Custom, Excise & Service Tax Tribunal
Nayara Energy Ltd vs Jamnagar(Prev) on 4 December, 2023
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Customs Appeal No. 12014 of 2015- DB
(Arising out of OIA-JMN-CUSTM-000-APP-074-075-15-16 dated 08/09/2015 passed by
Commissioner of CUSTOMS-JAMNAGAR (PREV))
NAYARA ENERGY LTD ........Appellant
Po-Khambhalia,
Jamnagar, Jamnagar, Gujarat
VERSUS
C.C.-JAMNAGAR(PREV) ......Respondent
Sharda House...Bedi Bandar Road,
Opp. Panchavati, Jamnagar
Gujarat
WITH
(i) Customs Appeal No. 12026 of 2015 - DB (C.C.-
JAMNAGAR(PREV))
(ii) Customs Appeal No. 12027 of 2015 - DB (C.C.-
Jamnagar(prev))
(iii) Customs Appeal No. 10358 of 2016 - DB (C.C.-Jamnagar(prev))
APPEARANCE:
Shri Vishal Agarwal & Ms. Dimple Gohil, Advocate for the Appellant-Assessee
Shri P K Rameshwaram, Additional Commission(AR) for the Respondent- Revenue
CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR
Final Order No. 12709-12712/2023
DATE OF HEARING: 23.06.2023
DATE OF DECISION: 04.12.2023
RAMESH NAIR
The assessee as well as the Revenue are in appeal against the
impugned order-in-appeal No. JMN-CUSTM-000-APP-074 to 075-15-16 dated
08.09.2015 passed by the Commissioner (Appeals), Ahmedabad.
1.1 The facts of the case are that the assessee are having a Petroleum Oil
Refinery at Vadinar, Jamnagar. Assessee had filed Bill of Entry No. F-
42/2009-10 dtd. 19.08.2009 for import of two grades of Crude Petroleum Oil
viz. (1) Deodorized Field Condensate Crude Oil and (2) Murban Crude Oil by
classifying the same under Custom Tariff heading No. 27090000 and availing
the benefit under Notification No. 21/2002-Cus dated 01.03.2002 (Sr. No.
487) as amended. The said Bill of Entry was assessed provisionally on
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20.08.2009 for want of test result by granting exemption under Notification
No. 21/2002-Cus. dated 01.03.2002, as amended. The test report of the
Chemical Examiner, Customs Revenue Chemical Laboratory, Kandla revealed
the product to be "Other than Petroleum Crude Oil". Thus it appeared that
assessee had mis-declared the imported goods with an intention to evade
Customs duty. Therefore, a show cause notice dated 18.08.2010 was issued
to the assessee. In adjudication, the lower adjudicating authority decided
the matter vide Order-In-Original dated 31.12.2014 wherein the
classification made by the assessee under Bill of entry No. F-42 dated
19.08.2009 under CTH 2709000 for the product declared as "Deodorized
Field Condensate Crude Oil" and "Murban Crude Oil" was rejected and the
Lower adjudicating authority classified the same under CTH 27101990
rejecting the benefit of Notification No. 21/2002 -Cus dated 01.03.2002;
confiscated 128280.721 Mts. Of "Processed Petroleum Product" (declared as
"Deodorized Field Condensate Crude Oil and Murban Crude Oil") under
Section 111(d) and (m) of Customs Act, 1962 imposing redemption fine
under Section 125 of the Customs Act 1962; confirmed the demand of
differential customs duty of Rs. 88,07,06,342/- under proviso to Section
28(1) of Customs Act, 1962 alongwith interest under Section 28AB of the
Customs Act 1962; imposing penalty of Rs. 88,07,06,342/- under Section
114A of the Customs Act, 1962 ; and imposing penalty of Rs. 8 Lakh on Shri
Nishant Chauhan under Section 112(a) of the Customs Act, 1962. The said
order was challenged by the assessee and revenue before the lower
appellate authority. The department filed the appeal before Commissioner
(Appeals) on the ground that the adjudicating authority ought to have
imposed penalty under Section 114A "equal to duty and interest". The Ld.
Commissioner (Appeals) vide impugned order-in-appeal dated 08.09.2015
upheld the classification of products "Deodorized Field Condensate Crude Oil"
under CTH 27101990 and denied benefit under Notification No. 21/2002-
Cus read with Notification No. 74/2008-Cus.; confirmed the demand of
differential customs duty of Rs. 46,05,54,755/- alongwith interest; set aside
the order of lower authority regarding classification of products "Murban
Crude Oil" under CTH 27101990 and reclassified the same under CTH
27090000 with benefit of Notification No. 21/2002-Cus read with Notification
No. 74/2008-Cus.; dropped the proceedings of confiscation of entire goods
under Section 111(d) and (m) of the Customs Act, 1962; dropped the
redemption fine imposed under Section 125 of the Customs Act, 1962;
dropped the penalty imposed on Shri Nishant Chauhan under Section 112(a)
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of the Customs Act, 1962. Aggrieved from the impugned order-in-appeal
both are in appeal before us.
