Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 6 July, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
Appeal No.C/143/06
Arising out of OIO No.KDL/Commr./78/2005, dt.31.08.05
Passed by: Commissioner of Customs (Appeals), Kandla
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s CC Kandla
Represented by Shri J.S. Negi, SDR
Vs.
Respondent/s M/s. Sturdy Polymers Ltd. & Others
Represented by None CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing :06.07.10 Date of Decision:
ORDER No. /WZB/AHD/2010 Per: MR. B.S.V. Murthy:
Specific intelligence was gathered by the officers of Directorate of Revenue Intelligence, (hereinafter referred to as DRI) to the effect that MT Athenian Victory was carrying Aviation Turbine Fuel Jet A-1, a canalized item under EXIM Policy 2002-07, and prior IGM No.F-751/19-06-2003 was filed mis-declaring the cargo as Superior Kerosene Oil (SKO). The officers of DRI boarded MT Athenian Victory in the night of 20/06/1993. The master of the vessel Mr. Wesolowski Boguslaw showed the original load port documents viz. Bill of Lading, certificate of origin, cargo manifest, certificate of quantity, certificate of quality, issued by M/s. Qatar Petroleum, Qatar and Ships Ullage report dated as 14.06.2003. In all these documents, the name of the product was shown as Aviation Turbine Fuel Jet A-1. The subject cargo was discharged completely in different tanks, hired by importers. 25098.940 MT ATF Jet A-1 along with mix bonded 3318.093 MT SKO imported previously and stored by other importers, was seized on 24.06.2003 under the reasonable belief that the same was liable for confiscation in terms of Section 111(d) 111(f) and 111(m) of the Customs Act, 1962 read with EXIM Policy 2002-2007 and Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992. Representative composite samples of the seized Aviation Turbine Fuel Jet A-1 were drawn under panchnama on 12.07.03 from the tanks No.FSWAI-9 and FSWAI-322. The samples were got tested from laboratory of BPCL, Chembur Refinery, Mumbai. They stated vide their letter dated 05.08.03 that the ATF sample meets all the tests for ATF as per report. Representative composite samples of seized Aviation Turbine Fuel Jet A-1 was drawn under panchnama on 30.06.03 from tank No.4 at M/s. Friends Salt Work and Allied Industries Ltd. Old Kandla. The samples were sent to the laboratory of M/s. Reliance Industries Ltd., Jamnagar. They have vide their letter dated 04.07.03 stated that the sample meets all the tests for ATF as per the report. Samples were also sent to CRCL laboratories at Vadodara and New Delhi and they expressed their inability to conduct all the tests as facilities, were reported to be not available. Samples were also sent to IIP, Dehradun, who tested a few parameters only. The Customs Tariff Act, 1975 schedule-I classifies Aviation Turbine Fuel (ATF) under Head 2710 1920 and Superior Kerosene Oil (SKO) under 2710 1910. While ATF has been defined in the supplementary note (d) as any hydrocarbon confirming to the Indian standards specification of Bureau of Indian Standards IS 1571:1992 2000, SKO has been defined as any hydrocarbon oil confirming to the Indian Standards Specification of Bureau of Indian Standards IS: 1549-1974 (reaffirmed in year 1996). The two products are not only classified differently but also have different standards and specifications under the Bureau of Indian Standards. Internationally also ATF has many more specifications to be satisfied in the terms of appearance, sulphur content, freezing point, copper and silver strip corrosion as well as conductivity. While ATF specifications necessarily satisfy all requirements of SKO under the Indian Standards the reverse cannot be true as well, SKO will not match the requirements laid down by IS 1571:2000 to say that every ATF consignment can be used as SKO can be correct but SKO can never be used as ATF unless the standard laid down for ATF itself are fulfilled. Even the ASTM distinguishes them separately. Standards for ATF are mentioned at D1655 and for Kerosene are mentioned at ASTM