Revenue’s Test Report held Inconclusive: CESTAT allows Classification of Mineral Hydrocarbon Oil as High-Speed Diesel as per Bill of Entry [Read Order]

The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai held the alleged case of misdeclaration made by the Revenue not sustainable as the reports for the 5 bills of entry are inconclusive since it does not enlist the mandatory parameters.

The bills of entry have goods declared as mixed mineral hydrocarbon oil and upon suspected misdeclaration, the department drew samples for testing at the Jawaharlal Nehru Custom House (JNCH). 3 of the 5 were found to be Superior Kerosene Oil (SKO), whose import is allowed only by the State Trading Enterprises. This is a violation of S.111(d) &(m) of the Customs Act and the goods were confiscated. A penalty was imposed under S.112(a) and S.114AA. The appellant Jaymco Polymers Pvt. Ltd and its director Shri Jethanand Rohra’s repeated request for a retest was rejected by the adjudicating authority without any cogent reasons.

The frequent smuggling going on by misdeclaration of SKO had increased the scrutiny on importers from the department. Revenue applied the principle of preponderance of probability on the appellant and the retest request was denied following the Board’s Circular No.30/2017.

Shri N.D. George representing the appellant claimed that the test was conducted without following proper protocols and was unreliable as the JNCH had not tested all the parameters suggested in the Indian Standards (IS) for petroleum products. IS 1459 and 1460 are not followed hence, the sample drawn cannot be considered a true representative sample. IS-1447 states “In no circumstances shall non-linear polyethylene containers be used to sample liquid hydrocarbons” yet the department had stored the samples in plastic containers.

The bench consisting of  Anil Choudhary (Judicial Member) found that the arbitrary rejection of the retest request from the appellant against natural justice. The court also found that out of the 8 parameters only 4 have been mentioned in the test and the rest has not been tested nor reported at all. The court quoted the case of HPL Chemicals v. CCE which states that “The classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the department has to adduce proper evidence and discharge the burden of proof” and as the sampling and the test report are unreliable, the revenue’s case cannot sustain. Miscarriage of justice is also found by denying the retest request. The bench states that no scope for applying the preponderance of probability was present.

The court states that “when the law prescribes a certain thing, to be done in a prescribed manner, it should be done in that way or not done at all”. The impugned order was squashed and the penalties and fine imposed on the appellant set aside. The goods under seizure were returned and a waiver of detention and demurrage charges was granted.

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