Custom, Excise & Service Tax Tribunal
Gp Petroleums Ltd vs Commissioner Of Customs-Nhava Sheva-I on 6 June, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
Customs Appeal No. 85793 of 2024
(Arising out of Order-in-Original No. 226/2023-24/Commr./Gr. I&IA/NS-I/CAC/JNCH
dated 07.12.2024 passed by the Principal Commissioner of Customs, NS-I, JNCH, Nhava
Sheva, Taluka-Uran, District Raigad, Maharashtra).
GP Petroleums Limited .... Appellants
803, 804, Ackruti Star
8th Floor, MIDC Central Road
MIDC, Andheri (East)
Mumbai - 400 093.
Versus
Principal Commissioner of Customs (NS-I) ...... Respondent
Jawaharlal Nehru Customs House (JNCH)
Nhava Sheva
Taluka-Uran, District Raigad,
Maharashtra - 400 707.
Appearance:
Shri Prakash Shah, Senior Advocate a/w S/Shri Suyog Bhave, Ananta
Khandait, Advocates for the Appellant
Shri Deepak Sharma, Authorized Representative for the Respondent
CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/85868/2025
Date of Hearing: 07.02.2025
Date of Decision: 06.06.2025
Per: M.M. PARTHIBAN
This appeal has been filed by M/s GP Petroleums Limited, Mumbai
(herein after, referred to as "the appellants", for short) assailing the Order-
in-Original No. 226/ 2023-24/ Commr./ Gr.I&IA/ NS-I/ CAC/ JNCH dated
07.12.2024 (herein after, referred to as "the impugned order") passed by
the Principal Commissioner of Customs, NS-I, JNCH, Nhava Sheva, Taluka-
Uran, District Raigad, Maharashtra - 400 707.
2.1 The brief facts of the case are that the appellants are engaged in
manufacturing and trading of Rubber Process Oil (RPO), by blending the
RPO with base oil and then selling it to their customers, depending upon
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the requirements of their customers. The basic raw material is RPO. For the
above purpose, the appellants had imported RPO through various ports
such as JNPT, Nhava Sheva; Pipavav and Mundra sea ports. During the
disputed period i.e. from 19.01.2017 to 09.08.2019, the appellants had
imported 'Rubber Processing Oil' under 79 Bills of Entry (B/Es) at the above
ports by classifying it under Customs Tariff Item (CTI) 2707 9900 and
claimed concessional rate of Basic Customs Duty (BCD) at 2.5% under
Serial No. 121E of Notification No. 12/2012-Customd dated 17.03.2012 and
Serial No. 143 of Notification No. 50/2017-Customs dated 30.06.2017.
Directorate of Revenue Intelligence, Mumbai Zonal Unit (DRI) had
developed an intelligence that the appellants had mis-declared the
classification of the imported RPO and had alleged that such imported
goods are correctly classifiable under CTH 2713 9000 with applicable BCD
at the rate of 5% vide Sr. No. 130 of Notification No.12/2012-Customs
dated 17.03.2012 and Sr. No. 147 of Notification No.50/2017-Customs
dated 30.06.2017. After conducting detailed investigation including
examination of various documents, test reports relating to such imports,
DRI had issued Show Cause Notice (SCN) No. DRI/MZU/CI/INT-164/2019
dated 23.02.2021, for classification of imported RPO under CTH 2713 9000,
demanding differential duty under Section 28(4) of the Customs Act, 1962
both on finally assessed and provisionally assessed imported goods along
with interest; confiscation of goods under Section 111(m) ibid and for
imposition of penalty on the appellants under Sections 112(a), 114A ibid.
2.2 The details of these B/Es; duty paid by the appellants and the
differential duty payable as confirmed in impugned order are given in gist
as follows:
Sr. Seaport No. Final/ Assessable Duty payable Differential Duty
No. of of Provi- value in Rs. as determined confirmed in
import B/Es sional impugned order
(Amount in Rs.)
1 JNCH, 60 Final 37,66,67,950 9,28,10,038 1,18,32,538
Nhava Provnl. 13,12,71,935 3,29,52,721 40,07,627
Sheva Total 50,79,39,885 12,57,62,759 -
Less Duty paid at Concessional rate 10,99,22,594 -
Total duty demanded for imports in JNCH seaport 1,58,40,165
2 Pipava 17 Final 32,81,38,366 7,99,76,299 1,04,55,696
Port Provnl. 7,47,79,885 1,83,13,594 24,26,608
Total 40,29,18,251 9,82,89,893 -
Less Duty paid at Concessional rate 8,54,07,589 -
Total duty demanded for imports in Pipava seaport 1,28,82,304
3 Mundra 2 Final 85,60,855 21,49,001
Port Less Duty paid@Concessional rate 18,87,645
Total duty demanded for imports in Mundra -
in Mundra seaport 2,61,356
Total duty confirmed in O-in-O 2,89,83,825
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2.3 The said SCN dated 23.02.2021 was assigned for adjudication as
Common Adjudicating Authority by the Central Board of Indirect Taxes &
Customs (CBIC) under clause (a) of section 152 ibid vide Notification No.
24/2021-Customs (N.T./CAA/DRI) dated 17.03.2021 for adjudication of the
present case by the Principal Commissioner of Customs, NS-I, Nhava
Sheva. Accordingly, the adjudicating authority had passed the impugned
order 07.12.2024 by classifying the impugned goods under CTI 2713 9000
and rejecting the classification adopted by the appellants under CTI 2707
9900 and denying the concessional duty/exemption claimed by them.
Further, in the said impugned order, the learned adjudicating authority had
re-assessed the finally assessed B/Es and provisionally assessed B/Es
separately; he had also confirmed the differential duty demanded in the
SCN dated 23.02.2021, under Section 28(4) of the Customs Act, 1962 by
invoking the extended period for the finally assessed B/Es for an amount
of Rs. 2,25,49,590/-and under Section 18 ibid for provisionally assessed
B/Es for an amount of Rs.64,34,234/-. He further confiscated the impugned
goods under Section 111(m) ibid and imposed Redemption fine of
Rs.10,00,00,000/- in lieu of confiscation goods under Section 125(1) ibid
and also imposed penalties on the appellants under Section 112(a) ibid.
Furthermore, he had also appropriated Rs.54,83,549/- deposited by the
appellants during the course of investigation against the above
confirmation of the demands. Being aggrieved with the impugned order
dated 07.12.2024, the appellants have filed this appeal before the Tribunal.
3.1 Learned Advocate for the appellants at the outset submitted that the
impugned order dated 07.12.2024, passed by the Common Adjudicating
Authority in adjudication of the SCN dated 23.02.2021 had been passed
beyond the statutory time limit prescribed under the Section 28 (9) of the
Customs Act, 1962. He further explained that the prescribed time limit of
one year for adjudication of the case expired on 22.02.2022; though it was
claimed by the Department that the SCN was kept under call book category
on the basis of instructions No.4/2021-Customs dated 17.03.2021 issued
by the Ministry of Finance, learned Advocate stated that such instructions
had directed field formations to keep only a particular SCN as pending and
it does not apply to all cases. Further, the SCN dated 23.02.2021 was
removed from the call book category on 31.03.2022; however, first
personal hearing was granted to them on 14.03.2023, i.e., after more than
11 months. Furthermore, the order dated 20.03.2023 given by the Chief
Commissioner of Customs extending the time limit to adjudicate the SCN
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up to 30.03.2024 issued under Section 28(9)(b) ibid, had come to the
notice of the appellants only from the impugned order, and they were never
served with such order providing extension of time for adjudication. Even
an opportunity for personal hearing before granting such an extension of
time has not been given to the appellants, which is clearly in breach of
principles of natural justice. Therefore, learned advocate submitted that
the SCN has not been adjudicated in terms of the legal provisions of Section
28 ibid, and thus the same is not sustainable on this ground alone. In this
regard, learned advocate had relied upon the following judgements passed
by the Hon'ble High Courts.
(i) Shri Ram Agro Chemicals Pvt. Ltd. Vs. Union of India - 2019
SCC online P&H 4918
(ii) A.B. Sugars Limited Vs. State of Punjab 2009 SCC Online P&H
7974
4.2 Further, learned Advocate also stated that the adjudicating authority
had wrongly rejected the classification in respect of disputed imports, on
the basis of the previous test reports submitted by the appellants during
investigation, on the basis that the same quality of goods which have been
tested earlier, have been imported in the present consignments. Further,
the adjudicating authority had discarded the test reports submitted by the
appellants which were favourable to them, and had incorrectly came to the
conclusion that the imported RPO is having aromatic constituents less than
50% by weight. Learned Advocate submitted that out of total 79 B/Es under
dispute, the appellants had carried out in-house testing of 64 B/Es, in which
the aromatic constituents by weight are indicated as more than 50% and
such test reports have been submitted during the investigation, and
adjudication. An illustrative case of such B/E and test report has also been
provided as part of the appeal papers in the form of Annexure-1. Therefore,
he stated that these facts have not been properly considered by the
adjudicating authority.