2. Shri Vishal Agrawal learned counsel with Ms. Dimple Gohil, Learned
Advocate appearing on behalf of the appellant-assessee submits that it is
not disputing the order of the Commissioner (Appeals) is so far as it relates
to setting aside the order of the lower authority regarding classification of its
second products 'Murban Crude Oil' under CTH 27101990 and reclassifying
the same under CTH 27090000 with benefit of Notification No. 21/2002-Cus.
dated 01.03.2022 read with Notification No. 74/2002-Cus. dated 04.06.2008
and dropping the proceedings of confiscation of entire goods under Section
111(d) and (m) of the Customs Act ,1962 and consequently dropping the
redemption fine as well as dropping penalty. The Appeal No. C/12014/2015
of appellant-assessee only to that part of the order which upholds the order
of the lower authority regarding classification of its other products
'Deodorized Field Condensate Petroleum Crude Oil' under chapter heading
27101990 and denying the benefit of Notification No. 21/2002-Cus dated
01.03.2002 read with Notification No. 74/2008 -Cus. dated 04.06.2008.
2.1 He submits that the burden of classification is on the revenue. It was
for the revenue to have established that the classification claimed by the
appellant was incorrect. In the instant case the classification claimed by the
appellant was based on the 3rd party evidences such as certificate of Origin,
Load Port documents, Supplier's Certificate etc. The Lower authorities
overlooked the facts that the 3rd party documents relied upon by the
appellant were from organizations of International repute such as those
issued by the organization owned by the government of Qatar, Certificates
issued by the reputed organization such as SGS. Further, the deodorized
field condensate is a recognized condensate and finds mention in the
International Publication such as RIM, PLAT etc. The Lower Authorities have
not disputed the correctness of these evidence and despite this have drawn
adverse inference without producing contrary evidence.
2.2 He further submits that Ld. Commissioner (Appeals) has committed a
grave error in upholding the order of the adjudicating authority regarding
classification of product 'Deodorized Field Condensate Petroleum Crude Oil'
under CTH 27101990 and consequently denying the benefit of Notification
No. 21/2002-Cus dated 01.03.2002 by completely ignoring appellant's plea
that the issue was no logner res integra as classification of Deodorized Field
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Condensate Petroleum Crude Oil has already been decided by the Tribunal
vide its Order No. A/123/12312/2014 dated 18.12.2014 in assessee's favour
in respect of import under another B/E arising out of common investigations
under taken by the DRI both in respect of the present B/E under dispute and
the B/Es involved in the case before the Hon'ble Tribunal. The said decision
was binding on Commissioner (Appeals) and ought to have followed the
same. The impugned order is , therefore, liable to be set aside on this
ground alone.
2.3 Without prejudice, he further submits that the Lower authorities have
failed to appreciate that the Chemical Examiner had, in the course of the
proceedings undertaken by the DRI submitted his opinion under cover of
letter dated 05.08.2010 wherein he had categorically stated that no amount
of testing could determine conclusively whether the product was petroleum
condensate as claimed by the appellant or was a refined petroleum
condensate as claimed by the revenue. The physio-chemical property was
overlapping with the physio-chemical characteristic of the refined petroleum
properties and therefore, it could not be conclusively affirmed whether the
imported product was petroleum condensate or refined petroleum
condensate. The Chemical Examiner has, in his opinion relied upon the
Minutes of the Meeting of the World Customs Organization Harmonised
System Committee wherein the sub-committee, after due deliberation by
experts from different countries came to a conclusion that the Chemical
composition and physical properties were similar and overlapping and that
there was no practical way of differentiating between the two groups of
products. This opinion of the Chemical Examiner clearly shows that merely
based on testing the product, it could not be said whether same was
petroleum condensate or refined petroleum condensate and the other
documents such as supplier's certificate, etc. were to be relied upon for
deciding the true characteristics of the products. The impugned order passed
by the Lower authorities has overlooked this aspect of the matter and thus
deserves to be set aside on this ground alone.
2.4 He also argued that learned Commissioner (Appeals) has committed a
grave error by placing its reliance on the chemical examiner's report is
respect of the products Deodorized Field Condensate Petroleum Crude Oil for
classifying the same under the chapter heading 27101990 and consequently
denying the benefit of Notification 21/2002-Cus dated 01.03.2002 especially
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when the chemical examiner has in his own admission admitted that he has
given the report on the basis of only 3 parameters i.e density of 15 0C,
distillation range and flash point which were not sufficient parameters for
determining whether the product in question is condensate or other
petroleum product as has been stated by him in reply to question No.2 of his
statement recorded on 29.06.2010. Further in the test memo relating to this
report, the full description of appellant's products was not given and the
product was described as only Crude Petroleum Oil and not as 'Deodorized
Field Condensate Petroleum Crude' and therefore, there was no occasion for
the Chemical Examiner to opine as to whether appellant's product was
condensate or not.
2.5 He also submits that classification of Deodarized Field Condensate
Petroleum Crude Oil has been the subject matter of deliberation by the
World Customs Organization and in fact the matter was examined by its
Review Sub-Committee at its 18th session which thereafter referred the
matter to the Scientific Sub-Committee for advice inter alia on the following
points: -
(a) Appropriate definition or description of "Natural Gas Condensate"
and
(b) How the product could be distinguished from similar synthetic
product of heading 2710.
