Custom, Excise & Service Tax Tribunal
Oil Energy vs Jamnagar(Prev) on 10 August, 2022
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
Customs Appeal No.10619 of 2020
(Arising out of OIA-JMN-CUSTM-000-APP-337-19-20 dated 20/03/2020 passed by
Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-
AHMEDABAD)
OIL ENERGY ......Appellant
Survey No. 30/1, Plot No. 39, Nirmala Nagar, Meghpar Kumbhardi, Anjar
Kutch
Kutch, Gujarat
VERSUS
C.C.-JAMNAGAR(PREV) ......Respondent
Sharda House...Bedi Bandar Road,
Opp. Panchavati,
Jamnagar, Gujarat
APPEARANCE:
Shri Vikas Mehta, Consultant for the Appellant
Shri Vinod Lukose, Superintendent(AR) for the Respondent
CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON'BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10968 /2022
DATE OF HEARING: 27.06.2022
DATE OF DECISION: 10.08.2022
RAMESH NAIR
The brief facts of the case are that the appellant M/s. Oil Energy have
filed bill of entry no. 7736631 dated 22.08.2018 seeking clearance of
117.86 MT of Low Aromatic White Spirit packed in flexi pack, by
classifying the same under customs tariff heading 27101990 of the First
Schedule to Customs Tariff Act, 1975 and declaring its assessable value of
Rs. 68,39,640/-. Based on the intelligence regarding imported kerosene
in guise of Low Aromatic White Spirit the representative sample of goods
contains any of these containers were drawn under Panchnama and
were tested by the chemical examiner, Customs House Laboratory, Kandla
and they vide their report clarified that the goods meet the requirement of
Kerosene as per IS 1459:2016. Accordingly, the goods were placed under
seizure. Thereafter, the matter has been decided vide the order in original
whereby the Adjudicating Authority held that 117.86 MT imported by the
appellant is Superior Kerosene Oil and not Low Aromatic White Spirit.
Accordingly the Classification of Goods claimed by the appellant under
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Custom Tariff Heading No. 27101990 has been rejected and ordered it to be
classified under Custom Tariff Heading No. 27101910 of the first schedule of
Custom Tariff Act, 1975. He ordered for confiscation of 117.86 MT. of
Superior Kerosene Oil value at Rs 68,39,640 imported by the appellant
under section 111(d),111(m) and 111(o) of the Customs Act, 1962. The
penalty of Rs. 6783960 was imposed upon the appellant under section 112
(a) (1) of Customs Act, 1962. Being aggrieved by this adjudication order the
appellant filed an appeal before the Commissioner (Appeal) who vide the
impugned order in appeal no. JMN-COSTM-000-APP-337-19-20 dated
20.03.2020 rejected the appeal filed by the appellant. Therefore, the present
appeal.
2. Shri Vikas Mehta, Learned Consultant appearing on behalf of the
Appellant submits that the lower authorities accepted the test report of
the goods imported whereas the test report is not conclusive and the
same is defective in as much as firstly in test memo the requirement of
test was for the purpose to ascertain that the goods imported is Low
Aromatic Spirit is a solvent. The Chemical Examiner without answering the
query raised in the test memo but he on his own decided that the product
is Kerosene. Secondly, the test required for establishing that the goods is
Kerosene has not been performed correctly. The chemical examiner has not
tested the vital parameters and jumped to the conclusion that the goods
imported is Superior Kerosene Oil. Therefore, the test report which is sole
basis of the case being inconclusive and defective, the case of the
department do not sustain. He submits that the Lower Authorities have
relied upon test results dated 16.102018 and 17.102018 issued by
chemical examiner, Grade II, Customs House Laboratory, Kandla to order
absolute confiscation of the goods on the ground that the same are Superior
Kerosene Oil, a restricted item imported into India and not Low Aromatic
White Spirit as declared by the appellant. He submits that the Learned
Adjudicating Authority merely relied upon 2 parameters namely, Final Boiling
Point (Maximum) and Flash Point (Minimum) to hold that goods are Superior
Kerosene. He referred to the test report and draw our attention to the
comparison between specifications of Kerosene set out under IS 1459:1974
with the actual testing carried out by the Chemical examiner and the
parameters based on which the Adjudicating Authority has held that goods
are Superior Kerosene. He submits that out of 8 Parameters the chemical
examiner tested only 3 parameters (Distillation, Flash Point and Smoke
Point). Out of this, Learned Adjudicating Authority has cited only 02
Parameters (Final Boiling Point and Flash Point) for concluding that goods
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are superior Kerosene. He submits that the Learned Adjudicating Authority
held that the Flash Point is between 40 to 43 degree Centigrade as against
35 (minimum) prescribed for solvent under IS 1745:1978. In as much as
there is no prescribed upper limit for this parameter, adverse inference
drawn by Learned Adjudicating Authority on this account is misplaced. He
submits that the entire case of the department in holding that the goods are
Superior Kerosene Oil is based on only 01 Parameter i.e. Final Boiling Point
as against 08 Parameters that are required to test as per requirement of
IS prescribed in the Supplymentary note.
