Classification Confirmed: Low Aromatic White Spirit Falls under CTH 27101990, Rules Court.

Court Name : CESTAT Kolkata

Parties : Kunjal Synergies Private Limited Vs Commissioner of Customs

Decision Date : 22 June 2023

Judgement ref : Customs Appeal No. 75662 & 75598 of 2022

N THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,

KOLKATA

REGIONAL BENCH – COURT NO.2

Customs Stay Petition No. 75253 of 2022 and

Customs Appeal Nos. 75662 & 75598 of 2022

(Arising out of Order-in-Appeal No. Kol/Cus(Port)/AKR/279/2022 dated 10.06.2022 passed by Commissioner of Customs (Appeals), Kolkata.

M/s Kunjal Synergies Private Limited,

15D, Everest House, 46C, J.L. Nehru Road, Kolkata-700071.

Commissioner of Customs (Port), Kolkata

..Appellant

VERSUS

Commissioner of Customs (Port), Kolkata.

15/1, Strand Road, Customs House, Kolkata-700001.

M/s Kunjal Synergies Private Limited

.. ...Respondent

APPERANCE:

Shri S. S. Chattopadhyay, Authorized Representative for the

Appellant/Revenue Shri Sudhir Mehta, Advocate for the Respondent/Party

CORAM:

HON’BLE MR. P. K. CHOUDHARY, MEMBER (JUDICIAL)

HON’BLE MR. K. ANPAZHAKAN MEMBER (TECHNICAL)

Misc./Stay order No. …75263/2023…and

FINAL ORDER No…75776-75777/2023

DATE OF HEARING : 11.04.2023

DATE OF PRONOUNCEMENT: 22nd June, 2023

PER K. ANPAZHAKAN :

The Appellant imported the goods with the description “Low

Aromatic White Spirit” and filed two Bills of Entry for warehousing,

classifying the goods under the CTH 2710 1990. Four Ex Bond Bills of

Entry filed by the Appellant earlier have already been assessed and

warehoused. An Alert Circular 02/2020 dated 23/03/2020 issued by

DRI, New Delhi indicated that some importers are importing Low

Aromatic White Spirit classifiable under CTH 271012, as per Chapter

Note 4 of Chapter 27 and misclassifying the same to violate the

provisions of Import Policy. Accordingly, SIB, Kolkata Customs has

initiated investigation against the Appellant and detained the said goods

imported by the Appellant. Samples were drawn and on the basis of the

Test Reports received from CRCL, Kolkata, the Department rejected the

classification of 271990 sought by the Appellant and proposed to

reclassify the same under the CTH 27101239 as „Solvent 145/205 as

per IS 1745:2018‟.

2. The Joint Commissioner of Customs (Port), SIB, Custom House,

Kolkata issued a SCN dated 30.06.2021 proposing to reclassify the

goods under 27101239. The Notice was adjudicated and the

adjudicating authority vide his order dated 24/02/2022 rejected the

declared description of the goods “White Spirit in bulk” and redetermined the same as “Solvent 145/205 as per IS 1745:2018”. He

allowed re-export of the goods imported vide the above said

Warehousing Bills of Entry, upon payment of Redemption Fine. He also

imposed penalty on the Appellant. The Appellant filed an appeal before

the Commissioner (Appeals), who allowed the appeal of the Appellant

vide his Order-in-Appeal dated 10/06/2022 and held the classification of

the goods under Customs Tariff 27101239 as erroneous and set aside

the Order-in-Original and remitted the matter back to the adjudicating

authority for proper assessment of the goods. Aggrieved by the

Impugned Order, the Appellant is before us.

3. Samples of the impugned goods were drawn and sent to CRCL,

Kolkata vide Test Memo Nos. 1080019 dated 13.01.2021 and 1080026

dated 13.01.2021, with a request to specify the following parameters:

(i) Colour

(ii) Density at 15 C

(iii) Viscosity

(iv) Flash Point (Abel)

(v) Class of Petroleum Product (A, B or C)

(vi) Distillation Range i.e. Initial Boiling Point and Final Boiling Point

(vii) Whether 90% or more by volume (including losses) distils at 210 C according to the ISO 3405 method (equivalent to the ASTM D 86 Method)?

(viii) Whether samples meet the criteria of “Light Oil and its preparations”?

(ix) Percentage of Aromatic Contents

(x) Specific Chemical name or class of Hydrocarbon along with CAS number

(xi) Any other specification/remarks.