The matter was thereafter examined by the said sub-committee but it also
could not reach to any definite conclusion looking into the complexities of
the issue involved and the overlapping nature of its various characteristics
and ultimately concluded that there was almost no practical way of
distinguishing between the two groups of products. The matter was
ultimately submitted to Harmonized Systems Committee which was
entrusted with the Job of providing as suitable definition of gas condensate
as is evident from the Harmonised System Committee, Brussels 24 th Session
report dated 08.10.1999 also referred to with approval, extracted and relied
upon by the Tribunal in its order dated 18.12.2014. After due deliberations
and recommendations, the Explanatory Notes of HSN were amended in the
year 2002 wherein in chapter hearing 27.09 following addition was made:
" The heading also covers gas condensate i.e crude oil obtained during the stabilization
of natural gas immediately upon its extraction -----"
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Once it has been held by an International Organization like World Customs
Organization that physio-Chemical parameters of Crude Petroleum Oil,
Petroleum Condensate and Petroleum Product of Chapter 27.10. are difficult
to differentiate due to overlapping nature and that there is almost no
practical way of distinguishing between the two groups of products and once
Deputy Chief Chemist in its correspondence with DRI has also opined that
supplier certificate is an important documents in such cases, the parameters
of which are to be matched with that of the Lab result in order to confirm the
goods, no credence can be placed on the Chemical Examiner's Report given
without calling for any literature or quality report or inspection agency report
and such a report is to be straightway eschewed and impugned order which
has upheld classification of condensate under CTH 27101990 solely on the
basis of the Chemical Examiner's report is liable to be set aside.
2.6 Without prejudice, he further submits that the Lower authorities have
erred in relying upon the report of the Deputy Chief Chemist to classify the
product as a refined petroleum product. The said report does not state that
the goods tested were refined petroleum product. The impugned order
misinterpreted the report of the CRCL and thus liable to be quashed. The
Report of the Chemical Examiner only concluded that what has been
imported is other than petroleum crude oil without appreciating that the
contention of the appellant was that what has been imported was petroleum
condensate and not crude petroleum oil.
2.7. He also submits that the lower authorities were clearly not justified in
rejecting the request for cross-examination of the Chemical Examiner as also
the Deputy Chief Chemist, without appreciating the fact that the entire case
made out by the revenue was based only on the test results, which did not
specify any reason or basis for arriving at the conclusion that the goods
imported by the appellant were other than crude petroleum oil.
2.8 He also argued that entire demand was time barred. The assessments
in the present case were finalized on 04.02.2010 and SCN was issued on
19.08.2010. In such a case, extended period could not have been invoked
specially when the Commissioner(Appeals) himself has absolved the
appellant from the charges of any mis-declaration on its part and has in his
findings set aside the penalty. Extended period can be invoked only in a case
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where there in any mis-representation, mis-declaration or suppression of
any fact with intent to evade duty.
3. As regards the revenue's appeal, he reiterates the findings of the
impugned order.
3.1 Shri P.K. Rameshwaram , ld. Additional Commissioner (AR) appearing
on behalf of the Revenue, as regard the assesee's appeal are concerned he
reiterates the findings of the impugned order. He further submits that ld.
Commissioner (Appeals) has rightly upheld the classification of product
"Deodorized Field Condensate Crude Oil" under CTH 27101990 and denied
benefit under Notification No. 21/2002-Cus read with Notification No.
74/2008 -Cus. He placed reliance on the following judgments:
Visal Lubetech Corpn Vs. CC., Coimbatore -2016(342)ELT 201 (Mad,)
Kalpana Chemicals Pvt. Ltd. Vs. CCE- 2001(127) ELT A165(SC)
Steer Overseas P. Ltd. Vs. CCE, Vijayawada -2022 (380)ELT 340 (Tri.
Hyd.)
Polyglass Acrylic MFG. Co. Ltd. Vs. Commr of Custom Vishakhaprnam -
2003(153)ELT 276 (SC)
CCE, Ahmedabad Vs. Cellulose Products of India -2000(124)ELT 1133
(Tri.)
Kalpana Chemicals Pvt. Ltd. Vs. Collector -2001(127)ELT A165 (SC)
Reliance Cellulose Products Ltd. Vs. CCE, Hyderabad -1997(93)ELT
646(SC)
Shree Tirumala Udyog Vs. CC, Bangalore -2003(162)ELT 908 (Tri.
Chennai)
Quinn India Ltd. Vs. CCE, Hyderabad -2006(198)ELT 326 (SC)
3.2 As regard the Revenue's appeal he submits that ld. Commissioner
(Appeals) has erred in passing the impugned order to the extent of setting
aside (i) confiscation of 62,657.721MT of Deodorized Field Condensate Crude
Oil under Section 111(d) and (m) of the Customs Act, 1962; (ii) imposition
of redemption fine; (iii) imposition of penalty.