D-3600. The EXIM policy para 2.11 read with ITC (HS) classifications of export import items 2002-2007 (Chapter 27 for entry at 2710 19 20) requires that all imports of ATF are to be made only through the canalizing agency i.e. M/s. Indian Oil Corporation. It is therefore, a restricted item and cannot be freely imported by anyone. The contract of M/s. Glencore International AG (hereinafter referred as M/s. Glencore) with M/s. Mitsui and Co., Japan was entered into as early as in 20.05.2003 well before the vessel MT Athenian victory was loaded with its cargo. The contract is specifically for the purchase of JET A-1 for quantity of 26000 MTs, which was to meet Qatar Petroleum Standard specifications from the port of Mesaieed Qatar. This was followed by a contract between M/s. Glencore and M/s. Samchira FZE, Sharjah on 04.06.03 for Superior Kerosene Oil (SKO) for a quantity of 25000 to 26000 MTs CIF, Kandla. This was confirmed on 12.06.03 with a fax message from M/s. Glencore that the cargo would be supplied ex Athenian Victory. As per the statement of the master of MT Athenian Victory the vessel was loaded with its cargo i.e. ATF Jet A-1 as Mesaieed Qatar between 13 to 14th June, 2003. M/s. Glencore therefore, was fully aware that the cargo loaded on the vessel MT Athenian Victory was ATF, M/s. Samchira in turn had already entered into similar contracts on 03.06.03 for the supply of SKO with the six importers namely, M/s. Saraswati Trading Co., Delhi, M/s. Neptune Tradelinks Pvt. Ltd., Gandhidham and Indore, M/s. Sturdy Polymers Ltd., Parwanoo, HP, M/s. Shale Oil Exim Ltd., Mumbai, M/s. Yash International, Gandhidham, M/s. Worldlink T.C. Bond Store, Gandhidham. The master of the vessel MT Athenian Victory, Mr. Wesolowski Boguslaw, in his statement dated 21.06.03 has stated that the vessel was loaded with 25105.623 MTs of ATF Jet A-1 between 13.06.03 and 14.06.03 and that the vessel had not carried out any cargo other than ATF and had also not discharged cargo at any other port. As per documents submitted by him i.e. Bill of Lading, certificate of origin, cargo manifest, certificate of quality and certificate of quality, the cargo of vessel MT Athenian Victory was ATF Jet A-1. M/s. Glencore at the time of entering into the contract with M/s. Mitsui and Co., Japan on 20.05.03 and at the time of entering into the contract with M/s. Samchira were aware that the cargo that was being traded was ATF and SKO. The fax dated 12.06.03 from M/s. Glencore to M/s. Samchira FZE, Sharjah mentions the name of the vessel, as MT Athenian Victory indicating that while Athenian Victory was being loaded with ATF its cargo was being traded and sold as SKO to M/s. Samchira FZE, Sharjah. Shri Girish Agarwal, Proprietor of M/s. Samchira in his statement dated 04.09.03 has stated that he has entered into a contract with the importers viz. M/s. Sturdy Polymers, M/s. Shale Oil Exim Ltd., Mumbai, M/s. Neptune Trade Links Pvt. Ltd., Gandhidham, M/s. Yash International, Ghandhidham, M/s. Worldlink T.C. Bond Store, Gandhidham. M/s. Saraswati Trading Co., Delhi, for supply of SKO on 03.06.03 and which was in turn to be supplied by M/s. Glencore as per contract he had entered with them on 04.06.03 and which was subsequently confirmed on 12.06.03. As per his statement after the dispute regarding the cargo (after it was seized by DRI on 24.06.03), he has taken up the issue with the supplier i.e. M/s. Glencore, who assured him that the load port documents would be corrected within 15 days. Shri Girish Agarwal was aware that ATF was a canalized item. He admitted that the cargo loaded on to the vessel MT Athenian Victory was ATF which was further supported by masters fax to M/s. Atlantic Shipping Pvt. Ltd., which was confirmed by Shri Prakash Laad, Director in his statement dated 28./29.06.03 as also in the statement of Shri Arvind Thakurdesai, Manager.
2. After issue of show cause notice the Commissioner in the impugned order dropped further proceedings initiated vide show cause notice issued by the DRI on 26.09.03. The Revenue is in appeal against this decision.