4. In response to the above queries vide the aforementioned TM No.

1080019 dated 13.01.2021, the Chemical Examiner Gr-I, CRCL, Kolkata

has submitted the following Report dated 28.01.2021:

CRCL Test Report: “Received two sample bottles marked as A & B

wrapped with cello tape and cloth, Each of the two samples is in the

form of clear colourless liquid composed of Mixed of Mineral

Hydrocarbon Oil (more than 70% by it) having following constants:

5. The Chemical Examiner reported that each of the samples under

reference meets the criteria of „Low Aromatic Solvent‟ as per IS 1745-

2018 for petroleum hydrocarbon solvent. He also stated that each of

the two samples under reference belonged to petroleum class B.

6. The CRCL Test Report confirmed that the goods are of Petroleum

Class B and clear colourless transparent liquid composed of Mineral

Hydrocarbon Oil. The CRCL Report indicated that:

i) the samples under reference meets the criteria of „low aromatic

solvent‟ as per IS 1745-2018 for petroleum hydrocarbon solvent.

ii) The samples under reference are Petroleum Class-B as per Petroleum

Act, 1934.

7. The Petroleum Class A, B and C are defined in the Petroleum Act,

1934, which are as given below:

i) “Petroleum Class A” means petroleum having a flash-point below

23 C

ii) “Petroleum Class A” means Petroleum having flash-point of 23 C

and above but below 65 C;

iii) “Petroleum Class C” means petroleum having a flash-pint of 65 C

and above but below 93 C

8. On the basis of analytical observations, it is observed that the

CRCL Test Report confirmed that the goods are of Petroleum „Class B‟.

Further, as per Chapter Note 4 of Chapter 27 of the Customs Tariff, for

the purposes of sub-heading 271012, „light oils and preparations‟ are

those of which 90% or more by volume (including losses) distil at 210 C

according to the ISO 3405 method (equivalent to the ASTM D 86

Method). On the basis of above CRCL Test Report, it could not be

ascertained whether the impugned goods are freely importable or to be

imported through State Trading Enterprise (STE) only. Therefore, a

letter dated 17.02.2021 was issued to the Chemical Examiner, CRCL,

Kolkata to clarify the following:

i) Whether the imported goods can be considered as petroleum

products namely

a. Solvent 60/80 (As specified under standard IS 1745)

b. Solvent 50/120 (As specified under standard IS 1745)

c. Solvent 145/205 (As specified under standard IS 1745)

d. Solvent 125/240 (AS specified under standard IS 1745)

e. Any other Solvent classified as Free as per DGFT Policy

f. Any other Solvent or hydrocarbon classified as RESTRICTED

i.e. can be imported by STEs only, as per DGFT Policy.

g. Any other Solvent specified under standard IS 1745.

9. In response to the clarification sought on the Test Reports vide

TM Nos. 1080019 & 1080026 both dated 13.01.2021, the Chemical

Examiner Gr.I, CRCL, Kolkata vide letter dated 19.02.2021 clarified that

both the samples under reference meets the criteria of 145/205 „low

aromatic solvent‟ as per IS 1745-2018 for petroleum hydrocarbon

solvent.

10. Therefore, the Department was of the opinion that the seized

goods imported vide the impugned Bills of Entry were „Solvent 145/205

low aromatic as per IS 1745:2018‟, which is appropriately classifiable

under Customs Tariff Item 27101239, which can be imported only by

State Trading Enterprises, as per schedule 1 of Import Policy Condition

(5) of Chapter 27 of Customs Tariff.

10. The Ld Departmental Representative relied upon the decision

of the Tribunal in the case of Venus Petrochemicals, Mumbai Vs

Commissioner of Customs, Kandla 2010(366)ELT 176 (Tri.-

Ahmd.) and argued that classification of the goods under CTH

27101239 by the adjudicating authority is proper. He stated that

the criteria of Initial Boiling Point and final Boiling Point mentioned

in the IS Standards 1745 are only the minimum and Maximum

boiling points. As per the test Reports the Initial Boiling Point

(IBP) of the impugned goods is 162 and Final Boiling Point (FBP)

is 194. Thus, he stated that the Test Reports satisfies the

requirements of the said standards and hence the adjudicating

authority has rightly classified the said goods under CTH

27101230. The Appellate Authority has wrongly analysed the

Interpretatory Rules and held that the said goods cannot be

classified under the CTH 27101239. He argued that the impugned

order passed by the Appellate Authority is liable to be set aside.