4.3 Learned Advocate further submitted that in terms of Chapter Note 2
to Chapter 27, similar oils and products with the predominance of aromatic
constituents obtained by the distillation of low temperature coal tar or other
mineral tar, by the 'stripping' of coal gas, by the processing of petroleum
or by any other process, would be specifically included under CTH 2707.
Therefore, he claimed that the classification adopted by them in the
disputed B/Es are correctly declared. In this regard, he placed reliance on
the following:
(i) CBIC Circular No.1189 dated 13.02.1989
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(ii) Aspam Petro energy Pvt. Ltd. Vs. Commissioner of Customs,
Kandla - 2024 (389) E.L.T. 103 (Tri. - Ahmd.)
(iii) Amit Petrolubes Pvt. Ltd. Vs. Commissioner of Customs, Kandla
- 2023 (12) E.L.T. 796 (Tri. - Ahmd.)
4.4 Learned Advocate submitted that the entire case of the Department
is based on assumptions drawn on the basis of 10 departmental test reports
purportedly obtained by the officers of the DRI from the customs laboratory
at Nhava Sheva and Kandla. The Department had reclassified the imported
goods under CTI 2713 9000 on the basis of aromatic contents being less
than 50% by weight and Aniline point. In these 10 test reports, the
aromatic contents have not been mentioned in 7 reports, and the Aniline
point is less than 55˚C in 7 reports. Therefore, learned advocate submitted
that such test reports cannot be relied on for extrapolating such results to
apply in respect of all the disputed 79 B/Es. He further stated that it is a
settled position in law that the test report can be the basis of classification
only for the products for which samples were drawn and such a report
cannot be the basis for some other goods, on which no samples were
drawn, and the specific test results/reports have not been obtained. This
regard they relied upon the following judgements:
(i) Shalimar Paints Ltd. Vs. Commissioner of Central Excise,
Calcutta - 2001 (134) E.L.T. 285 (Tri. - Kolkata) affirmed by
Hon'ble Supreme Court - 2002 (145) E.L.T. A242 (S.C.)
(ii) Rajkamal Industrial Pvt. Ltd. Vs. Commissioner of Customs,
Kandla - 2024 (2) TMI. 314 (Tri. - Ahmd.)
4.5 In their case, learned Advocate submitted that the dispute in
classification is arising out of interpretation of law; and that there is no
case of any positive act of suppression, collusion, wilful misstatement etc.
established by the investigation. Therefore, he submitted that the extended
period of limitation under Section 28(4) ibid does not apply to the present
case and imposition of redemption fine consequent to confiscation and
imposition of penalty on the appellants in the impugned order is not
sustainable. In view of the above, he pleaded that on the above basis, their
appeal may be allowed.
5. On the other hand, learned Authorised Representative (AR)
appearing for Revenue, reiterated the findings made by the learned
Principal Commissioner of Customs in the impugned order and stated that
on the basis of the detailed investigation and findings made, the impugned
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order is sustainable. Therefore, he stated that the appeals filed by the
appellants may be dismissed.
6. We have heard both sides, examined the case records and the additional
submissions made during the course of hearing, paper books submitted by
both sides.
7. The issue involved herein is to decide the following:
(i) determine the classification of goods imported by the
appellants as to whether, the same merits classification under
Customs Tariff Heading (CTI) 2707 9900 described as 'Rubber
Processing Oil (RPO)' as claimed by the appellants; or, is it
classifiable under CTI 2713 9000 described as 'Other residues of
Petroleum oils or oils obtained from bituminous minerals' as
determined in the impugned order, for deciding on appropriate
levy of customs duty on the basis of appropriate classification of
goods; and
(ii) to decide whether confirmation of differential duty demanded
under Section 28(4) of the Customs Act, 1962 is legally
sustainable: and
(iii) to decide whether confiscation of impugned goods; imposition
of redemption fine in lieu of such confiscation and consequent
imposition of penalty on the appellants are legally sustainable.
The disputed period involved in this case is from 19.01.2017 to 09.08.2019.
8.1 On perusal of case file, certain undisputed facts as highlighted by the
Advocate for the appellant and not disputed by AR for the Revenue are
summarised herein below:
(i) The appellants M/s G.P. Petroleums Limited is a limited company with
its Managing Directors being Shri Ayush Goel (Promoter Director) and Smt.
Deepa Goel (Promoter Director), and the other directors keep on changing
with some independent directors. M/s Sah Petroleums Ltd., was taken over
by the above promoters on 01.08.2014 and after few months in April, 2015,
name of the said the company was changed to/s G.P. Petroleums Limited.
The said company continues to manufacture lubricants, greases and rubber
process oil under Vasai factory.
(ii) Shri Jagdish Govind Nagwekar, Authorised person of the appellants had
given in his voluntary statement dated 04.12.2019 that they had classified
Rubber Process Oil (RPO) under CTI 2707 9900 assuming that aromatic
content is more than 50% and also based on old departmental instructions
dated 13.02.1989and as per the general practice adopted in the trade by
all importers. They had imported RPO and blend the same with base oil to
change the viscosity as per customer's requirement, and after such
blending these are packed in drums and sold in bulk through tankers to
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tyre manufacturing companies like MRF, CEAT, Goodyear etc. which is used
during vulcanization of rubber. Generally they do in house test of imported
goods at the time of its receipt and in their letter dated 06.11.2019
submitted to the department, they had given details of B/Es covering all
those imports wherein the aromatic constituents is less than 50% and in
other cases where the aromatic constituents is more than 50% by weight.
(iii) The standards prescribed for petroleum based oils for Rubber industry
is provided under BIS Standard IS 15078:2001, which inter alia prescribe
the maximum Aniline point as 55˚C.
(iv) The impugned goods under dispute is covered under 79 B/Es i.e., 60
B/Es relating to imports under JNCH, Nhava Sheva seaport; 17 B/Es
relating to imports under Pipava seaport and 2 B/Es relating to imports
under Mundra seaport.
(iv) In respect of 18 B/Es, the appellants on the basis of their in-house
chemical test reports inter alia indicating the aromatic constituents being
less than 50%, had paid the differential duty of Rs.46,85,539/- along with
applicable interest of Rs.7,98,010/- during the time of investigation and
informed the same to the department vide their letters dated 04.12.2019
and 09.12.2019.
(v) The appellants had claimed that in respect of imports under 64 B/Es,
the in-house test reports indicate that the aromatic constituents are more
than 50%; however, only a specimen copy of such in-house test report was
submitted as Annexure-1.
(vi) In respect of 5 previous test reports of JNCH, Nhava Sheva; 4 previous
test reports of Pipava port and 1 previous test report of Mundra port, it is
indicated in all such test reports that the imported goods are either having
aromatic constituents of less than 50% or that they are not confirming to
the standard specifications of IS 15078-2001 prescribed for Petroleum
based Process Oil for Rubber Industry.
(viii) In respect of imports under 25 B/Es in JNCH, Nhava Sheva port, DRI
investigation had claimed that the appellants had indicated their previous
test reports as the basis for claiming the concessional duty of 2.5% BCD;
however, these previous test reports specifically indicate that the aromatic
constituents are less than 50%.
Since the above facts/documents have been relied upon in the
impugned order, in support of the findings on mis-classification of goods as
'Rubber Process Oil' instead of 'Other residues of Petroleum oils', it will be
important for us to see whether the same can be held as valid evidences
for coming to a conclusion on the appropriate classification of the goods.
8.2 In order to address the above issue of classification of imported
goods, we would like to refer the relevant legal provisions contained in
Section 12 of the Customs Act, 1962; the Customs Tariff Act, 1975 and
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rules framed thereunder for consideration of proper and appropriate
classification of the subject goods under dispute.
"Section 12. Dutiable goods. -
(1) Except as otherwise provided in this Act, or any other law for the time
being in force, duties of customs shall be levied at such rates as may be
specified under the Customs Tariff Act, 1975 (51 of 1975), or any other
law for the time being in force, on goods imported into, or exported from,
India.
(2) The provisions of sub-section (1) shall apply in respect of all goods
belonging to Government as they apply in respect of goods not belonging
to Government."
"Section 1. Short title, extent and commencement. -
(1) This Act may be called the Customs Tariff Act, 1975.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may,
by notification in the Official Gazette, appoint.
Section 2. Duties specified in the Schedules to be levied. -
The rates at which duties of customs shall be levied under the Customs
Act, 1962 (52 of 1962), are specified in the First and Second Schedules.
xxx xxx xxx xxx
THE FIRST SCHEDULE - IMPORT TARIFF
(Refer Section 2)
THE GENERAL RULES FOR THE INTERPRETATION OF IMPORT
TARIFF
Classification of goods in this Schedule shall be governed by the following
principles:
1. The titles of Sections, Chapters and sub-chapters are provided for ease
of reference only; for legal purposes, classification shall be determined
according to the terms of the headings and any relative Section or Chapter
Notes and, provided such headings or Notes do not otherwise require,
according to the following provisions:
2. (a) Any reference in a heading to an article shall be taken to include
a reference to that article incomplete or unfinished, provided that, as
presented, the incomplete or unfinished articles has the essential
character of the complete or finished article. It shall also be taken to
include a reference to that article complete or finished (or falling to
be classified as complete or finished by virtue of this rule), presented
unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be
taken to include a reference to mixtures or combinations of that
material or substance with other materials or substances. Any
reference to goods of a given material or substance shall be taken to
include a reference to goods consisting wholly or partly of such
material or substance. The classification of goods consisting of more
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than one material or substance shall be according to the principles of
rule 3.
