Custom, Excise & Service Tax Tribunal
Petro Lubes India vs Commissioner, Customs-New Delhi on 15 December, 2023
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO.III
Customs Appeal No.54904 of 2023 (SM)
[Arising out of Order-in-Appeal No.CC(A)CUS/D-II/IMP/ICD/TKD/1025/2022-23 dated
26/27.10.2022 passed by the Commissioner of Customs (Appeals), New Customs House, New
Delhi]
M/s. Petro Lubes India, Appellant
Shop No.11/B,
Near D.S. Dharamkanta,
Kultana Road,
Haryana-124 501.
Versus
Commissioner of Customs, Respondent
New Customs House, Near I.G.I. Airport, New Delhi.
APPEARANCE:
Ms. Sunaina Phul, Advocate for the appellant. Shri Rohit Issar, Authorised Representative for the respondent.
CORAM:
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL) FINAL ORDER No. 51655/2023 DATE OF HEARING:29.11.2023 DATE OF DECISION:15.12.2023 BINU TAMTA:
1. The appellant has assailed the Order-in-Appeal No. CC(A)CUS/D-
II/IMP/ICD/TKD /1025/2022-23 dated 26/27.10.2022 passed by the Commissioner (Appeals).
2. The facts of the case are that an intelligence was gathered by the officers of DRI, DZU, that the appellant were engaged in clearing 'Automotive Diesel Fuel' by misdeclaring the import consignments as that of 'Mixed Glycol or Base Oil'. The import of automotive diesel fuel is restricted and allowed for import only by State Trading Enterprises in 2 terms of ITC (HS) Import Policy, 2017, while the import of Mixed Glycol and Base Oil classifiable under CTH 2710 1971 is free. It was also gathered that the appellant were also undervaluing the imported consignments and misdeclaring the net weight of the consignments to evade proper payment of customs duty.
3. Acting on the intelligence, consignments imported by the appellant under 12 containers vide Bill of Entry No.2795056 dated 16.02.2021 was put on hold for examination and sampling. The imported goods were examined in presence of independent witnesses and examination proceedings were recorded in panchnama dated 19/20.02.2021. During examination, representative samples were drawn from each of the 12 containers. As goods in all the containers were identical and same (as declared), sample from one container was forwarded to CRCL for testing vide department's letter dated 01.03.2021. The sample was again drawn under panchnama dated 18.03.2021 from the same container from which sample was sent to CRCL and the same was forwarded to Society for Petroleum Laboratory (SFPL), Noida, U.P., a Government Laboratory registered under the Union Ministry of Petroleum and Natural Gas for testing of petroleum products vide department's letter dated 22.03.2021 with a request to test the samples for their conformity to the parameters/standards of Automotive Diesel Fuel. Both the laboratories i.e. CRCL & SFPL vide their reports dated 26.03.2021 and 01.04.2021, respectively reported that the samples meet the requirement of Automotive Diesel Fuel.
4. As the impugned goods were found to be Automotive Diesel Fuel, which was not freely importable, they were found to be liable for 3 confiscation and therefore were seized vide seizure memo dated 25.06.2021 under Section 110 of the Customs Act, 1962.
5. Statements dated 05.07.2021 and 05.08.2021 of Shri Sachin Singh, Proprietor of the appellant were recorded under Section 108 of the Customs Act, 1962. Test report dated 26.03.2021 of CRCL and test report dated 01.04.2021 of SFPL were shown to the appellant. The appellant after seeing and understanding the said test reports, put his dated signature on the said reports and accepted the same. He categorically stated that he had nothing to comment on the results of these test reports.
6. On completion of the investigation, show cause notice dated 16.08.2021 was issued to the appellant proposing reclassification of the impugned goods (Automotive Diesel Fuel) from CTH 27101971 to CTH 27101944; rejection of declared assessable value of Rs.66,31,084,29/- of the impugned goods under Rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (for short CVR, 2007) and re- determination as Rs.79,57,301/- under Rule 4 & 5 of CVR, 2007 read with Section 14 of the Customs Act, 1962; confiscation of impugned goods under Section 111(d), 111(f) and 111(m) of the Customs Act, 1962 and penal action on the appellant under Section 112(a), 114 A and 114 AA of the Customs Act, 1962. The Adjudicating Authority affirmed the show cause notice, however, the appellate authority modified the Order-in- Original only on limited aspect of quantum of duty being excessive and hence reduced the same.
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7. I have heard the learned counsel for the appellant and also the Authorised Representative for the revenue and perused the records of the case.