11. Heard both sides and perused the appeal records.

12. The issue to be decided here is the classification of the goods

„low aromatic white spirit‟ imported by the Appellant. The

Appellant has classified the goods under CTH 27101990 and filed

the Bills of Entry Nos 2202769 dated 01/01/2021 and 2203997

dated 02/01/2021. Revenue has reclassified the said goods under

CTH 27101239 on the basis of Test Report of CRCL, Kolkata,

wherein it is stated that the product under reference meets the

requirements of „light oils and preparations‟ and hence the

impugned goods are rightly classifiable as „ Solvent 145/205‟ as

per IS 1745:2018.

13. In order to decide whether the goods can be classified as

„solvent 145/205 as per IS standard 1745/2018, it is required to

compare the results of the Test Report for the impugned goods

with that of the standard requirements for the solvent 145/205 as

per IS 1745/2018. A Comparative Chart of the Test Report dated

13.01.2021 alongwith requirements for Petroleum Hydrocarbon

Solvent 145/205 as per IS 1745/2018 is furnished below:

14. From the above comparative chart, it is to be examined whether the

impugned goods can be classified as „Solvent 145/205‟ under CTH

27101239. As per the Test Report details furnished above, the IBP of

the impugned goods is 162 degree Celsius and FBP is 194 degree

Celsius, whereas as per the IS standard 1745 the minimum IFB should

be 145 degree Celsius (IBP) and maximum FBP should be 205 degree

Celsius respectively. The Appellant stated that the IFB 162 of the

impugned goods is much higher than the minimum IFB requirement of

145 as per the IS 1745 standard. Also the FBP 194 of the impugned

goods as per the Test Report is much lower than than the maximum

FBP requirement of 205, as per IS 1735 standards. The Appellant also

stated that the flash point 48 for the impugned goods as per the Test

Report is much higher than the requirement of 35 flash point as per IS

1745 standards. The Aromatic content % by volume as per the Test

Report found for the impugned goods was 21 whereas the requirement

as per IS standard 1745 is 45. Thus, they argued that none of the

above parameters in the Test Report are matching with the

requirements as per IS 1745 standards for classifying the goods as

„Light Oils and preparations‟ under CTH 2712.

15. The Appellant cited the decision of the Tribunal Kolkata in the case

of Krishna Technochem Pvt Ltd Vs CCE, Haldia, vide Final Order No

77087-77089, dt. 25.09.2019 wherein the applicability of Note 4 to

Chapter 27 has been examined. The relevant portion of the order is

reproduced below:

“8. Further, in the instant case, sole reliance has been

placed by the Ld. Commissioner on the Chemical Examiner’s

report. As rightly pointed out by the Ld. Advocate that, in the

testing report it has been stated that the sample drawn from the

appellant’s premises is liquid containing mixture of hydrocarbons

having distillation range from 35 degree to 58 degree Celsius and

flash point below 25 degree Celsius. The classification adopted by

the Ld. Commissioner is not in consonance with the Note no. 4 to

Chapter 27 of the Tariff which states that “Light Oil and

Preparations” are those of which 90% or more by volume (incl.

losses) distilled at 210 degree Celsius, whereas the Chemical

Examiner has stated that the range of distillation of product is 35

degree to 58 degree Celsius which is much below 210 degree

Celsius. Hence the classification under Chapter 271011 cannot be

adopted. Similar observations have been made by the Tribunal in

the aforesaid decision.

9. In view of the aforesaid, the classification adopted by

the Ld. Commissioner cannot be approved and hence, the entire

duty demand, interest and penalty are set aside and the appeals

are allowed with consequential relief. The personal penalty

imposed on Shri Bindhyachal Singh, Accountant, is also set

aside.”

The above said decision of the Tribunal Kolkata was upheld by the

Hon‟ble Supreme Court 2022(379)ELT 273 (S.C.) with the following

observations:

“2. We have heard Mr. Balbir Singh, Learned ASG appearing on

behalf of the appellant. We have gone through the impugned judgment

and order passed by the Customs, Excise and Service Tax Appellate

Tribunal, Kolkata, (for short “the Tribunal”) more particularly, the

reasoning given in para 8. We have also considered the sub-heading

notes and as per the said sub-heading notes, for the purposes of subheading 2710-12, “Light Oils and Preparations” are those of which 90%

or more by valume (including losses) distilled at 210 degree Celsius.