2.1 He submits that as regard the issue that whether all the test
prescribed under IS are not carried out by department in order to decide
the classification, Hon'ble High court of Gujarat, in the judgment dated
20.01.2022 in the case of Rajkamal Industries applied the principles of
"reasonable doubt" and "preponderance of probability" in the case where
14 out of 21 tests were carried out . However, in the respectful submission
of appellant, the same when applied to the case in hand would make it
absolutely clear that only 01 parameter, i.e. Distillation (Flash Point being
the second and common between solvent and kerosene) cannot give rise to
any reasonable doubt and preponderance of probability that goods under
consideration are Superior Kerosene Oil. He submits that as regard the
specifications for the Petroleum Hydrocarbon solvents under IS : 1745-
1978 submitted by the Learned AR that there are 07 grades of solvent
and items having final boiling point of above 205 degree centigrade is also
considered as solvent under column 9 only. It will per se not to make it
Superior Kerosene Oil. Hence, in the respectful submission of appellant,
distillation range cannot be considered as kind of differentiating factor
between solvent and Superior Kerosene Oil.
2.3 It is the submission that without testing the samples with references
to i) Acidity ii) burning quality iii) colour iv) Copper strip corrosion and v)
Sulphur content and by citing only, distillation, the criteria of reasonable
doubt and probability laid down by the Hon'ble High Court of Gujarat in
the case of Rajkamal Industrial Pvt. Ltd (Supra) is not satisfied. He also
referred to a book titled "Significance of Tests for Pertroleum Products",
seventh edition by Salvatore J.Rand, in chapter 7 dealing with Burner,
Heating and Lighting Fuels.
2.4 He submits that the parameters prescribed for kerosene (not for
solvent) in the given fact kerosene is used as illuminant and fuel. He submits
that all the parameters have not been tested and the parameters that are
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tested do not satisfy the criteria. The impugned order passed by Learned
Commissioner (Appeals) is liable to be quashed and set aside. He also
submits that due to illegal absolute confiscation of the goods in question, the
appellant is suffering heavy detention and demurrage charges which may be
ordered to be waived. In support he placed reliance on the following
judgments :-
Shri. Jethanand Rohra and M/s. Jaymco Polymers Pvt. Ltd vide Final
Order No.A/85436-85437/2022 dated 09.05.2022
Swarna Oils Services vs. Commissioner of Customs , Mundra - 2020-
TIOL-970-CESTAT-AHM
3. Per Contra, Shri Vinod Lukose appearing on behalf of the Revenue
reiterates the finding of the impugned order. He submits that as per the test
report the chemical examiner has given a clear report that the goods
imported by the appellant are meeting with the specification of Kerosene. He
submits that the appellant made submission is that all the parameters of
kerosene have not been tested. The vital parameters have been tested and
it was found that the product in question is Kerosene. He placed heavy
reliance on the decision of Hon'ble High Court of Gujarat in the case of
Rajkamal Industrial Pvt Ltd wherein the Hon'ble High court of Gujarat Held
that even though all the parameter are not tested and only on the basis
of 14 parameters it was held in favour of the Revenue therefore applying
the ratio of this High court judgment the appeal filed by the appellant is not
sustainable. Hence, same is liable to be dismissed.
4. We have carefully considered the submission made by both sides and
perused the records. We find that the goods imported by the appellant have
been absolutely confiscated on the ground that the same is Superior
Kerosene Oil and not Low Aromatic White Spirit as declared by the appellant.
The Superior Kerosene Oil is a restricted item therefore the same was
absolute confiscated. In this regard the department has conducted the
chemical test of the product for which the representative sample was drawn
and sent to the chemical examiner, Custom House Laboratory, Kandla. The
test memo whereby the sample was sent is scanned below:-
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From the above memo it can be seen that the query for testing of the
product was made as " Whether sample confirm the description of goods
as above or otherwise?" from this test query the department wanted to
confirm whether the product imported by the appellant is Low Aromatic
White Spirit or otherwise. However against the said test memo the following
report was given by the chemical examiner.
