The Gujarat High Court has held that the Customs Department ought not to establish imported Base Oil can be used as HSD or Automotive fuel in internal combustion engines.
The Revenue issued a show-cause notice calling upon the respondents herein to show cause as to why the entire consignment of the HSD should not be confiscated and penalty be imposed under Section 112(a) and (b), Section 114AA read with Section 117 reply of the Customs Act. The show-cause notice came to be adjudicated by the Commissioner of Customs, Kandla, who, vide order in original dated 3rd December 2019, reclassified the imported goods under the CTH 27101930 as HSD and confiscated the imported goods with an option to re-export on payment of fine / penalty by the respondents – companies and individual Directors of the Companies under Section 112(a) of the Customs Act. The order in original also imposed a penalty on the individual Directors under Section 114AA of the Act. Further, various penalties came to be imposed under Section 112(a) and Section 114AA on the foreign suppliers and their representatives.
The respondents being aggrieved and dissatisfied with the order originally passed by the Commissioner of Customs, Kandla, challenged the same by filing appeals before the CESTAT, Ahmedabad. The Tribunal, allowed the appeals and took the view that the goods imported were not High-Speed Diesel, but was just a Base Oil thereby setting aside the redemption fine and penalties imposed.
The Revenue, being dissatisfied with the impugned order passed by the Tribunal, has appealed against the Tribunal’s order.
The division bench of Justice Nisha M.Thakore and Justice J.B.Pardiwala held that the modus operandi adopted thus appears to be that High-Speed Diesel imported under the guise of Base Oil SN 50 is being diverted as fuel by routing such goods through the purported manufacturers who claim to manufacture Bio-Diesel B100. These glaring facts were ignored by CESTAT while drawing the observations that the department ought to have established that the imported Base Oil can be used as HSD / Automotive fuel in internal combustion engines.
“All the Tax Appeals succeed and are hereby allowed. The impugned common order passed by the Tribunal dated 28th September 2021 is hereby quashed and set aside. The substantial questions of law are answered in favor of the Revenue and against the assessees,” the court said.
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