3. When by application of rule 2(b) or for any other reason, goods are,
prima facie, classifiable under two or more headings, classification shall
be effected as follows:
(a) The heading which provides the most specific description shall be
preferred to headings providing a more general description.
However, when two or more headings each refer to part only of the
materials or substances contained in mixed or composite goods or to
part only of the items in a set put up for retail sale, those headings
are to be regarded as equally specific in relation to those goods, even
if one of them gives a more complete or precise description of the
goods.
(b) Mixtures, composite goods consisting of different materials or
made up of different components, and goods put up in sets for retail
sale, which cannot be classified by reference to (a), shall be classified
as if they consisted of the material or component which gives them
their essential character, in so far as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), they
shall be classified under the heading which occurs last in numerical
order among those which equally merit consideration.
4. Goods which cannot be classified in accordance with the above rules
shall be classified under the heading appropriate to the goods to which
they are most akin.
5. In addition to the foregoing provisions, the following rules shall apply
in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases, drawing
instrument cases, necklace cases and similar containers, specially
shaped or fitted to contain a specific article or set of articles, suitable
for long-term use and presented with the articles for which they are
intended, shall be classified with such articles when of a kind normally
sold therewith. This rule does not, however, apply to containers
which give the whole its essential character;
(b) Subject to the provisions of (a) above, packing materials and
packing containers presented with the goods therein shall be
classified with the goods if they are of a kind normally used for
packing such goods. However, this provision does not apply when
such packing materials or packing containers are clearly suitable for
repetitive use.
6. For legal purposes, the classification of goods in the sub-headings of a
heading shall be determined according to the terms of those sub headings
and any related sub headings Notes and, mutatis mutandis, to the above
rules, on the understanding that only sub headings at the same level are
comparable. For the purposes of this rule the relative Section and Chapter
Notes also apply, unless the context otherwise requires.
THE GENERAL EXPLANATORY NOTES TO IMPORT TARIFF
1. Where in column (2) of this Schedule, the description of an article or
group of articles under a heading is preceded by "-", the said article or
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group of articles shall be taken to be a sub-classification of the article or
group of articles covered by the said heading. Where, however, the
description of an article or group of articles is preceded by "- -", the said
article or group of articles shall be taken to be a sub-classification of the
immediately preceding description of the article or group of articles which
has "-". where the description of an article or group of articles is preceded
by "---" or "----", the said article or group of articles shall be taken to be
a sub-classification of the immediately preceding description of the article
or group of articles which has "-" or "--".
2. The abbreviation "%" in any column of this Schedule in relation to the
rate of duty indicates that duty on the goods to which the entry relates
shall be charged on the basis of the value of the goods as defined in section
14 of the Customs Act, 1962 (52 of 1962), the duty being equal to such
percentage of the value as is indicated in that column.
3. In any entry, if no rate of duty is shown in column (5), the rate shown
under column (4) shall be applicable.
ADDITIONAL NOTES
In this Schedule,--
(1)(a) "heading", in respect of goods, means a description in list of tariff
provisions accompanied by a four-digit number and includes all sub-
headings of tariff items the first four-digits of which correspond to that
number;
(b) "sub-heading", in respect of goods, means a description in the list
of tariff provisions accompanied by a six-digit number and includes all
tariff items the first six-digits of which correspond to that number;
(c) "tariff item" means a description of goods in the list of tariff
provisions accompanying eight digit number and the rate of customs
duty;
(2) the list of tariff provisions is divided into Sections, Chapters and Sub-
Chapters;
(3) in column (3), the standard unit of quantity is specified for each tariff
item to facilitate the collection, comparison and analysis of trade
statistics."
8.3 From plain reading of the above legal provisions, it transpires that in
order to determine the appropriate duties of customs payable on any
imported goods, one has to make an assessment of the imported goods for
its correct classification under the First Schedule to Customs Tariff Act,
1975 in accordance with the provisions of the Customs Tariff Act by duly
following the General Rules for Interpretation (GIR) and the General
Explanatory notes (GEN) contained therein. The First Schedule to the
Customs Tariff Act, 1975 specifies the various categories of imported goods
in a systematic and well-considered manner, in accordance with an
international scheme of classification of internationally traded goods, i.e.,
'Harmonized Commodity Description and Coding System' (HS).
Accordingly, goods are to be classified taking into consideration the scope
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of headings / sub-headings, related Section Notes, Chapter Notes and the
General Rules for the Interpretation (GIR) of the First Schedule to the
Customs Tariff Act, 1975. Rule 1 of the GIR provides that the classification
of goods shall be determined according to the terms of the headings of the
tariff and any relative Section notes or Chapter notes and thus, gives
precedence to this while classifying a product. Rules 2 to 6 provide the
general guidelines for classification of goods under the appropriate sub-
heading. In the event of the goods cannot be classified solely on the basis
of GIR 1, and if the headings and legal notes do not otherwise require, the
remaining Rules 2 to 6 may then be applied in sequential order. Further,
while classifying goods, the foremost consideration is the 'statutory
definition', if any, provided in the Customs Tariff Act. In the absence of any
statutory definition, or any guideline provided by HS explanatory notes, the
trade parlance theory is to be adopted for ascertaining as to how the goods
are known in the common trade parlance for the purpose of dealing
between the parties.
8.4 In the case before us, the contending classification of imported goods
discussed in the impugned order are either under CTI 2707 9900 described
as 'Rubber Process Oil (RPO)' as claimed by the appellants; or under CTI
2713 9000 described as 'Other residues of Petroleum oils or oils obtained
from bituminous minerals' of the First Schedule to the Customs Tariff Act,
1975. Further, in terms of Chapter Note 2 to Chapter 27, statutory
definition of 'Petroleum oils and oils obtained from bituminous minerals'
have been provided.
"CHAPTER 27
Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes
Notes :
xxx xxx xxx xxx
2. References in heading 2710 to "petroleum oils and oils obtained from
bituminous minerals" include not only petroleum oils and oils obtained from
bituminous minerals but also similar oils, as well as those consisting mainly
of mixed unsaturated hydrocarbons, obtained by any process, provided that
the weight of the non-aromatic constituents exceeds that of the
aromatic constituents...."
In terms of the above requirements of Chapter Note 2 for classifying
imported goods as petroleum oils and oils obtained from bituminous
minerals, we find that the weight of the non-aromatic constituents should
exceed that of the aromatic constituents, by weight.
