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2024 (7) TMI 1571

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..... the test reports relied upon, besides indicating lack of conformity with IS:1460 in that of their own laboratory and in that of the state level coordinator oil industry of sample not meeting the test of high speed diesel, the possibility of conforming to the other tariff line for diesel oil had not been considered. That is a flaw in the classification exercise which the lower authorities were required to in the light of the reports of non-conformity. The adopted tariff item is not intended to cover adulterated diesel oil but oils and preparations other than light oils and preparations and, in the absence of clear finding of not being light oil as to merit classification under sub-heading 2710 19 of First Schedule to Customs Tariff Act, 1975, the only available fitment is as preparations which was the claim of appellant too, albeit in a different heading - the finding of the impugned goods as preparations has not been subjected to conformity with the text of the adopted description. This is yet another ground for invalidating the classification adopted by the lower authorities. The adopted heading, for preparations , requires the article to comprise not only 70% or more by weight o .....

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..... 4] of Commissioner of Customs (Appeals), Mumbai II, Jawaharlal Nehru Customs House (JNCH), Nhava Sheva for having upheld the finding of the original authority that goods imported by them merited re-classification solely, and even that erroneously, from exclusion attributed to threshold presence of petroleum oil or oil from other bituminous mineral in the description corresponding to declared heading to not only fasten differential duty liability beyond ₹ 54,34,636/- as assessed by them but also other consequences, related and unrelated, stemming from such revision. The fiscal stake, in consequence, is duty liability of ₹ 1,27,19,657/- besides payment of fine of ₹ 10,00,000/- under section 125 of Customs Act, 1962 and penalties under section 114A and 114AA of Customs Act, 1962 before compliance with direction to reexport the goods confiscated under section 111(d) and section 111(m) of Customs Act, 1962. The first appellate authority reduced the redemption fine to ₹ 5,00,000/- and penalty on the individual under section 114AA to ₹ 10,00,000/-. 2. The core of the issue is that the goods claimed by the importer to be penetrating oil 60 (for industrial use) .....

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..... sed heading owing to which alone value was targeted for enhancement. It is also submitted by him that the manifold Rules and Regulation pertaining to handling and sale of diesel oil had been erroneously applied to their imports without authority of law inasmuch as the goods imported by them were not diesel oil. It was also pointed out that the adjudicating authority had gone beyond the test report to insinuate that presence of hydrocarbons in diesel oil to conclude that imports were adulterated. He contended that the original authority had exceeded its jurisdiction in re-classification of the imported goods erroneously as diesel oil and then posited that the presence of other substance adulterated the diesel oil rendering it liable to be denied clearance for home consumption as the goods contravened the laws pertaining to handling of diesel which the first appellate authority upheld. 4. According to Learned Authorised Representative, the test report made it abundantly clear that the goods were a mixture of hydrocarbons with more than 70% by weight of petroleum oil or oil from other bituminous mineral and, thereby, warranted classification within heading 2710 of First Schedule to Cu .....

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..... assify the goods as diesel. Goods may be either diesel oil or adulterated diesel oil; the latter could not be the former except by imperiling the integrity of the tariff to fit adulterated products along with prime. It is indeed travesty of assessment under Customs Act, 1962 for purportedly unlawful goods to be regularized by determination of liability to duty. Indeed, despite holding that the impugned goods were adulterated diesel oil with only one possible consequence, the adjudicating authority has proceeded to not only re-classify the goods but also to undertake revaluation which are pre-requisites of assessment to enable clearance for home consumption. A shakier foundation for adjudicatory consequence is difficult to contemplate. The proper officer was required to ascertain correctness of declaration of rate of duty and value for assessment of duty liability under section 17 of Customs Act, 1962 and the proper officer under section 47 of Customs Act, 1962 was to allow clearance for home consumption after ascertainment that duty as assessed had been discharged and the goods are not prohibited. From that responsibility to ordering re-export after confiscation of goods for the ob .....

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..... pes fall within the other sub-heading. It would, therefore, appear that the adjudicating authority has chosen not to classify the impugned goods as diesel oil and took recourse to the residual tariff item within the residual sub-classification merely to deny the declared classification and to insist on re-export. This is not in conformity with neutrality envisaged in the General Rules for Interpretation of the Import Tariff appended to Customs Tariff Act, 1975 and is in discord with the onus devolving on proper officer in the decisions of the Hon ble Supreme Court supra. 9. From a perusal of the finding of the original authority, and sustained in the impugned order, which relied upon the test reports for overruling the declared classification solely by the content of petroleum oils or oils obtained from bituminous minerals being above 70%, the test report, at serial number 11, offers no clue about the manner of computation or conformity thereof with the heading proposed in the show cause notice. In both the test reports relied upon, besides indicating lack of conformity with IS:1460 in that of their own laboratory and in that of the state level coordinator oil industry of sample no .....

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..... have noticed that heading 2710 of First Schedule to Customs Tariff Act, 1975 is not restricted to petroleum or bituminous sources; it was, therefore, necessary to identify the specific source before venturing upon the residual sub-heading below. Furthermore, for fitment within preparations of this heading, it should have been taken note of that it was intended for such as were not specified elsewhere and the range of specifications elsewhere, other than under the claimed heading, was not examined. The adjudicatory exercise was not sufficiently exhaustive and the affirmation in appellate disposal was flawed for that reason justifying invalidation of the adopted classification. 12. The appellant had, and in accordance with the past practice, sought coverage within Lubricating preparations (including cutting-oil preparations, bolt or nut release preparations, anti-rust or anti-corrosion preparations and mould release preparations, based on lubricants) and preparations of a kind used for the oil or grease treatment of textile materials, leather, furskins or other materials, but excluding preparations containing, as basic constituents, 70 % or more by weight of petroleum oils or of oils .....

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