8. The main challenge in this appeal is to the validity of the test reports on the ground that the samples have not been tested on all the 21 parameters specified in IS:1460:2005 (BIS standard for Automotive Diesel Fuel), therefore it being inconclusive cannot be relied upon. According to the appellant, the two reports have given different findings for same parameters and since there is no other corroborative evidence, the impugned order is unsustainable. I do not find any merit in the submissions made by the learned Counsel for the simple reason that test have been conducted by highly specialized government laboratories, i.e., CRCL and SFPL and no fault can be found on the test reports submitted by them. The test report dated 26.03.2021 by CRCL, the same reads as :
" The sample meets the requirements of Automotive Diesel Fuel as per IS :1460 :2017. It is other than base oil."
Similarly, the test report dated 1.04.2021 by SFPL also says :
" Certified that the above sample conforms to I S:
1460: 2017 (latest version) specification for automated automotive, diesel fuel HSD in the critical test parameters as detailed in the test report and therefore is not considered to be a suspect case of adulteration"
From the aforesaid two reports, it is clear that the impugned goods are 'Automotive Diesel Fuel' and conform to the standards of IS:1460:2017 and therefore the challenge that the samples have not been tested on all 5 the 21 parameters is baseless and does not establish that the goods are not Automotive Diesel Fuel. The issue is squarely covered by the deicision of the High Court of Gujarat in the case of Raj Kamal Industries - 2022 (2) TMI 264, where after detailed discussion, it was observed that testing even on limited parameters by three laboratories independently clearly established that the goods were nothing but HSD as per IS:1460:
2005, the relevant para is quoted below:-
"40. Thus, what is discernible from the above referred case laws is that it would be too much to ask the department to prove its case with mathematical accuracy. So long as the department has been able to establish its case with such a degree of preponderance, the existence of a fact could be said to have been proved. The only ground on which the Tribunal interfered with the findings recorded by the adjudicating authority is that the laboratories were not in a position to conduct all the 21 tests. The Tribunal has ignored the fact that all the 14 tests carried out in three different laboratories revealed only one thing that the sample showed the characteristics of the High Speed Diesel. If the department is able to lead evidence to this extent, the onus would thereafter shift upon the assessees to establish that these 14 tests cannot be said to be conclusive of the fact that the subject goods is High Speed Diesel. No such attempts have been made by the assessees."
9. The controversy that the goods have not been tested on all 21 parameters would not really make any difference and even on the basis of limited parameters the identity of the goods stands established in view of cogent and substantive evidence in the form of test reports by the two independent government laboratories. These test reports cannot be said to be incomplete or inconclusive. Consequently, the goods in question 6 imported by the appellant were mis-declared as they were not Mixed Glycol and Base Oil but were Automotive Diesel Fuel, the import whereof is restricted only by State Trading Enterprises in terms of the Import Policy, 2017. Therefore, the impugned goods being Automotive Diesel Fuel was covered under CTH 2710 1944 and not under CTH 2710 1971 as per the declaration made by the appellant.
10. It also needs to be appreciated that Shri Sachin Singh, the proprietor of the appellant company in his statement dated 5.08.2021 recorded under section 108 of the Customs Act accepted the findings of both the test reports. The relevant contents of the statement of the appellant (noted by the Adjudicating Authority in extenso) are as under
:
" On being shown the Test report Lab numbers CRCL/27/400 (DRI) dated 26.03.2021, SFPL Test report no. FTL/ HSD/21/3 /76 dated 01.04.2021 bearing SFPL Code no. 21-86, in respect of testing of samples drawn from the containers imported under Bill of Entry No. 2795056 dt. 16.02.2021 filed by M/s Petro Lubes India he stated that he had been shown the aforementioned test reports in respect of testing of samples drawn from the containers imported under Bill of Entry No. 2795056 dt. 16.02.2021 filed by M/s Petro Lubes India. On seeing and understanding the same that the samples of imported goods found to be Automotive diesel fuel by the testing agency, he put his dated signature in token of his acceptance. He had nothing to comment on the results of these test reports". (Emphasis laid).
Once the samples have been drawn under proper Panchnama and they have been tested by two recognized government laboratories as 7 Automotive Diesel Fuel, which stands accepted and admitted by the appellant, there is no scope for any doubt or any further corroboration. The veracity of these test reports given by highly technical experts is not open to challenge on frivolous grounds of cross examination sought to be raised by the appellant and as rightly noted by the adjudicating authority that it is only an attempt by the appellant to delay the proceedings. The statement of the proprietor has been recorded under Section 108 which is admissible in evidence, wherein he accepted the test reports and refused to comment thereon and in that view no fruitful purpose would have been served by allowing cross examination. Moreover, the said statement has never been retracted by him.