3. Learned DR on behalf of the Revenue submitted that
i) The Commissioner erred in accepting the argument of M/s. Glencore International that the samples were forwarded and decided with bias omitting to note that the cargo was declared as SKO, he submits that the samples were forwarded and decided for ATF only since the documentary evidence revealed that what was loaded into the ship was ATF.
ii) The fact that Reliance Industries refused for cross examination will not take away the correctness of the certificate given by a DGCA approved chemist.
iii) The original load port documents recovered from the master of the vessel categorically indicated the cargo to be ATF. It is not the case of Glencore that they have not purchased ATF from M/s. Mitsui & Co., Japan.
iv) The condition of the goods at the time of import is a material factor and not the subsequent handling and usage. Therefore the Commissioners reliance on the ISI standards relating to handling are not relevant for the purpose of classification. The ISI standards only relate to handling after importation.
v) The Commissioners conclusion that allegation of fabrics of documents is baseless is not correct in view of the bill of lading statement of the shipping agent, owners of the vessel etc.
vi) The refusal of IOCL to purchase the cargo of ATF is not relevant and what is relevant is what was imported.
vii) The duty rate on SKO considered by the Commissioner is not relevant. Commissioner was required to determine whether the cargo was ATF or not.
4. On the other hand learned C.A. submitted that the Commissioner had passed a very elaborate order in which he has considered all the evidences produced by the department. As rightly observed by Commissioner ATF can be used as SKO but SKO cannot be used as ATF. The very fact that ATF imported was unloaded into tanks which also contained SKO supports the case of the appellants.
5. We have considered the submissions made by both the sides. The issue is whether goods imported as a SKO should be classified as ATF just because at the time of loading into the shipping it was contraacted as ATF is the question to be decided here. There is no dispute that at the time of loading in the load port, the product was loaded as ATF and understanding of the party purchasing was also that it was ATF. However it is also a fact as observed by the Commissioner that while ATF can be used as SKO, SKO cannot be used as ATF. Therefore even if the product was purchased as ATF, nobody can prevent a manufacturer or an exporter selling it as SKO. In the normal course as contended by the Revenue, the product would have been classified as ATF only. However it is the observation of the Commissioner which shows that in the case of ATF it is not only the specifications that are relevant but even handling procedures are prescribed. The very fact as observed by the Commissioner that the ATF imported was transferred into tanks which contained SKO also defeats the case of the DRI. Further nowhere it has been brought out as to whether the handling of ATF after it was loaded in the load port till it was unloaded in the destination port, the procedure prescribed for handling ATF were as per the standards for the purpose or not which is very vital.
6. We also find that the Commissioner has discussed the situation faced by M/s. IOCL in para 64 of his order. He has observed the time and again OICL faced situations where due to some handling problem or due to inadequate storage facilities they were compelled to downgrade the product from ATF to SKO. The very procedure followed by the importers for handling ATF shows that none of them heard that the product was to be used as ATF. No evidence has been shown to prove that the importers took steps to follow the procedure as per ISI standards for handling and storage in respect of ATF. This again would show that the parties concerned thought that what they were importing SKO only.
7. Another factor considered by the Commissioner with which we agree is that the supplier M/s. Glencore International was not new to India and they were fully aware about their customers and the end use in the hands of ultimate customer. No process is required to convert ATF to SKO. Non observance of stringent handling operation specified for ATF is sufficient. On this basis the Commissioners observation that the goods were sold, purchased, imported as SKO only with intention to use the same as SKO appears to be correct. In the absence of any evidence to show that specific standards IS: 7667 for handling and storage of ATF have been followed would show that the product has to be treated as SKO only. The refusal of IOCL lift the product also support this view.
8. Further the observation of the Commissioner that no airlines in India buy ATF from the importers is also correct in view of the fact that no airlines would be willing to take such huge risks to buy ATF from unknown importers without knowing and confirming that the prescribed handling procedures and storage procedures have been followed.
9. The request for cross examination of chemists could not be held since DRI could not produce the chemists. Reliance Industries specifically stated that the report was given with the clear understanding that it will be used for reference parties only. While it may be true that M/s. Glencore had purchased the ATF from Mitsui & Co., Japan but what they sold to Indian buyers was SKO only. The very fact that load port documents were available with the master of the vessel and handed over to the investigated agency would in our opinion support the case of the appellants rather than the department. If there was an intention to declare ATF as SKO and sell the same, the documents would not have been kept in the ship and if they were to be kept, fabricated documents would have been kept. It is not a case of investigating skills of the DRI that load port documents have been recovered and special efforts had to be made for this purpose. This also supports the case of the appellants.
10. The observation of the Commissioner that rate of duty was higher on SKO than ATF is also a relevant factor.
11. In view of the above discussion, we do not find any merit in the appeals filed by the Revenue and accordingly reject the same.
(Pronounced in Court on ___________________)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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