3.3 He submits that despite a specific findings of the appellate authority
that the goods "Deodorized Field Condensate Crude Oil" imported by the
importer under CTH 27090000 merit classification under CTH 27101990 as
"Other" and as such the benefit of Notification No. 21/2002-Cus dtd.
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01.03.2002 read with Notification No. 74/2008-Cus dtd. 04.06.2008 cannot
be extended to them and custom duty is required to be recovered/ paid on
the said products, the appellate authority went on to hold that there was no
mis-declaration. The respondent had declared the imported product as
Petroleum Crude Oil and availed the benefit of Notification No. 21/2002-Cus.
dated 01.03.2002 as amended. The product was found to be processed
product of petroleum crude only after testing to the sample from the
laboratories of Customs House, Kandla and CRCL, New Delhi. Thus the
respondent had mis-declared the description of the goods with an intention
to avail wrong benefit of Notifications. There appears to be no doubt that the
product "Deodorized filed Condensate Crude Oil" was mis-classified which
ipso facto means it was rendered liable for confiscation under Section 111(d)
and (m) of the Customs Act, 1962. Section 111 of the Customs Act ,1962
does not grant immunity in case of mis-declaration/mis- classification. Even
otherwise, since the importer was operating under self assessment
procedure he was under the obligation to correctly declare the classification
& having failed to do so, the act of omission on the part of the importer has
rendered the impugned goods liable for confiscation under Section 111(d)
and (m) ibid. He placed reliance on the decision CCE Mumbai Vs. Multimetal
Ltd. - 2002(144)ELT 574 (Tri. Mumbai).
3.4 He also submits that since the product "Deodorized Field Condensate
Crude Oil" was assessed provisionally and cleared, and later on found the
same to be liable for confiscation under Section 111(d) and (m) of the
Customs Act, 1962, the appellate authority should have imposed redemption
fine in lieu of confiscation under Section 125 ibid. He placed reliance on the
following judgments:
Weston Components Ltd. -2000(115)ELT 278 (SC)
M/s Shiv Kripa Ispat Ltd. - 2009(235) ELT 623 (Tri.)
Raja Impex -2008(229)ELT 185 (P&H)
Pregna International Ltd. -2010(262)ELT 391
R.D. Metal and Co. - 2008(232)ELT 464(Tri.)
Amartexinds Ltd. -2009(240)ELT 152
Pushpal Exports Pvt. Ltd. - 2013(295)ELT 424
3.5. He also argued that since the goods were rendered liable for
confiscation under Section 111 of the Customs Act, 1962, penalty was
imposed on the respondent under Section 114A of the Customs Act, 1962 by
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the adjudicating authority. However, the appellate authority disagreed with
the decision of lower authority with regard to imposing of penalty on the
ground that there was no mis-declaration by the appellant. In the present
matter it is on record that respondent had mis-declared the description of
the goods with an intention to avail wrong benefit of Notification No.
21/2002-Cus dtd. 01.03.2002. There are umpteen numbers of case laws
which lay down the principle that in order to impose the penalty under
Section 112(a) there is no need of mens-rea on the part of the importer and
the only ingredient required is an act or omission on their part which
rendered the goods liable to confiscation. He placed reliance on the following
decisions:
Comex Co. Vs. Collect of Customs, Madras-I - 1997(96)ELT 526
(Mad.)
(ii)Bansal Industries -2007(207)ELT 346 (Mad)
Vardhman Exports -2013(290)ELT 305 (Tri. -Mum)
Indo Daein Leather - 2011(274)ELT 552 (Tri. Mum)
4. We have carefully considered the submissions made by both the sides
and perused the records. We find that the limited issue to be decided in the
present matter is whether the goods imported by the appellant-assessee
classifiable under CTH 27101990 or under CTH 27090000 and consequently,
whether the goods imported are eligible for exemption under Notification No.
21/2002-Cus. dated 01.03.2002 read with Notification No. 74/2008-Cus.
dated 04.06.2008
4.1. We find that in the present matter revenue claimed the classification of
declared goods as 'Deodorized field Condensate Crude Oil' and 'Murban
Crude Oil' under CTH 27101990, whereas the appellant-assessee contends
that it is properly classified under CTH 2709 and therefore they have rightly
claimed the exemption notification. To decide the dispute, it would be
appropriate to refer to the relevant Chapter headings as per the Custom
Tariff Act are as follows: -
Tariff Description of goods
Items
27090000 Petroleum oils and oils obtained from bituminous
minerals, Crude.
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2710 Petroleum oils and oils obtained from bituminous
minerals, other than crude; ---------------
27101990 Other
Corresponding HSN explanatory notes for CTH 27.09 and 27.10 are as follows : -
27.09 PETROLEUM AND OILS OBTAINED FROM BITUMINOUS
MINERALS CRUDE.
This heading covers crude petroleum oils and crude oils obtained from bituminous
minerals (e.g. from shale, calcareous rock, sand), i.e., natural products, whatever their
composition, whether obtained from normal or condensation oil-deposits or by the
destructive distillation of bituminous minerals. The crude oils thus obtained remain
classified in this heading even when they have been subjected to the following process :
(1) Decantation.