3. In the present case, even as per the Chemical Examiner’s

Report, the range of distillation of the product in question was between

35 degree to 58 degree Celsius which is much below 210 degree Celsius

and the word used in sub-heading notes referred to herein above is “at”

and not “up to”. Therefore, we see no reason to interfere with the

impugned order(s) passed by the Tribunal.

4. The present appeals are, accordingly, dismissed.”

16. In view of the above decision, the Appellant stated that when the

Test Reports differs from the standards prescribed, the goods cannot be

held to satisfy the requirements under IS 1745 standards meant for

CTH 2710. Hence the impugned goods cannot be categorized as „Light

Oils and Preparations‟ as per the CRCL Test report. We find merit in the

argument of the Appellant. None of the above said parameters are

matching with the minimum or maximum standards fixed as per IS

1745 standards. There is a vast difference between the minimum IFB

and maximum FBP fixed as per IS standard 1745 and the result

received for the impugned goods. Hence, we hold that the impugned

goods cannot be classified under CTH 27101239 as per the comparison

between the Test reports received from CRCL and its comparison with

the IS Standard 1745 parameters required.

17. We find that Revenue has relied upon Note 4 to Chapter 27 for

classifying the impugned goods under the CTH 27101239. For the sake

of ready reference the said Note 4 is reproduced below:

“Note 4. For the purposes of sub-heading 2710 12, “light oils and

preparations” are those of which 90% or more by volume (including

losses) distil at 210 C according to the ISO 3405 method (equivalent to

the ASTM D 86 method)”

18. We find that the above condition as prescribed in the Note 4 has not

been verified in the CRCL report. It is the primary condition required to

be tested for classifying any goods under CTH 2712. From the said

Note, it is evident that for purpose of sub heading 2710.12, the “light

oils and preparations” are those of which 90% or more by volume

(including losses) distil at 210 degree Celsius, but the test report is

silent about it. AS per the Test Report, the FBP is 194, which means

100% of the goods evaporate at 194 degree Celsius itself whereas for

classification of the goods as „solvent 145/205‟ under CTH 27101239,

the requirement as per Note 4 is that only a maximum of 90% should

evaporate at 205 degree celsius. Since the entire 100% of the goods

evaporate at 194 degree celsius itself, the goods are not meeting the

requirements as specified under Chapter Note 4 of Chapter 27,

accordingly we hold that the impugned goods cannot be classified under

CTH 27101239 as claimed by the Revenue.

19. The Appellant stated that they have imported ten consignments of

white spirit in the past which were assessed and cleared under CTH

27101990. No dispute was raised on compliance of Petroleum Act 1934,

in respect of those ten consignments. In respect of six Bills of Entry

where the goods were detained, the Appellate Authority remanded the

matter after holding that the goods were not classifiable under CTH

27101239. The Appellant stated that after rejecting the classification

under CTH 27101239, the Commissioner (Appeals) should have

classified the said goods under CTH 27101990, which is the only

residuary entry available for classification of the said goods. Further

they contended that remanding the matter for assessment in respect of

the said six Bills of Entry by the Commissioner (Appeals) is bad in law.

Regarding the remaining four Bills of Entry where goods were assessed

and Ex-Bond Bills of Entry were filed, the Appellant contended that the

goods should not have been seized/ confiscated since out of charge

orders have been issued in respect of these goods.

20. We find merit in the arguments of the Appellant. In the impugned

order, the Commissioner (Appeals) has rejected the Classification of the

goods under CTH 27101239. When the goods do not satisfy the criteria

fixed under Note 4 of Chapter 27, the goods cannot be classified under

CTH 27101239. The remaining option available in the Tariff is to classify

the same under CTH 27101990 which is the only residuary entry

available for classification. Regarding the remaining 4 Bills of Entry, as

discussed above the Test Reports of CRCL Kolkata does not provide any

material evidence for classification of the said goods under CTH

27101239. Since the said goods are rightly classifiable under the CTH

27101990, the classification adopted by the Appellant is in order and

hence the goods are not liable for confiscation.

21. In view of the above discussion, we allow the appeal filed by the

Appellant. Stay application also gets disposed of.

(Pronounced in the open court on 22nd June,2023…)

Sd/-

(P. K. Choudhary)

Member (Judicial)

Sd/-

(K. Anpazhakan)

Member (Technical)