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The chemical examiner instead of answering the query that whether sample
confirmed the description of goods as Low Aromatic White Spirit. The
chemical examiner reported that parameter meets the requirement of
Kerosene as per IS- 1459:2016. From the above we find that there may be
a possibility that on the basis of the parameters tested by the chemical
examiner the same also match with the parameter of the product imported
by the appellant. Therefore, it was important on the part of the chemical
examiner to first check as per the query raised by the custom that whether
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the sample conformed to the description of the goods as Low Aromatic
White Spirit or not. Further as per the department's claim that the Superior
Kerosene oil is specified under BIS 1459:1974, the said Specification is
scanned below:
From the above specification it can be seen that to arrive at the conclusion
that the product is Superior Kerosene Oil there are 8 Parameters which
needs to be tested but as per the test report only 3 Parameters were
tested. For this reason the test report of chemical examiner reporting the
product as Kerosene cannot be taken as conclusive. Moreover, the appellant
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have rightly pointed out that the Adjudicating Authority has based this
finding only on 1 parameter i.e. "Distillation" out of 8 Parameters for
holding that goods are SKO. We find that Learned Commissioner (Appeals)
finding only on the basis of 1 parameter i.e. distillation which cannot lead
to the conclusion that the product in question is SKO . The counsel
referred to the book titled "Significance of Tests for Petroleum Products",
seventh edition by Salvatore J.Rand the relevant portion of the book is
reproduced below:-
i. Colour is an indication of the overall purity of the product
ii. Burning quality test-by verifying Char value would indicate
the chemical composition of the Kerosene. Similarly, the
bloom on glass chimney test require that there should not
be any appreciable formation of deposits or "bloom" on the
lamp glass chimney during burning under normal operating
conditions
iii. The copper strip corrosion test is carried out to ascertain
the tendency to corrode copper and copper-alloy
components present in the kerosene handling and burner
systems
iv. Sulphur content have a bearing on air pollution
4.1 We find that the above parameter have been prescribed for the
kerosene (not for solvent). It is undisputed that the kerosene is used as
illuminant and fuel. To arrive at the conclusion that the goods are kerosene
which is used for illuminant and fuel the above parameters have to be
tested. We find that the decision of Mumbai Tribunal dated 09.05.2022 in
the case of Shri. Jethanand Rohra and M/s. Jaymco Polymers Pvt. Ltd
(Supra) supports the case of the appellant wherein on the issue of
classification of imported goods as kerosene it was held as under:
"18. Although the adjudicating authority have referred to
characteristics- CHAR value, bloom on glass chimney, but have failed
to show how the said characteristics, which governed the parameters,
- burning quality has been satisfied. Further, Revenue have failed to
appreciate that these characteristics determine not the quality but the
burning quality of kerosene which is an important parameter for
determination of kerosene. The test reports being the only evidence
relied upon by Revenue in the instant case to allege mis-
declaration/mis-classification, are wholly inconclusive and unreliable. It
is further urged that the court below have erred in holding that the two
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characteristics viz. CHAR value and bloom on glass chimney are
secondary in nature, which is contrary to the prescription under
IS1459. These characteristics are of prime importance in determining -
whether a sample of product is kerosene or not...
......
31. However, in respect of the other two parameters regarding burning quality and colour, there is absolutely no evidence that the Revenue has produced to establish that the said two parameters are met with. Thus, Revenue has failed to demonstrate how the other two said parameters were also met."
In view of the above decision of the tribunal the classification claimed by the appellant appears to be correct. We find that the appellant also relied upon the decision of this tribunal in the case of Swarna Oil Services (Supra) wherein the appeal filed by the importer was allowed after noticing that no test was undertaken for 3 parameters that were required under IS standard to establish that imported goods were SKO. In this case as many as 6 test have not been carried out for the same commodity. Therefore, we find that the case of Swarna Oil Service (Supra) is directly applicable to the facts of the present case. As regards the heavy reliance made by the revenue on the judgment of Hon'ble High Court in the case or Rajkamal (Supra) we find that in the said judgment the Hon'ble High Court applies the principle of "reasonable doubt" and "preponderance of probability". In that case out of 21 parameter only 14 parameter were tested however in the present case the only parameter relied upon by the adjudicating authority is Distillation out of 2 (final boiling point and flash point). On the basis of this it will not lead to any "reasonable doubt" and "preponderance of probability" that goods under consideration are SKO. We are therefore of the view that without testing the samples with reference to i) Acidity ii) burning quality iii) colour iv) Copper strip corrosion and v) Sulphur content and by citing only, distillation, the criteria of reasonable doubt and probability laid down by the Hon'ble High Court of Gujarat in the case of Rajkamal Industrial Pvt. Ltd (Supra) is not satisfied.
4.2 As regard the submission of the appellant regarding wavier of detention and demurrage charges the tribunal in the case of Shri. Jethanand Rohra and M/s. Jaymco Polymers Pvt. Ltd held in para 41 as under:-
"41. As the goods are lying under seizure and subsequent confiscation by the Customs Department for more than two years, for no fault of the appellant, grant of waiver of detention and demurrage charges is appropriate and direct that the proper certificate shall be issued by the 10 | P a g e C/10619/2020 concerned authority. We also direct that the goods in dispute be delivered to the appellants forthwith, within a period of two weeks from the date of receipt or service of this order."
4.3 We are of the view that the department must give effect of the above order for wavier of detention and demurrage charges. As per our above discussion and finding we are of the view that department could not establish that the goods in question is SKO therefore, the classification claimed by the appellant needs to be maintained.
5. Accordingly, impugned order is set aside and giving effect of this order the department shall vacate the absolute confiscation and penalty imposed is set aside. Appeal is allowed with the consequential relief in accordance with law.
(Pronounced in the open court on 10.08.2022 ) RAMESH NAIR MEMBER (JUDICAL) RAJU MEMBER (TECHNICAL) Geeta