(2) De-salting
(3) Dehydration
(4) Stabilisation in order to normalize the vapour pressure
(5) Elimination of very light fractions with a view to returning them to the oil-
deposits in order to improve the drainage and maintain the pressure.
(6) The addition of only those hydrocarbons previously recovered by physical
methods during the course of the above-mentioned processes.
(7) Any other minor process, provided it does not change the essential character of
the product.
The heading also covers gas condensates, i.e., crude oils obtained during the
stabilization of natural gas immediately upon its extraction. This operation consists of
obtaining, mainly by cooling and depressurization, the condensable hydrocarbons (C4 to
approximately C20) from the wet natural gas.
27.10 PETROLEUM OILS AND OILS OBTAIFND FROM
BITUMINOUS MINERALS, OTHER THAN
CRUDE; PREPARATIONS; NOT ELSEWHERE
SPECIFIED OR INCLUDED, CONTAINING BY
WEIGHT 70% OR MORE OF PETROLEUM OILS
OR OF OILS OBTAINED FROM BITUMINOUS
MINERALS, THESE OILS BEING THE BASIC
CONSTITUENTS OF THE PREPARATIONS;
WASTE OILS.
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Petroleum oils and oils obtained from bituminous minerals (other than crude) and
preparations not elsewhere specified or included, containing by weight 70% or more of
petroleum oils or of oils obtained from bituminous minerals, these oils being the basic
constituents of the preparations, other than waste oils;"
4.2 In view of above it is clear that all petroleum Oils and Oils of CTH
27.09 are obtained from Bituminous minerals. On the other hand CTH 27.10
contained petroleum oils and oils obtained from bituminous minerals which
are other than crude. In the present matter it is on records that as regard
the Product "Murban Crude Oil CTH 2709000" Customs House, Vadinar vide
letter No. VIII/48-15/VDR/Sample/2009-10 dtd. 13.05.2010 had sent
sample for ascertaining whether the sample is 'Murban Crude Oil' or
otherwise. The Chemical Examiner, Kandla vide his report dated 24.05.2010
specified the sample as " It has the characteristics of Petroleum Crude'' and
on that basis Ld. Commissioner (Appeals) allowed the classification of import
of Murban Crude Oil under CTH 27090000. We find that department not
disputed the classification of said goods and accepted the same. However as
regard the goods " Deodorized Field Condensate Crude Oil" Ld.
Commissioner (Appeals) by relying the Chemical Examiner Report held that
product " Deodorized Field Condensate Crude Oil" imported by the appellant
-assessee under CTH 27090000 merit classification under CTH 27101990
and as such the benefit of exemption notification cannot be extended to
appellant-assessee. Whereas appellant disputed the said Chemical
examiner's report in respect of its products Deodorized Field Condensate
Petroleum Crude Oil on the ground that the Chemical examiner has given
the report on the basis of only 3 parameters and which are not sufficient
parameters for determining whether the product in question is condensate or
other petroleum products.
4.3. We find that appellant has produced Technical Literature before the
Adjudicating Authority which indicates that the physio-chemical parameters
of Crude Petroleum Oil, Petroleum Condensate and Petroleum Products of
Chapter 27.10 are difficult to differentiate due to overlapping nature and
that there is almost no practical way of distinguishing between the two
groups of products. In the said event appellant was clearly justified is
asking for the cross-examination of the Chemical Examiner which was
rejected by the adjudicating authority. In the present proceedings, the
report, opinion and statements of the Chemical examiner are the only
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evidence with the revenue to say that imported goods are required to be
classified under CTH 2710. Therefore the adjudicating authority was not
right in rejecting the cross-examination of the chemical examiner. We find
that when the show cause notice itself relies upon the Chemical Examiner's
report, there is no reason for the adjudicating authority to deny the cross-
examination of the Chemical Examiner, which would be necessary for
ascertaining the method of testing. We are of the view that serious
miscarriage of the principles of natural justice has happened.
4.4 We also find that Appellant in support of their classification of goods
produced the sale contract dated 15.07.2009 issued by TASWEEQ describing
the goods as Deodorized Field Condensate, Bill of Lading, Certificate of
quality report issued by the producer i.e RAS GAS Ltd., Certificate of Origin
issued by TASWEEQ Oil Marketing Co. wholly owned by the Government of
Qatar, Certificate of Quality issued by TASWEEQ Oil Marketing CO., ASSAY
report issued by SGS for Deodorized Field Condensate before the
adjudicating authority. The above documents available on records prove
beyond doubt that appellant-assessee had procured Petroleum Crude Oil
classifiable under CTH 2709. There is no logical reason with the revenue not
to accept the classification claimed by the appellant on the basis of the
above documents.