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8.5 In the case before us, the contending classification of imported goods
discussed in the impugned order are either under CTI 2707 9900 or CTI
2713 9000 of the First Schedule to the Customs Tariff Act. Thus, it is clear
that at the Chapter level, there is no difference of opinion among the
department and the appellants. The dispute in classification therefore lies
in the narrow compass of analysis of the appropriate Chapter Heading
either 2707 or 2713, and its sub-heading under which the impugned goods
are covered as per the Customs Tariff and then classifying the impugned
product under the corresponding Tariff Item. Now, we may closely examine
the scope of the contending classification for determining correct
classification of the imported goods. The scope of goods covered under CTI
2707 9900 relates to "-- Other" under the heading "Oils and other products
of the distillation of high temperature coal tar; similar products in which
the weight of the aromatic constituents exceeds that of the non-aromatic
constituents", other than Benzol, Toluol, Naphthelene and other aromatic
hydrocarbon mixtures described in CTI 2707 5000"; and on the other side,
the department has re-classified the impugned goods covered under CTI
2713 9000 as "- Other residues of petroleum oils or of oils obtained from
bituminous minerals". Hence, we need to closely look at the classification
under the First Schedule to the Customs Tariff Act for arriving at proper
conclusion on the classification of the impugned goods. The relevant
headings and their tariff entries in the First Schedule to the Customs Tariff
Act, 1975 of contending Chapter headings 2707 and 2713 are extracted as
below:
"CHAPTER 27
Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes
xxx xxx xxx xxx
Chapter Description of goods
Heading
(1) (2)
2707 Oils and other products of the distillation of high temperature coal
tar; similar products in which the weight of the aromatic
constituents exceeds that of the non-aromatic constituents
2707 10 00 - Benzol (benzene)
2707 20 00 - Toluol (toluene)
2707 30 00 - Xylol (xylenes)
2707 40 00 - Naphthelene
2707 50 00 - Other aromatic hydro-carbon mixtures of which 65% or more
by volume (including losses) distils at 250°C by the ISO 3405
method (equivalent to the ASTM D 86 method)
- Other :
2707 91 00 -- Creosote oils
2707 99 00 -- Other"
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C/85793/2024
And
"Chapter Description of goods
Heading
(1) (2)
2713 Petroleum coke, petroleum bitumen and other residues of
petroleum oils or of oils obtained from bituminous
minerals
- Petroleum coke :
2713 11 -- Not calcined :
2713 11 10 --- Raw petroleum coke for anode making in aluminium industry
conforming to standard IS 17049
2713 11 90 --- Other
2713 12 -- Calcined :
2713 12 10 --- Calcined petroleum coke for anode making in aluminium
industry conforming to standard IS 17049
2713 12 90 --- Other
2713 20 00 - Petroleum bitumen
2713 90 00 - Other residues of petroleum oils or of oils obtained from
bituminous minerals"
9.1 It could be seen that by applying the GIR 1, the position is made
clear that Chapter Heading 2707 covers within its scope and ambit, mainly
of two broad categories of goods:
(i) first one i.e., oils and other products obtained by the distillation of
high temperature coal tar in more or less broad fractions, which produces
mixtures consisting predominantly of aromatic hydrocarbons and other
aromatic compounds, covered under CTHs 2707 10; 2707 20; 2707 30;
2707 40; 2707 50 and 2707 91;
(ii) the second one i.e., similar oils and products with a predominance of
aromatic constituents obtained by the distillation of low temperature coal
tar or other mineral tar, by the 'stripping' of coal gas by the processing
of petroleum or by any other process covered under CTH 2707 99;
Further, the first broad category of products are further grouped under
various CTIs as follows:
(a) Benzol (benzene), toluol (toluene), xylol (xylenes) and solvent
naphtha covered under CTI 2707 1000; 2707 2000; 2707 3000;
(b) Naphthalene oils and crude naphthalene covered under CTI 2707
4000;
(c) Anthracene oils and crude anthracene, Phenolic oils, Pyridine,
quinoline and acridine bases covered under CTI 2707 5000;
(d) Creosote oils covered under CTI 2707 9100; and
the second broad category of goods cover the following:
(e) Similar oils and products with a predominance of aromatic
constituents obtained by the distillation of low temperature coal tar
or other mineral tar, by the 'stripping' of coal gas by the processing
of petroleum or by any other process, covered under CTH 2707 9900;
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C/85793/2024
9.2 Similarly, by applying same GIR 1, it could also be seen that Chapter
Heading 2713 covers within its scope and ambit, mainly of three broad
categories of goods:
(i) first one i.e., "Petroleum coke" covered under CTH 2713 11 and 2713
12;
(ii) the second one i.e., "Petroleum bitumen" covered under CTI 2713
2000; and
(iii) the third one i.e., "Other residues of petroleum oils" covered under
CTI 2713 9000.
9.3 Broadly, we find that the chapter heading 2707 deals with "various
types of oils and other products of the distillation of high/low temperature
Coal tar or other mineral tar". These are obtained by the 'stripping' of coal
gas by the processing of petroleum or by any other process. Whereas,
Chapter heading 2713 deals with products of residue which are "petroleum
coke, petroleum bitumen or other residues of petroleum oils" usually
obtained cracking or destructive distillation or as a residue of the distillation
of crude petroleum. The scope of coverage of Chapter heading 2707 is
largely based on the aromatic constituents of the products of the distillation
of coal tar, where the wight of the aromatic constituents exceeds that of
the non-aromatic constituents, in order to get covered under this heading.
Further, where the non-aromatic constituents exceed that of aromatic
constituents in respect of petroleum oils obtained from bituminous minerals
then these would be classifiable either under heading 2710 in terms of
Chapter Note 2 to Chapter 27 or under heading 2713 as residues of
petroleum oils. From the above, we are of the prima facie view that
appropriate classification of imported goods can be decided based on the
fact evidencing the aromatic and non-aromatic constituents of the goods;
and whether these are of residues of petroleum oils or oils obtained from
bituminous minerals. Thus, on the basis of the above terms of customs
tariff headings, sub-headings and tariff entries providing the scope of
coverage of goods read with relevant Chapter Note 2 to Chapter 27, being
the legal basis of classification under the Customs Tariff Act, 1975, we are
of the considered opinion, that if the impugned goods containing the
aromatic constituents by weight exceeds that of the non-aromatic
constituents, then appropriate classification of the impugned goods would
be under CTI 2707 9900. Otherwise, where the impugned goods containing
the non-aromatic constituents by weight exceeds that of the aromatic
constituents or where the aromatic constituents is less than 50%, and not
fulfilling the requirements of chapter note 2, then the appropriate
classification of the impugned goods would be under CTI 2713 9000.
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C/85793/2024
9.4 We also find that the Central Board of Excise & Customs (CBEC) vide
Circular No.11/89 dated 13.02.1989 had examined the issue of
classification of Speciality Oil (Processed Oil) in the context of doubts
expressed for classification whether under sub-heading No. 2719.50 or
2713.39/2713.30 or under sub-heading No. 2707.90 of the Schedule to the
Central Excise Tariff Act, 1985 being a discussion point in South Zone Tariff-
cum-General Conference of Collectors of Central Excise. Based on the
discussion held in the said tariff conference and in consultation with the
Deputy Chief Chemist, CRCL, the issue was decided by the Board and
communicated to the filed formations for uniformity in assessment. In such
instructions issued by CBIC also it is found that basis for classification of
Rubber Process Oil is based on the fact whether the aromatic constituents
exceeds that of the non-aromatic constituents, which is in supportive of our
views on classification of impugned goods. The extract of the said circular
is given below:
"Circular No. 11/89, dated 13-2-1989
F. No. 87/2/88-CX.3
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi
Subject : Classification under Heading No. 27.10 or 27.13 or 27.07.
A doubt has been raised as to whether Speciality oils (Processed
Oils) manufactured out of furfural extracts are classifiable under sub-
heading No. 2719.50 or 2713.39/2713.30 or under sub-heading No.
2707.90 of the Schedule to the Central Excise Tariff Act, 1985.
2. The matter came up for discussion at the South Zone Tariff-cum-
General Conference of Collectors of Central Excise held at Bangalore on
4th and 5th October, 1988. It was pointed out at the Conference that
Speciality oils (Processed Oils) under dispute contained aromatic
constituents predominately over non-aromatic constituents and
therefore, the said goods cannot be classified under Heading No. 27.10
in view of the provisions of Chapter Note 2 of Chapter 27 of CET. In such
case, the Conference viewed that the goods in question would be
appropriately classifiable under sub-heading No. 2713.39 during the
period from 28-2-1986 to 29-2-1988 and under sub-heading No.
2713.30 from 1-3-1988 onwards. The Conference, however, desired
that the views/comments of the Deputy Chief Chemist, CRCL might be
obtained before the issue was finally settled.
3. Accordingly, the Deputy Chief Chemist, CRCL was consulted on the
issue. The Deputy Chief Chemist, CRCL has stated that HSN Explanatory
Note under HSN Heading No. 27.13 covers extracts derived from the
treatment of lubricating oils with certain selective solvents and thus
furfural extracts of different grades would squarely fall under sub-
heading no. 2713.39/2713.30 during the relevant period as 'other
residues of petroleum oils or of oils obtained from bituminous materials'.
The Processed oils (Speciality oils) in question, are manufactured
16
C/85793/2024
products obtained by blending the said extracts. These are tailor-made
products to meet the specific requirements for a particular use viz.
rubber processing oils and are individually identifiable as rubber
processing oils and thus would cease to be furfural extracts and, for
these reasons, the processed oils in question do not remain qualified for
classification under sub-heading No. 2713.39/ 2713.30 as 'other
petroleum residues'. In view of the provisions of Chapter Note 2 of
Chapter 27, the possibility of classification of such goods under Heading
No. 27.10 of CET is also ruled out since aromatic constituents in this
case predominate over non-aromatic constituents. The Deputy Chief
Chemist, CRCL, has opined that the more appropriate sub-heading for
the goods in question would be 2707.90 as 'similar products in which
the weight of aromatic constituents exceeds that of the non-aromatic
constituents. The Board agrees with the views of the Deputy Chief
Chemist in the matter.
4. Accordingly, it is hereby clarified that the 'Speciality Oils' (Processed
Oils) in question would be appropriately classifiable under sub-heading
No. 2707.90.
5. The above guidelines may be brought to the notice of the lower field
formations and the trade interests also may be suitably advised."
9.5 From the impugned order, we also note that there is a specific BIS
standards prescribed in respect of petroleum based oils for Rubber industry
provided as IS 15078: 2001. Some of the characteristics and the standard
requirements for Type-I Aromatic RPO are given at paragraph 1.4(xii) of
the impugned order at internal page 7 of 67. This include Aniline point
specified at the maximum of 55˚C, being the standard prescribed under BIS
for RPO/Petroleum oil for use in Rubber industry. Therefore,compliance
with the above IS standard specifications would also support the
classification of RPO accordingly.