11. The next issue to be considered is the valuation of the impugned goods. The allegation considered by the adjudicating authority is that the appellant has mis-declared the value of the goods as the nature of the goods itself was mis-declared. In the present case, on the basis of the intelligence, the data of live import of subject goods were examined in respect of four individual importers, namely, M/s Mangli Enterprises, M/s Vishal Oil and Lubricants Co., M/s. Shobhag International Private Ltd and M/s Petro Lubes India Ltd. The department relied on the import of Base Oil and Mixed Glycol by M/s Shobhag International Pvt. Ltd., where also the said importer was also importing Automotive diesel fuel by mis- declaring them during the same period and from the same country of origin, i.e., UAE at the rate of US$450 MTS, which was evident from the Whatsapp chat. Finding it to be a case of undervaluation, the value declared was held to be incorrect, which amounts to mis-declaration of the valuation by the appellant. Therefore, the value declared by the 8 appellant of Rs.66,31,08,429/- was rejected and the same was re- determined at Rs. 79,57,301/- under Rule 4 and 5 of the Customs Valuation Rules, 2007, read with Section 14 and Section 17(4) of the Customs Act. I, therefore, uphold the demand on account of value difference as calculated by the Authority.
12. Having come to the conclusion that the appellant had mis-declared the goods, and therefore mis-classified them, which resulted in misdeclaration of the value of the goods, the authorities below rightly held that the goods were liable to confiscation under section 111(d)(f) and (m) of the Customs Act. The said goods are restricted goods as only State Trading Enterprises could import them and the appellant had no authorization to import the restricted goods. Since the import is contrary to the restrictions placed on such imports by the Government of India, hence, the seized goods have become prohibited goods in terms of section 2 (33) of the Customs Act and therefore order of absolute confiscation in the present case is justified. I would like to refer to a recent decision of the Delhi High Court in Nidhi Kapoor Versus Union of India - 2023 SCC, online, Del 5099, where the learned Division Bench after referring to all the earlier decisions concluded that an infraction of a condition for import of goods would also fall within the ambit of section 2 (33) of the Act and therefore their redemption and release would become subject to the discretionary power of the adjudging officer and therefore did not find any illegality in the orders passed for absolute confiscation of the imported goods. Referring to the definition of "prohibited goods" in Section 2(33), the Supreme Court in Om Prakash Bhatia Vs. 9 Commissioner of Customs, Delhi analysed it as under:
"9. From the aforesaid definition, it can be stated that (a) if there is any prohibition of import or export of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and
(b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either 'absolutely' or 'subject to such conditions' to be fulfilled before or after clearance, as may be specified in the notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub-section (2). Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods. This is also made clear by this Court in Shekih Mohd. Omer v. Collector of Customs, Calcutta and Others [(1970) 2 SCC 728] wherein it was contended that the expression 'prohibition' used in Section 111(d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955.
The Court negatived the said contention and held thus :-
".....What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to "any prohibition imposed by any law for the time being in force in this country" is liable to be confiscated. "Any 10 prohibition" referred to in that section applies to every type of "prohibition". That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression "any prohibition" in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions "prohibiting", "restricting" or "otherwise controlling", we cannot cut down the amplitude of the word "any prohibition" in Section 111(d) of the Act. "Any prohibition"
means every prohibition. In other words all types of prohibitions. Restrictions is one type of prohibition. From item (I) of Schedule I, Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues."
Also, considering the fact that the impugned goods are highly inflammable and require expertise to handle them, requiring special storage facilities, the adjudicating authority rightly rejected the redemption of these goods and ordered absolute confiscation.
13. In view of the discussion above, the penalty both under section 112(a) and section 114AA needs to be imposed on the appellant. The Adjudicating Authority had imposed penalty of Rs. 35 lakhs under Section 112 (a) and Rs. 20 lakhs under Section 114AA of the Customs Act, however, the Appellate Authority reduced the same to Rs. 15 lakhs and Rs 10 lakhs under section 112(a) and 114AA respectively, considering that the section prescribes only the upper limit of penalty that can be imposed and since the goods have been absolutely confiscated, the penalty needs to be moderate. I agree with the impugned order that the 11 penalty as imposed by the adjudicating authority was excessive. Consequently, no interference is called for in the quantum of penalty which has already been reduced by the impugned order.
14. The impugned order is hereby affirmed, and the appeal is accordingly dismissed.
[Order pronounced on 15th December, 2023] (Binu Tamta) Member (Judicial) Ckp.