4.5 We also find that on the identical issue in their own case of Appellant,
Tribunal vide final order dated 18.12.2014 decided the classification of
imported goods. The Test report of the products involved in the Bill of Entry
F-91 dated 28.12.2009 which was the subject matter of dispute before the
Tribunal and Bill of Entry F-42 dated 19.08.2010 being the subject matter of
the present appeal are also similar. Hence, the findings arrived by the
Tribunal in its order dated 18.12.2014 equally applies to the present case
also. We reproduce the same as under:-
"6. Heard both sides and perused the case records. The issue involved is as to
what should be the correct classification of the imported goods described as 'Qatar Low
Sulphur Condensate' (Qatar LSC) in the Bill of Entry No. F-91, dated 28-12-2009. Main
appellant is claiming the classification under CTH 27090000 as a natural gas condensate
whereas the Adjudicating authority has held the classification of the goods under CTH
27101990 based on the test reports and written opinions given by the Chemical
Examiner, Kandla. If the goods are classifiable under CTH 27090000 then all the goods
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get exempted under Notification No. 21/2002-Cus., dated 1-3-2002 read with
Notification No. 74/2008-Cus., dated 4-6-2008.
6.1 Both the above competing entries as per Custom Tariff Act are as follows : -
Tariff Items Description of goods
27090000 Petroleum oils and oils obtained from
bituminous minerals, Crude.
2710 Petroleum oils and oils obtained from
bituminous minerals, other than crude; -----
-
27101990 6.2 Corresponding HSN explanatory notes for CTH 27.09 and 2710 are as follows : -
27.09 PETROLEUM AND OILS OBTAINED FROM BITUMINOUS MINERALS CRUDE.
This heading covers crude petroleum oils and crude oils obtained from bituminous minerals (e.g. from shale, calcareous rock, sand), i.e., natural products, whatever their composition, whether obtained from normal or condensation oil-deposits or by the destructive distillation of bituminous minerals. The crude oils thus obtained remain classified in this heading even when they have been subjected to the following process :
(1) Decantation. (2) De-salting (3) Dehydration (4) Stabilisation in order to normalize the vapour pressure (5) Elimination of very light fractions with a view to returning them to the oil-
deposits in order to improve the drainage and maintain the pressure. (6) The addition of only those hydrocarbons previously recovered by physical methods during the course of the above-mentioned processes. (7) Any other minor process, provided it does not change the essential character of the product.
The heading also covers gas condensates, i.e., crude oils obtained during the stabilization of natural gas immediately upon its extraction. This operation consists of obtaining, mainly by cooling and depressurization, the condensable hydrocarbons (C4 to approximately C20) from the wet natural gas.
27.10 PETROLEUM OILS AND OILS OBTAIFND
FROM BITUMINOUS MINERALS, OTHER
THAN CRUDE; PREPARATIONS; NOT
ELSEWHERE SPECIFIED OR INCLUDED,
CONTAINING BY WEIGHT 70% OR MORE OF
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PETROLEUM OILS OR OF OILS OBTAINED
FROM BITUMINOUS MINERALS, THESE OILS
BEING THE BASIC CONSTITUENTS OF THE
PREPARATIONS; WASTE OILS.
Petroleum oils and oils obtained from bituminous minerals (other than crude) and preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than waste oils;"
6.3 As per the above HSN explanatory notes., which are followed for interpreting the Customs Tariff also, all petroleum oils and oils of CTH 27.09 are obtained from Bituminous minerals (e.g. Shale, Calcorous rock and sand) and are natural products but also include gas condensates obtained during stabilization of natural gas immediately upon its extraction. However, the processes like De-calcination, De-salting, Dehydration, Stabilisation, Elimination of very light fractions, cooling and de-pressurization etc. for obtaining condensable hydrocarbons (C4 to C20) from the wet natural gas does not take the end gas condensates out of CTH 2709. On the other hand CTH 27.10 contained petroleum oils and oils obtained from bituminous minerals which are other than crude. The logical interpretation of the above HSN explanatory will be whether the goods imported by the main appellant have only undergone the processes specified in HSN explanatory notes under CTH 27.09 or have undergone any other process which is so major that it change the essential charter of the natural product. Learned advocate appearing on behalf of the appellant argued that Qatar LSC is a mixture of natural Hydrocarbons on which no process other than those specified in HSN explanatory notes under CTH 27.09 has been undertaken. That similar composition of products of CTH 2910 could overlap for some mixtures of CTH 2710. That internationally it is not possible to distinguish between the two categories of products of 27.09 and 27101990. It is observed from the report dated 8-10-1996 of Harmonized System Committee of World Customs Organization, Brussels on classification of 'Gas Condensates' that 'Gas Condensate' of CTH 2709 are similar in composition to some of the products of CTH 2710. Para 10 to 13 of their report is relevant and is reproduced below : -
"How to distinguish "gas condensates" from similar synthetic products of heading 27.10 "10. In this regard there was almost consensus in the Sub-Committee that the chemical composition and physical characteristics of "gas condensates" and similar synthetic products of heading 27.10 were in fact very similar and overlapped in my cases. There was almost no practical way of distinguishing between the two groups of products.
11. After discussion, the Sub-Committee agreed that the information obtained so far was insufficient for reaching a satisfactory conclusion in respect of the definition of "gas Condensates" and distinguishing them from the similar products of heading 27.10.15
C/12014, 12026,12027/2015 C/10358/2016-DB Nevertheless, the Sub-Committee agreed to submit to the Review Sub-Committee the following text concerning the description of "gas condensates". For the first indent, on which opinions were divided, there are two options, (1) the text drafted by the Secretariat on the basis of information provided by China and the EC and (2) an alternative text drafted on the basis of information provided by the US. Both texts have been placed in square brackets.