9.6 On perusal of the records of the case, it transpires that the Rubber
Process Oil (RPO) imported by the appellants were subjected to chemical
testing by drawing samples of the imported consignment at the port of
import, and the goods are assessed to customs duty on the basis of such
test reports. In case of where the goods are being cleared out of customs
control pending receipt of test report, then the goods are assessed by the
Customs Apprising Group of the jurisdictional Customs Comissionerate on
'provisional' basis by taking necessary test bond with suitable undertaking
to pay differential duty on demand, when the imported goods are finally
assessed on the basis of the test report under Section 18(2) of the Customs
Act, 1962.
9.7 It also transpires from the records that the appellants had submitted
vide their letters dated 06.11.2019, 04.12.2019 and 09.12.2019 that in
respect of 18 B/Es imported through JNCH port, the aromatics constituents
17
C/85793/2024
was less than 50%, and they have made payment of differential duty of
Rs.25,26,471/- along with interest of Rs.5,49,360/-. Further, the
appellants have also mentioned therein that they would submit to the
investigation authorities all the test reports conducted in their in-house
laboratory for all imported consignments of RPO, and they are prepared to
pay under protest the differential duty, where the aromatics constituents
are less than 50% in respect of all past consignments. The list of such 18
B/Es imported through JNCH port or as follows:
Sr. Bill of Entry No. Date
No.
1. 9233431 08.04.2017
2. 9577875 05.05.2017
3. 2454143 14.07.2017
4. 2807819 10.08.2017
5. 4750474 10.01.2018
6. 4923987 23.01.2018
7. 6424914 17.05.2018
8. 7413095 28.07.2018
9. 7695935 18.08.2018
10. 8050942 14.09.2018
11. 9260759 14.12.2018
12. 9437535 27.12.2018
13. 9670379 16.01.2019
14. 9924449 04.02.2019
15. 2698381 03.04.2019
16. 3348446 22.05.2019
17. 3869739 29.06.2019
18. 4437402 09.08.2019
Since the fact that non-aromatic constituents by weight exceeds that of the
aromatic constituents, i.e., in other words, the aromatic constituents is less
than 50%, in all the above imported consignments of 18 B/Es through JNCH
port, Nhava Sheva the appropriate classification of such goods covered
under these 18 B/Es would be under CTI 2713 9000 and not under CTI
2707 9900, as claimed by the appellants. Further, the appellants vide letter
dated 09.12.2019 had also informed the department that they had made
payment of differential duty of Rs.25,26,471/- along with interest of
Rs.5,49,360/- towards the remaining consignments, where they had
accepted that the aromatic constituents is less than 50%. Thus, the
importer had made a total payment of Rs.46,85,539/- along with interest
of Rs.7,98,010/- i.e., total amount of Rs.54,83,549/- during investigation.
9.8 We further find that CBEC had issued instructions vide Circular No.
Customs dated 18.07.2017, wherein detailed guidelines have been
provided for re-testing of samples, in case the first test result of a sample
taken upon arrival of goods declared for importation shows an adverse
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C/85793/2024
finding, on the basis of the request submitted by the importers. The extract
of such circular is given below:
"Circular No. 30/2017-Cus.,
dated 18-7-2017
F. No. 450/15/2017-Cus.IV
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Excise & Customs
New Delhi
***
Subject : Detailed guidelines for re-testing of samples - Regarding.
World Trade Organization (WTO) negotiated Trade Facilitation Agreement (TFA), which aims at simplifying the trade processes and bringing down barriers to trade has come into force w.e.f. 22nd February, 2017. India is a signatory to this agreement.
2. India has placed a number of trade related measures negotiated under the TFA in Category A. Article 5.3.1 envisages granting an opportunity for a second test in case the first test result of a sample taken upon arrival of goods declared for importation shows an adverse finding. Further Article 5.3.3 makes it obligatory to consider the result of the second test, if any, for the release and clearance of goods, and, if appropriate, may accept the results of such test. The aforementioned Articles have been placed in category A. In order to have uniformity in approach among the field formations with regard to re-testing of samples, the following procedure is prescribed :
a. Customs officers may draw the samples from import consignments for testing in case of consignments wherever needed. The results of all test reports, adverse or otherwise, shall be communicated to the importer or his authorized representative/ Customs Broker immediately on its receipt.
b. In case the importer or his agent intends to request the Additional/Joint Commissioner of Customs for a re-rest, then the same shall be made in writing to the said officer within a period of ten days from the receipt of the communication of the test results 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 19 C/85793/2024 the samples, the importer or his representative shall be present and certify that the samples drawn are representative.
f. The competent authority shall consider the results of the re- test without prejudice to the results of the first test. In case there is a variation in the results of the first test and the re-test, the competent authority shall take the decision relying upon either of the tests specifying the grounds in writing for the decision so taken. In case the competent authority is unable to decide whether to rely upon the first or the re-test results, then it may order a second re- test provided the consignment is still within the customs control. However, this option should not be resorted to in every case of variation between the first test and re-test results.
g. The facility of re-testing, is a trade facilitation measure, which should generally not be denied in the ordinary course. However, there might arise circumstances where the customs officer is constrained to deny the re-testing facility. Board expects that such denial would be occasional and on reasonable grounds to be recorded in writing.
h. Where the re-testing procedure is done at the instance of the department instead of the importer, the above procedure shall be followed mutatis mutandis.
3. Difficulties, if any, in implementation of this circular, should be brought to the notice of the Board."
9.9 In the present case, for the imported consignments, test reports are required to be issued by the Customs Laboratory, at the respective ports of import, where samples have been drawn for testing by the customs officers at the time of assessment. Further, the procedure for sampling of import/export goods, storage of samples, arranging for tests, recording of test reports and related matters at Jawaharlal Nehru Custom House have been prescribed in Public Notice No. 05/2011 dated 21.04.2009, with a view to facilitating the process. Such procedure also provides for verification of self-assessment made by the importer, wherever the revenue implications are high, and in case of doubtful declaration by importer, or where verification of item description or specification is needed. However, wherever there is test report available for the same commodity with reference to the same supplier and the same importer, unless there is a reason for doubt, a previous test report which is less than 6 months old can be relied upon. If the imported goods are accompanied by manufacturers invoice, and manufacturers test report or test report of an accredited testing lab in the country of export of the goods, the goods may be released without a test bond. Therefore, it is also noticed that on the basis of certain previous test reports, the impugned goods could have also been cleared extending the concession claimed by the appellants. However, during investigation, the custom house laboratory at JNCH, Nhava Sheva; Pipava and Mundra have given the test reports in respect of 20 C/85793/2024 imported consignments by the appellants during the disputed period which indicated that the importer goods does not meet the requirement of petroleum based process oil for rubber industry as per IS 15078:2001 in respect of the specified parameters like Kinematic viscosity at 100˚C, density, Aniline Point; and that the aromatic constituents are of less than 50% by weight. Accordingly in respect of 25 B/Es of imports under JNCH, Nhava Sheva where the imported goods have been cleared on the basis of previous test reports, as mentioned in the respective B/E, since the requirement of adherence to BIS standards for RPO and aromatic constituents not being above 50% by weight, these goods are also alleged by the DRI investigation and the adjudicating authority had classified it to be under CTI 2713 9000 and not under CTI 2707 9900, as claimed by the appellants. The list of such B/Es are given below:
Sr. Bill of Entry No. Bill of Entry Previous Test Report No. Date (PTR)
1. 8252989 19.01.2017 198 dtd. 20.01.2017
2. 9233431 08.04.2017 198 dtd. 20.01.2017
3. 9577875 05.05.2017 198 dtd. 20.01.2017
4. 2059354 12.06.2017 198 dtd. 20.01.2017
5. 2104275 15.06.2017 198 dtd. 20.01.2017
6. 2807819 10.08.2017 244 dtd. 17.07.2017
7. 2818587 11.08.2017 244 dtd. 17.07.2017
8. 2899390 18.08.2017 244 dtd. 17.07.2017
9. 3165378 08.09.2017 244 dtd. 17.07.2017
10. 4750174 10.01.2018 1649 dtd. 10.01.2018
11. 6424914 17.05.2018 450 dtd. 18.05.2018
12. 7413095 28.07.2018 1326 dtd. 30.07.2018
13. 7695935 18.08.2018 1683 dtd. 24.08.2018
14. 8050942 14.09.2018 450 dtd. 18.05.2018
15. 8424090 11.10.2018 450 dtd. 18.05.2018
16. 8562186 22.10.2018 450 dtd. 18.05.2018
17. 9260759 14.12.2018 1326 dtd. 30.07.2018
18. 9437535 27.12.2018 1326 dtd. 30.07.2018
19. 9670379 16.01.2019 1326 dtd. 30.07.2018
20. 9924449 04.02.2019 1326 dtd. 30.07.2018
21. 2698381 03.04.2019 1326 dtd. 30.07.2018
22. 3348446 22.05.2019 1326 dtd. 30.07.2018
23. 3456252 30.05.2019 1326 dtd. 30.07.2018
24. 3869739 29.06.2019 1326 dtd. 30.07.2018
25. 4437407 09.08.2019 Not Specified 10.1 On the issue of classification of the impugned goods, other than those covered in the above B/Es, the learned adjudicating authority had come to the conclusion that the goods are classifiable under CTI 2713 9000 on the basis of the following findings as recorded in the impugned order. The relevant paragraphs are extracted and given below:
"4.10..... I find that in the subject case, from the aromatic constituents and aniline point mentioned in the departmental test reports, previous test report (PTR) number mentioned in the description 21 C/85793/2024 of the Bills of Entry, as well as same quality, specification of the goods and their identical supply chain involved, it is evident that the aromatic constituents of the imported Rubber Process Oil was less than 50%. Given the past behavior of the Noticee, their in-house test reports showing aromatic constituents as more than 50% has no credibility. Moreover, only test reports of the Customs laboratory, other suitable Govt. laboratories or private accredited laboratory, can be considered for the said purpose. Further, the test reports were not submitted at the time of filing of the Bills of Entry and were submitted at a later stage after several years of import. The submission of their in-house test reports by the Noticee appears to be an afterthought and therefore, cannot be relied upon. In view of the above, I discard the test reports submitted by the Noticee and conclude that the Rubber Process Oil consignments imported by the Noticee were having aromatic constituents less than 50%; thus, they were wrongly classified under CTI 27079900, instead of the correct CTI 27139000.
