2016(06)LCX0064

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri M.V. Ravindran, Member (J) and C.J. Mathew, Member (T)

KUSHAL N. DESAI

Versus

Commissioner Of Cus. (Import), Mumbai

Order Nos. A/88202-88209/2016-WZB/CB, dated 27-6-2016 in Appeal Nos. C/86916-86919, 86944-86945 & 87749-87750/2014

Cases Quoted -

Commissioner v. Shalimar Paints Ltd. - 2001(07)LCX0333 Eq 2002 (145) ELT A242 (S.C.) - Referred [Para 8]
Gujarat State Export Corporation Ltd. v. Union of India -1983(12)LCX0010 Eq 1984 (017) ELT 0050 (Bom.)- Relied on [Para 8]
Pee Jay Apparels Pvt. Ltd. v. Commissioner - 2001(04)LCX0191 Eq 2001 (135) ELT 0842 (Tribunal)- Relied on [Para 8]
Shalimar Paints Ltd. v. Commissioner - 2000(08)LCX0089 Eq 2001 (134) ELT 0285 (Tribunal) - Relied on [Para 8]

Advocated By -

S/Shri D.B. Shroff, