should be made only on the remnants of the samples originally tested or on duplicate representative sealed samples in the custody of the Customs Further, to avoid delays, samples for second tests shall be marked as immediate before sending to the laboratory. In a case it may so happen that fresh samples have to be drawn, then such sampling should be done in the presence of the importer or his representative/customs broker. e. The requests for re-test of samples on the ground that the original sample was not representative should be entertained only if the consignment is still in Customs control. At the time of drawing the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amples and sent two sets of representative samples drawn earlier to CRCL, New Delhi for retesting. On the basis of the retest report received from CRCL, New Delhi, the Department has come to the conclusion that the petroleum products in this case get distilled by 90% or more by volume at 210 C and hence to be classified as Light oils and preparations falling under Chapter Heading 2710 1290. 7.1.3. We observe that the Appellant-importer requested for re-drawl of samples as the testing was done on old samples would not give the desired result. However, the Department again sent duplicate/triplicate samples and the CRCL Delhi vide its report dated 24.11.2021 i.e. after more than 12 months from the date of drawal of samples opined that the goods to be light oil and preparations. We agree with the submission of the Appellant-importer that the goods being volatile in nature, testing of samples drawn 12 months before would not give the desired results. The department could have drawn fresh samples for testing, as the goods are still available with customs. Thus, we observe that the Ld. Commissioner (Appeals) has rightly rejected the Test Report of CRCL, New Delhi. 7.1.4. We observe that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant paragraphs from the impugned order passed by the Commissioner (Appeals) are reproduced below for ready reference: - 7.2 In this regard, I observe that it is important to understand the definition of Light oils and preparations , which is mentioned in Sub Heading Note 4 to Chapter 27 of the Customs Tariff that is reproduced below for ready reference: *4. For the purposes of sub-heading 2710 12, light oils and preparations are those of which 90% or more by volume fincluding losses) distil at 210 C according to the ISO 3405 method (equivalent to the ASTM D 86 method) Therein, it is explicitly mentioned that Light oils and preparations are those of which 90% or more by volume (including losses) distil at 210 C, however, the IOCL Test Report dated 16.03.2021 has mentioned that the impugned goods are 90% distilled at 204 C, which negates the impugned goods to be covered under the said definition since the primary paramount condition has not been fulfilled. It is observed that the adjudicating authority has relied upon the test report of CRCL, Delhi and did not take cognizance of the test reports of CRCL, Kolkata and IOCL, Haldia on its own discretion arbitrarily. It failed to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nconclusive to some extents, as it has not determined the Flash Point on exact basis, as it has provided the Flash point to be 25 deg * C and the flash point is required to determine the class of the petroleum product. As such the Petroleum Class A, B and C are defined in the Petroleum Act, 1934, which are as given below: (i) petroleum Class A ^ prime prime means petroleum having a flash-point below 23 C. (ii) petroleum Class B means petroleum having flash-point of 23 deg * C and above but below 65 deg * C (iii) petroleum Class C ^ prime prime means petroleum having a flash-point of 65 deg * C and above but below 93 deg * C On the basis of analytical observations, it is observed that the CRCL, Kolkata and IOCL report are conclusive to determine the impugned goods to be falling under petroleum Class A ^ prime prime but report of CRCL, Delhi is inconclusive in this regard. Further, as per Chapter Note of Chapter 27 of the Customs Tariff, for the purposes of subheading 2710 12, light oils and preparations are those of which 90% or more by volume (including losses) distil at 210 deg * C according to the ISO 3405 method (equivalent to the ASTM D 86 method). In this regard, IOCL report d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) to arrive at the classification is more appropriate and we do not find any reason to interfere with the same. Accordingly, we uphold the classification of the goods approved in the impugned order and hold that the goods imported are appropriately classifiable under Chapter Heading 2710 1990 as declared by the importer. 8. Issue Nos. (2): 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 or not. and (3) Whether the Appellant-importer is liable for imposition of penalty for violation of the provisions of the Petroleum Act, 2002 or not. 8.1. We observe that the Appellant-importer imported the goods in used and reusable drums having capacity of 215-225 litres. As per Rule 2(1)(xix), petroleum in bulk means petroleum contained in a tank irrespective of the quantity of petroleum contained therein. The goods imported by the Appellant-importer in drums do not fall under the ambit of 'bulk' and the same are classified as 'Other than bulk' The Appellant-importer was having a PESO license valid up to 31.12.2025 for import of 1200.KL petroleum Class A - 1050 KL in bulk, Class B - 100 K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of redemption fine. We observe that the adjudicating authority has ordered for confiscation of the goods for violation of the provisions of Petroleum Act 2002. 8.3. Regarding the violations of Petroleum Act, 2002 and the requirement of PESO license, the Appellant-importer submits that they were not aware that they cannot import materials in drums and if they import the same in drums of capacity less than 1000 litres, then the same cannot be considered as 'bulk'. We observe that the Appellant-importer was having PESO license to import Petroleum A, B C in bulk. In the instant case, the goods were imported in drums having capacity of 220 Litres. We observe that the Appellant-importer were having license to import and store the goods in their own name. Further, we observe that the Appellant-importer has applied for amendment in PESO license and the concerned authority vide letter dated 14.06.2022 has granted license to import the goods other than bulk in class A Petroleum. We also observe that the goods are still lying seized and after 14.06.2022 the Appellant-importer is allowed to import in non-bulk quantity also. Accordingly, we hold that there is no violation of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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