xxx xxx xxx xxx 4.10.2.....From the above, I find that all the consignments of 'Rubber Process Oil' imported by the Noticee were having identical supply chain viz., originating from same set of suppliers and same country; and were having same quality and specification viz. they were distillates coming directly from the distillation of refinery without involving any further processing. Thus, in terms of the recommendation of the Deputy Chief Chemist, CRCL, as mentioned in the above Circular, the product imported by the Noticee, being unprocessed residues of petroleum oils or of oils obtained from bituminous materials, is rightly classifiable under chapter heading 2713.
4.10.3 Notwithstanding the above I find that the issue of correct classification of RPO has been settled by the Hon'ble CESTAT, Mumbai vide its Final Order Nos.A/87132-87137/2017-WZB/CB dated 26.04.2017 in Appeal Nos.C/86916-86919 and 86944-86945/2014- Mum in respect of Sah Petroleums Ltd. Vs. Commissioner of Customs (Import), JNCH, Nhava Sheva, [2017 (358) E.L.T. 483 (Tri. Mumbai)]. It is pertinent to mention here that aforesaid company M/s Sah Petroleums Ltd., which was one of the Appellants in the above case, was subsequently taken over by new promoters Shri Ayush Goel and Smt. Deepa Goel and renamed as M/s GP Petroleums Ltd. Thus, the aforesaid order of the Hon'ble Tribunal was in respect of the Noticee involved in the instant case itself. Merely changing the importer's name and its promoters would not alter the significant law point i.e., the classification of RPO decided by the Hon'ble CESTAT in the importer's own case. The classification of RPO will remain unchanged, given that the goods were of identical/similar nature imported from same supplier and country and declared with same description as Bills of Entry by M/s Sah Petroleums Ltd., and there has been no change in the nature of imported goods, relevant Chapter Heading and Custom laws."
However, we find that the procedure prescribed in Circular No.30/2017- Customs dated 18.07.2017 for re-testing as a measure of trade facilitation, either on production of in-house test reports submitted by the appellants in support of the classification claimed by them or for denying their claim have not been followed by the departmental authorities. Further, there is 22 C/85793/2024 no justification shown by the adjudicating authority for out right rejection of the in-house test reports submitted by the appellants where the aromatic constituents were more than 50%, by simply stating that it is an afterthought. In an illustrative case of B/E No. 3456252 dated 30.05.2019 covering import of RPO at JNCH, Nhava Sheva port, the appellants had submitted the chemical analysis report showing aromatic constituents as % of mass of 72.58%, the extract of which is placed below. However, such factual detail which is crucial in determination of the classification of impugned goods has not been examined in the impugned order.
23C/85793/2024 Therefore, we do not find any merits in such findings recorded by the adjudicating authority for classification of the imported goods under CTI 27139000 in the rest of the B/Es, other than those discussed as above in preceding paragraph at 9.7 above.
10.2 We further find that at the time of investigation, the test reports conducted by the departmental CRCL laboratory on various import consignments made by the appellants were sought from the jurisdictional Customs/CRLC authorities covering the entire disputed period. In respect of the majority of imports covered under 60 B/Es imported through JNCH, Nhava Sheva port, the Joint Director, JNCH CRCL Laboratory had replied vide letter File No. S/16-16/2020-21/LAB/JNCH dated 29.07.2020 that as per the data available with them, in respect of Rubber Process Oil imported by the appellants during the period from 2014 onwards till date (29.07.2020) only two samples having reference B/E No.4750474 dated 10.01.2018 and B/E No.7695935 dated 18.08.2018 had been tested in JNCH Laboratory. Out of these two test reports, the authorities were able to trace only the test report w.r.t. B/E No.7695935 dated 18.08.2018; and 24 C/85793/2024 for the other B/E analysis report as recorded in the Chemist's register was provided to the Senior Intelligence Officer, DRI/investigation authorities. In the said two reports, there is no indication of the presence of aromatic or non-aromatic constituents in the sample of the imported goods is given. The extract of the said letter is given below:
Similarly, the Joint Director of CRCL, Customs House Laboratory at Kandla have given test repo0rts of 5 samples tested by them relating to the following B/Es viz. one B/E No. 8088043 dt. 05.01.2017 of Mundra port and four B/E Nos. 4485292 dt. 20.12.2017; 5688855 dt. 22.03.2018; 8703844 dt.01.112018;4493164 dt.14.08.2019 of Pipavav port, where the Aniline point has been indicated as 44°C, 42° C, 42° C, 43° C and 43° C 25 C/85793/2024 respectively, where the maximum permissible as per IS15098:2001 in 55°C. In the above factual position, it is not known how the learned adjudicating authority had come to a conclusion that the aromatic constituents of the imported RPO was less than 50% as recorded in his findings at para 4.10 of the impugned order, the extract of which is given in paragraph 9.1 above.
10.3 In the impugned order, the adjudicating authority had confirmed the demands proposed in the SCN by invoking extended period of limitation, on the ground that the appellants have made misleading declarations, mis-
classified the imported goods and claimed ineligible exemption benefits. From the facts on record, it clearly transpires that in respect of all the imported goods, the appellants have filed the B/E providing the description of the goods along with supporting documents such as suppliers invoice etc., and have claimed the customs tariff classification of the goods as per their understanding and also claimed concessional rate of custom duty by availing the notification benefits. The knowledge of the classification of imported goods in the earlier cases of imports under the business entity M/s Sah Petroleums Limited and the Tribunal's order dated 26.04.2017 in that case has also been shown as the ground for deliberate act of mis- declaration.
10.4 In a number of cases, the Tribunal have held that in cases of classification disputes, extended period cannot be invoked and penalty cannot be imposed claiming it as mis-statement, as the customs statute provide for modifying self-assessment made by an importer through re- assessment by proper officer. In the case of Midas Fertchem Impex Pvt. Ltd. Vs. Principal Commissioner of Customs, ACC (Import), New Delhi in Final Order No. A/50027-50031/2023 dated 13.01.2023 - 2023 (384) E.L.T. 397 (Tri.-Del.), a similar view was taken by the Tribunal by holding that wrong classification or claim of an ineligible notification or wrong self- assessment of duty by an importer will not amount to mis-statement or suppression. Further, the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company Vs. Collector of C.Ex., Bombay - 1995 (78) E.L.T. 401 (S.C.) in Civil Appeal No. 1957-58 of 1988 vide judgement dated 28.03.1995 have held the act of proviso clause providing the extended period for demand in certain cases specified therein such as collusion, wilful mis-statement, suppression of facts with an intention to evade duty carves out an exception and permits the authority to exercise this power within 26 C/85793/2024 five years; a perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. Hence, the Hon'ble Supreme Court have held that such acts must be deliberate. In the present case, the dispute is only on classification of imported goods and for the claim of duty concession under customs notification. In view of the above decisions of various judicial forum, these claims of the importer cannot per se be termed as mis-declaration, as such claim has to be examined in the process of assessment of goods.