"Natural gas condensates
- (are crude oils obtained from the stabilization, immediately on extraction of natural gas. This operation consists of extracting the condensable hydrocarbons contained in the "wet" natural gas, mainly by cooling and depressurization (through throttling)] or
- (are obtained, at well-site gas processing plants, by condensing C4 to approximately C20 hydrocarbons contained in the "wet" natural gas)
- normally consist of (C4 to approximately C20) hydrocarbons with no unsaturated hydrocarbons or only trace amounts thereof; the main components are (C6 to C9) hydrocarbons.
- are normally clear or transparent liquids, but sometimes are yellowish or coloured.
- approximately (80)% by volume distil at about (200)ºC;
- (have an octane value not exceeding 30); - (have an API gravity of 55 to 65)."
12. In view of the Scientific Sub-Committee's indication that a definition of "gas condensates" and how to distinguish them from similar products of heading 27.10 could not be satisfactorily produced, the Review Sub-Committee at its 19th Session agreed that the proposal for a new subheading in heading 27.09 to cover "gas condensates" should not be further examined during the review cycle for the HAS 2002 version.
13. It is also felt that the classification of "gas condensates" should be submitted to the Harmonized System Committee together with the information obtained so far from Chinese EC, the United States and Canada; administrations were invited to provide further information regarding the chemical composition, physical characteristics and definition of the "gas condensates" under consideration."
7. In the light of above factual matrix, it is apparent that there are overlapping in the nature and properties of Natural Gas Condensates of CTH 2709 and some the synthetic products of CTH 2710. This dispute/confusion has been internationally accepted by the World Customs Organization, Brussels as per report dated 8-10-1996 of Harmonised Systems Committee on classification of 'Gas Condensates'. Chemical Examiner, Kandla in its very first report dated 29-1-2010 certified that the sample tested is pale yellow oily liquid and is comprised of mixture of mineral hydrocarbons. In the same report, he is 16 C/12014, 12026,12027/2015 C/10358/2016-DB opining that the sample is of 'other than petroleum crude' and in the same breath he further asks for the literature on the claim of the appellant. When the literature is supplied by the Superintendent, Vadinar Chemical Examiner promptly confirm that samples are of crude Petroleum and are classifiable under SH 2709 of HSN. A chemical analyst dealing with physico chemical testing of petroleum products impulsively could not have said in report dated 29-1-2010. that the goods are 'other than Petroleum Oil' and simultaneously asking for the literature/related documents when internationally it is accepted that it is difficult to distinguish 'Gas Condensates' of CTH 27.09 and similar synthetic products of CTH 27.10. The same could be said of all the bills of entry of Crude Oil finalized by Superintendent, Vadinar under Order F. No. VIII/48-4/FIN/2003-Pt III, dated 25-2-2010. It is also observed that after a favourable report dated 15-6-2010 was given by the Chemical Examiner, saying that imported goods are Crude Petroleum Condensate, DRI obtained fresh opinion dated 5-8-2010 from the Chemical Examiner by writing a letter dated 22-7-2010. Para 5 & 6 of this letter read as follows :-
"5. Your test report, above mentioned letters and statements do not give any conclusive opinion of the subject goods. It also appears that you have refrained yourself from giving specific details of the process which the said goods have undergone and other details which may help in deciding the correct classification. It appears that you have rather given conflicting reports and replies, which do not lead to conclusion of correct nature/nomenclature and classification of the goods. As you are aware, these particular imports have Revenue implication involving crores of rupees.
6. It is therefore advised that the matter may be taken seriously and specific and conclusive and reasoned reports showing nature/nomenclature and classification of the goods on the basis of the test conducted be submitted to this office URGENTLY."
8. Two statements dated 6-7-2010 and 29-6-2010 of Dr. Gyan Prakash Sharma, Chemical Examiner Grade-I, Kandla were also recorded by the investigation to clarify the conflicting opinions given by the Chemical Examiner. It is observed from answer to Q. No. 3 in the statement dated 6-7-2010 and answer to Q. No. 1 of statement dated 29-6-2010 that Chemical Examiner was aware of the overlapping and similar nature of Crude Gas Condensate of CTH 2709 and similar synthetic products of CTH 2710. In the event of conflicting opinions appellant was clearly justified in asking for the cross-examination of the Chemical Examiner which was rejected by the adjudicating authority. It is observed from the judgments relied upon by the adjudicating authority to reject the cross- examination, as discussed in Para 33.2 of the OIO, dated 28-2-2013, that none of them says that cross-examination in all cases should be denied. In the relied upon case law of Jagdish Shankar Trivedi v. CCE, Kanpur - 2006 (194) E.L.T. 290 (Tri.-Del.) the person mentioned in Supreme Court's extracted passage, whose cross-examination was asked for, was an informer. In case of anti-smuggling/anti-evasion cases name/identification of 17 C/12014, 12026,12027/2015 C/10358/2016-DB informer is always protected. In other relied upon case, it was never said by any court that cross-examination should be invariably rejected. Rather most of the judgments relied upon by the adjudicating authority say that request of cross-examination has to be seen with respect to facts of each case. In the present proceedings the report, opinion and statements of the chemical examiner are the only evidences with the Revenue to say that imported goods are required to be classified under CTH 2710. Therefore, adjudicating authority was not right in rejecting the cross-examination of the chemical examiner.