10.5 Further, in terms of the definition provided for 'assessment' under Section 2(2) of the Customs Act, 1962 (substituted w.e.f. 29.03.2018), it includes determination of the dutiability of goods and the amount of duty so payable, with reference to the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act and exemption or concession of duty, consequent upon any notification issued under the Customs statute for the time being in force. Further, under Section 17 ibid, the proper officer of Customs may verify the self- assessment made by the importer and where it is found on verification, examination or testing of the goods, that the self-assessment is not done correctly, he may re-assess the duty leviable on such goods. The above legal provisions clearly enunciate that determination of proper duty payable on the import goods on verification of self-assessment made by an importer / appellants under Section 17(2) ibid and if the self-assessment is not done correctly, then the requirement of proper officer to make re-assessment under sub-sections (4)&(5) of Section 17 ibid, being the functions to be carried out as per the legal provisions of the Customs statute. Hence, the claim of tariff classification of goods, duty exemption under notification cannot be implied to mean wilful suppression of facts regarding true nature of the imported goods (RPO) and the importer has mis-classified with an intention to evade duty by the appellants as claimed in the SCN at paragraph 8.5 for invoking the extended period of limitation under Section 18(4) ibid. Further, the requirement of declaring the requisite particulars by the importer in the form of filing B/E as prescribed under the Regulations, indicating the various particulars of the imported goods including description, classification, value of goods, duty concession/ exemption claimed by them etc., are to enable self-assessment under Section 17 ibid and the same cannot be claimed as the grounds for invoking the extended period under the category of mis-declaration. It is also a fact on record, that the adjudicating authority on re-assessment of finally 27 C/85793/2024 assessed B/Es had confirmed the differential duty by invoking the extended period of limitation under Section 18(4) ibid. In view of the above factual position and as there is no specific grounds or evidences placed on record by the investigation in the SCN dated 23.02.2021 and that there is no specific findings recorded in the impugned order proving the ingredients of mis-declaration or suppression of facts with an intention to evade duty, we are of the considered view that the invocation of extended period in the present case does not stand the scrutiny of law.
10.6 From the records of the case, it is also seen that the appellants have claimed that in some of the provisionally assessed B/Es, where the test bonds have been executed, subsequently such assessments were finalized extending the benefit of exemption, without any demand of differential duty as the aromatic constituents were higher than 50%. For example, the appellants have stated in B/E No.4688651 dated 23.03.2016 for import of RPO in ten containers, the assessment was made 'provisional' with a test bond for Rs. 29,89,380/- for which they have claimed that the aromatic constituents was 69.64% thereby the classification under CTI 2707 9900 adopted by them was correct. Further, it is also seen that the Test Bond initially accepted by the Customs Appraising Group of the JNCH, Nhava Sheva for the aforesaid B/E on 29.03.2016 was cancelled later.
An extract of the aforesaid illustrative B/E and the test bond where Bank Guarantee executed is first accepted at the time of provisional assessment and later Bond/Bank Guarantee cancelled by the Department is extracted and given below:
28C/85793/2024 29 C/85793/2024 30 C/85793/2024 31 C/85793/2024 10.7 Since, the demand of duty under Section 18 ibid on re-assessment of provisionally assessed B/Es did not place on record any specific chemical test report(s) as evidence in support of the fact that non-aromatic constituents exceeds that of aromatic constituents and further had outrightly rejected the in-house test reports produced by the appellants, 32 C/85793/2024 the basis for its re-assessment under CTI 2713 9000 and consequent demand of differential duty under Section 18 ibid, in our considered opinion does not stand the scrutiny of law.
11.1 On the issue of adjudication of the SCN within the prescribed period under Section 28(9) ibid, the appellants had placed an argument that the order of the Chief Commissioner of Customs, Zone-II dated 22.03.2021 was not provided to them and they were not given an opportunity of hearing. The relevant sub-section (9) of Section 28 ibid is extracted and given below:
"(9) The proper officer shall determine the amount of duty or interest under sub-section (8),--
(a) within six months from the date of notice, 1[***] in respect of cases falling under clause (a) of sub-section (1);
(b) within one year from the date of notice, 1[***] in respect of cases falling under sub-section (4):2
[Provided that where the proper officer fails to so determine within the specified period, any officer senior in rank to the proper officer may, having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or interest under sub-section (8), extend the period specified in clause (a) to a further period of six months and the period specified in clause (b) to a further period of one year:
Provided further that where the proper officer fails to determine within such extended period, such proceeding shall be deemed to have concluded as if no notice had been issued.]"
Since, in the present case the SCN has been issued invoking the extended period, it is claimed by the appellants that the time limit of one year would apply from the date of issue of the SCN on 23.02.2021. However, as explained in the impugned order at paragraph 4.2, in view of the CBIC's instructions Customs dated 17.03.2021 issued in pursuant to the Hon'ble Supreme Court's judgement in the matter of M/s Canon India Private Limited Vs. Commissioner of Customs in Civil Appeal No.1827 of 2018 - 2021 (376) E.L.T. 3 (S.C.), the subject SCN was transferred to Call Book category vide Order dated 22.03.2021. It is mentioned therein that the aforesaid position was intimated to the appellants by the Department vide its letter dated 07.04.2021. Subsequently, after the legal amendments made with respect to 'proper officer' for issuing SCNs under the Customs Act, the matter was taken up from call book category for adjudication, duly providing an opportunity for personal hearing to the appellants on 1 Words "where it is possible to do so," omitted by the Finance Act, 2018, w.e.f. 29-3-2018. 2 Inserted by the Finance Act, 2018, w.e.f. 29-3-2018.33
C/85793/2024 14.03.2023. Further, in terms of the sub-section (9) of Section 28 ibid, extension of time limit for adjudicating the present SCN upto 30.03.2024 was granted by the Chief Commissioner of Customs. Thereafter, again the adjudicating authority had given fresh opportunities for personal hearing to the appellants on 08.11.2023, 07.12.2023. As on both occasions, the appellants had requested for adjournment of the hearing; one another opportunity was given on 27.12.2023, and the personal hearing was attended by Shri K.S. Mishra, Advocate and Shri Prashant Kubal, Consultant on behalf of the appellants.
11.2 On the above issue, the legal provisions as it existed prior to 29.03.2018, provide that the time limit is prescribed under sub-section (9) of Section 28 ibid would apply for adjudication of the notice is 'where it is possible to do so'. However, subsequent to the amendment introduced in the Finance Act, 2018 w.e.f. 29.03.2018, in cases involving extended period, the immediate senior officer in rank/superior authority to the adjudicating authority, having regard to the circumstances under which adjudication of the SCN could not be done within the prescribed period of one year, has been empowered to extend the time limit for a further period of one another year. In the present case, the aforesaid requirement of Section 28(9) ibid have been duly followed by the adjudicating authority. We also find that the Tribunal in the case of Kopertek Metals Private Limited Vs. Commission of CGST (West), New Delhi - 2024 (12) TMI 269 - CESTAT NEW DELHI, dealing with the issue of statutory time limit of one year provided under Section 11A(11) of the Central Excise Act, 1944 for adjudication of the case in respect of Central Excise matters, have held that the facts of each case has to be examined to find out whether there were circumstances or insurmountable exigencies which made it impracticable for the adjudication to take place, as has been held by the Hon'ble Delhi High Court in Swatch Group of India Pvt. Ltd. Vs, Union of India 2023 (386) E.L.T. 356 (Del.). In the Kopertek case (supra) the Tribunal had set aside the demands in all 209 SCNs on the ground that there was no plausible explanation as to why it was not possible for the Adjudicating Authority to complete the adjudication process within the stipulated time.
11.3 We find that in the present case, the adjudicating authority had given detailed explanation of the grounds why he could not adjudicate the case, and the case was kept under call book category, without adjudication, due to the specific instructions of the CBIC relating to the matter of Canon India case pending before the Hon'ble Supreme Court and the permission had 34 C/85793/2024 been given for extension of the time period for adjudication of the case by the proper authority in terms of Section 28(9) of the Customs Act, 1962.
11.4 Further, in the case of Canon India (supra) the Hon'ble Supreme Court held in its judgement dated 09.03.2021, that the entire proceeding in that case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before them are invalid without any authority of law and liable to be set-aside and accordingly the ensuing demands were also set aside. However, in the Review Petition No.400 of 2021 filed in Civil Appeal No.1827 of 2018, the Hon'ble Supreme Court vide its judgement dated 07.11.2024 inter alia have held that the enactment of sub-section (11) of Section 28 cures the defect pointed out in Sayed Ali (supra) and the judgment in Mangali Impex (supra) deserves to be set aside. It was also clarified in the said judgement dated 07.11.2024 that the officers of Directorate of Revenue Intelligence, Commissionerates of Customs (Preventive), Directorate General of Central Excise Intelligence and Commissionerates of Central Excise and other similarly situated officers are proper officers for the purposes of Section 28 and are competent to issue show cause notice thereunder. Therefore, any challenge made to the maintainability of such show cause notices issued by this particular class of officers, on the ground of want of jurisdiction for not being the proper officer, which remain pending before various forums, shall now be dealt with in the manner specified in that judgement. In respect of appeals pending before the CESTAT, it was decided by the Apex Court that they shall now be decided in accordance with the observations made in that decision. Besides the above discussions on the power or authority to issue SCN, which has been finally settled by the Hon'ble Supreme Court, we do not find any infirmity in the impugned order passed in adjudication of the SCN in the present case, as the said adjudication order has been passed on 07.02.2024 much prior to the last date of 30.03.2024.
12.1 On the identical issues of classification of Rubber Process Oil, demand of duty by invoking extended period, we find that the Coordinate Bench of the Tribunal in the case of Sah Petroleums Limited Vs. Commissioner of Customs (Import), JNCH, Nhava Sheva - 2017 (358) E.L.T. 483 (Tri.- Mumbai) have examined the issue of classification of Rubber Process Oil (RPO) in identical set of facts and have held that raw RPO merit classification under Chapter Heading 2713 90. The relevant paragraphs of the said order is extracted and given below:
35C/85793/2024 "21. The next issue to be decided in the present appeals is whether the goods are classifiable under Chapter sub-heading 2707 9900 as canvassed by the revenue or 2710 1960 as canvassed by the Appellants or under 2713 9000 as alternatively pleaded by the Appellants. We find that goods were purported to be classified under Chapter sub-heading 2707 9900 by the revenue on the ground that Rubber Process Oil (RPO) which meets the requirements stipulated in the Chapter Note 2 of Chapter 27 would remain appropriately classifiable under sub-heading 2710 and that in case where the weight or aromatic constituent exceeds that of non-aromatic constituents then such product would appear more appropriately classifiable under 2707 subject to meeting the requirements. The Chapter Note 2 of Chapter 27 read as under :
Reference in heading 2710 to "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed un-saturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.
However, the references do not include liquid synthetic polylefins of which less than 60% by volume distills at 3000C, after conversion to 1013 millibars when a reduced- pressure distillation method is used.
22. The revenue has sought classification under 2707 on the ground that as the aromatic constituents exceeds the non-aromatic constituents hence the goods will fall under Chapter sub-heading 2707. As far as issue of classification under Chapter sub-heading 2713 is concerned we find that raw RPO is being imported and is blended with various solvents to manufacture finished RPO for use by rubber industry which would meet the BIS Specifications laid down in BIS : 15078 : 2001 in terms of viscosity and density. The imported raw RPO is manufactured from Vacuum Gas Oil which is raw material for lubricating refineries. When it is cracked at high temperature and treated with solvents vaiious types of lubricating oil are obtained and the remaining extracts are derived from the treatment of lubricating oil with selected solvents. These residues or extracts are not similar to those oils as listed in 27.07 namely benzol (benzene), toluol (toluene) xylol (xylenes), solvent naptha, naphthalene oils and crude naphthalene, anthracene oils and crude anthracene, phenolic oils (phenols, cresols, xylenols etc), pyridine, quinolone and acridine basis and creosote oils. Unless it is similar oil, the raw RPO would not merit classification under Chapter sub-heading 27.07. Being "other residues of petroleum oils or of oils obtained from bituminous materials" will merit classification under Chapter Heading 2713. The classification of RPO under chapter heading 2713.39/2713.30 was recommended by the Deputy Chief Chemist and same was accepted by C.B.E. & C. in its circular No. 11/1989, dated 13-2-1989. We also find that the CRCL in its communication dated 23-8-2013 has also stated that RPO are mainly aromatic extracts which are produced during the refining of lubricating oil base stocks and that such aromatic extracts derived from treatment of lubricating oils with certain selected solvents are covered by heading 2713 9000. The Chapter sub-heading 27.13 covers Petroleum Coke, petroleum bitumen and other residues of petroleum oils or of oils obtained from bituminous minerals. The imported goods RPO cannot be classified under Chapter sub-heading 27.07 as it is not applicable to residues of petroleum oils or of oils obtained from bituminous minerals. Further even as per the HSN Explanatory Notes to said chapter the correct classification would be 36 C/85793/2024 under Chapter sub-heading 271390 00. The more specific tariff heading is ought to be assigned to the goods in case if two headings are equally applicable. We therefore hold that the raw RPO imported by the Appellants would merit classification under chapter heading 2713.90 and would be liable to duty accordingly.
23. The demands against the Appellants have also been raised by invoking extended period of limitation in respect of previous imports.
We find that during the course of earlier imports also the samples were drawn by the Customs Authorities and were sent for testing. The aromatic contents were found to be less than 50% by weight and the goods were allowed to be cleared. In such view of facts it cannot be said that the Appellants have suppressed any facts from department. Further we find from the bill of entry for home clearances that there is no mention of any provisional assessment of the same which shows that the Bills of Entry were finally assessed. From the detailed discussions made hereinabove, it can be seen that the issue involved is grave interpretation of law that whether goods in question is hazardous or otherwise and also involved issue on classification. The outcome of the case is based on strict laboratory tests of various agencies, hence it cannot be expected from the appellants that they know the nature of imported goods, accordingly, the impression of facts cannot be attributed to the appellants. We are therefore of the view that the demands are also hit by limitation of time and the demands raised by invoking extended period of limitation are not sustainable.
24. In view of our above findings we set aside the confiscation of goods, duty demand and penalties imposed. We hold that the impugned goods be classifiable under Chapter sub-heading 27139000 and the same shall be assessed accordingly. The demands made against the Appellants by invoking extended period of time are also not sustainable in view of our above observation and findings."
12.2 In this regard, we find that the department having been aggrieved with the above order of the Tribunal in the case of Sah Petroleums Ltd., have filed Civil Appeal before the Hon'ble Supreme Court. In the said appeals filed by the Principal Commissioner of Customs (Import-II), Mumbai, in a bunch cases involving M/s Gandhar Oil Refinery (I) Ltd., Sah Petroleums Ltd. and others, the Hon'ble Supreme Court of India in Civil Appeal Diary No. 22552 of 2017 vide judgement delivered on 08.09.2017 have held that the judgement of the Tribunal does not warrant any interference and dismissed the appeals filed by the department. However, the question of law pertaining classification of goods were left open. The relevant extract of the said judgement is given below:
37C/85793/2024
13.1 In view of the foregoing discussions and analysis, and on the basis of the orders passed by the Tribunal, particularly in the identical set of facts in the case of Sah Petroleums Ltd., (supra) which was also upheld by judgement of the Hon'ble Supreme Court dated 08.09.2017, we are of the considered view that the impugned order dated 07.12.2024 confirming the adjudged demands by invoking the extended period of limitation under Section 28(4) of the Customs Act, 1962 and consequent confiscation of imported goods, imposition of redemption fine, penalties on the appellants is not legally sustainable. Since, the demand of duty under Section 18 ibid on re-assessment of provisionally assessed B/Es did not place on record any specific chemical test report(s) as evidence in support of the non- aromatic constituents exceeding that of aromatic constituents and further had outrightly rejected the in-house test reports produced by the 38 C/85793/2024 appellants, the demands confirmed in this regard and the demand of duty which could be computed under Section 28(10B) ibid also does not stand the scrutiny of law. As regards classification of the goods, since the Hon'ble Supreme Court had left the question of law open in the case of M/s Gandhar Oil Refinery (I) Ltd., Sah Petroleums Ltd. and others, the issue of classification of Rubber Process Oil have been examined in detail in paragraphs No. 9.1 to 9.9 above, in terms of the legal provisions of the Customs statute.
13.2 Consequent to such determination of the principles of classification of the impugned goods on the basis of the customs tariff headings, sub- headings and tariff entries read with relevant Chapter Note 2 to Chapter 27 of the Customs Tariff Act, 1975, we are of the considered view, that if the impugned goods containing the aromatic constituents by weight exceeds that of the non-aromatic constituents, then appropriate classification of the impugned goods would be under CTI 2707 9900. Otherwise, where the impugned goods containing the non-aromatic constituents by weight exceeds that of the aromatic constituents or where the aromatic constituents is less than 50%, and that the requirements of chapter note 2 has not been fulfilled, then the appropriate classification of the impugned goods would be under CTI 2713 9000. Accordingly, as discussed in detail at paragraph 9.7 above, the appellants had submitted vide their letters dated 06.11.2019, 04.12.2019 and 09.12.2019 that in respect of (i) import consignments covered under 18 B/Es imported through JNCH port, where the aromatics constituents was less than 50%, and that they have made payment of differential duty of Rs.21,59,068/- along with interest of Rs.2,48,650/- on 05.12.2019; and (ii) in respect of the remaining consignments, where they had accepted that the aromatic constituents is less than 50%, they had paid the differential duty of Rs.25,26,471/- along with interest of Rs.5,49,360/-. Thus, the importer had made a total payment of Rs.46,85,539/- along with interest of Rs.7,98,010/- i.e., total amount of Rs.54,83,549/- on the ground that the imported goods having aromatic constituents of less than 50% by weight, is not classifiable under CTI 2707 9900 as claimed by them, and are right classifiable under the alternate classification of CTI 2713 9000 as determined by the department. Therefore, the total differential duty of customs along with interest paid by the appellants for an amount of Rs. 54,83,549/- and appropriated in the impugned order dated 07.12.2024 at paragraph 5(i) is sustained.
39C/85793/2024
14. In the result, the impugned order dated 07.12.2024 passed by the learned adjudicating authority is set aside to the above extent and the appeal filed by the appellants are partly allowed in their favour.
(Order pronounced in open court on 06.06.2025) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) Sinha