8.1 Learned AR relied upon the case law of Reliance Cellulose Products Limited v. CCE, Hyderabad (supra) and Hindalco Industries Limited v. CCE, Allahabad (supra) to argue that chemical report of the departmental chemical examiner cannot be brushed aside. Para 12 of the Apex Court judgment in the case of Reliance Cellulose Products Limited v. CCE, Hyderabad (supra) is reproduced below : -
"12. These orders are now under challenge before this Court. We were referred to a number of test reports obtained by the appellant from various persons and on the basis of these opinion, the reports of the Departmental Chemical Examiner and also the Chief Chemist were assailed. We are of the view that the Assistant Collector cannot be said to have erred in relying upon the reports given by the Chemical Examiner and the Chief Chemist. It may be that in a given case, the report of the Chief Chemist may be demonstrated to be palpably wrong. In such a case, the Court may direct re-examination of the whole issue. But that is not the case here. It has not been shown that the Chemical Examiner or the Chief Chemist were in error in their analysis in any way. The views expressed by the Chief Examiner and Chief Chemist of the Government cannot be lightly brushed aside on the basis of opinion of some private persons obtained by the appellant."
It is seen from the above that Hon'ble Apex Court has also observed that there could be a situation where report of the Chemical Examiner is palpably wrong. In the present case we observe that chemical examiner has given conflicting opinions, therefore, the same can be questioned. The facts of the case before the Apex Court were thus different than the facts and circumstances of these proceedings. In the case of Hindalco Industries Limited v. CCE, Allahabad (supra), Hon'ble Allahabad High Court only observed that if assessee is not satisfied with the analysis report he can ask for retest. In the present case, appellant is not agitated with the physico. Chemical analysis made by the Chemical Examiner but is aggrieved with the opinions given by him in the classification of the imported goods. It is now a settled proposition of law that a chemical examiner can give opinion on the chemical nature of the goods tested but cannot suggest whether a 'Gas Condensate' imported by the appellant will be classifiable under 2709 or 2710. The international authorities on classification .of 'Crude Gas Condensate' has expressed 18 C/12014, 12026,12027/2015 C/10358/2016-DB concern and confusion over the difficulty in distinguishing these products of CTH 2709 from similar synthetic products of CTH 2710. When products of CTH 2709 and 2710 have similar characteristics/compositions then the only way to entertain a contrary classification adopted by the appellant, was to extend the investigation to the place of origin of the goods. No such enquiry seems to have been made with the supplier which is owned by Govt. of Qatar. It is also not the case of the Revenue that Customs documents provided by the appellant at the time of clearance are fake or forged by deliberately given a wrong description. Appellant has argued that the price at which the 'Gas Condensate' is imported tallies with the crude rates as per the established journals of the imported products. There is no evidence on record to indicate that imported goods were of refined category falling under CTH 2910 which fetched higher value in international oil market. Rather there is no case that the imported goods are undervalued. It is also difficult to comprehend that the present importer will bring refined products for re- refining of the same again. It is not the case of the Revenue that appellant has sold the imported goods as such. Nothing was brought on record that non-aromatic constituent of the imported goods was more than aromatic constituents, by way of a chemical test report, as required under Chapter Note 2 of Chapter 27 of the Customs Tariff Act. There is also nothing on record that the supplier of imported goods has done any major processes on the natural product other than those specified in HSN explanatory notes under HSN Heading No. 27.09
9. In view of the above there is no logical reason with the Revenue not to accept the classification claimed by the appellant on the basis of the documents available on record as per their contract dated 11-12-2009 entered with Vitol Asia Pte. Limited, Singapore.
10. We are not going into time bar aspect of the demands as on merits we have decided the issue in favour of the appellant.
11. In view of the above observations appeals filed by the appellants are allowed. Miscellaneous applications are also disposed of accordingly."
The above decision in the assessee's own case reinforce their claim in the present case that the imported goods in question is classifiable under CTH 2710.
4.6 As per our above discussion and finding, the impugned orders are not sustainable to the extent of confirming classification of product "Deodorized Field Condensate Crude Oil' under CTH 2710 and denying benefit under Notification No. 21/2002-Cus read with Notification No. 74/2008-Cus. Hence, the same are set aside.
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5. When the impugned Order-in-appeals itself is liable to be set aside on merit, the appeal by the department for imposing redemption fine and penalty has no chance of survival. In the result the assessee's Appeals are allowed and the Revenue's Appeals are dismissed.
(Pronounced in the open court on 04.12.2023) (RAMESH NAIR) MEMBER (JUDICIAL) (C. L MAHAR) MEMBER (TECHNICAL) Raksha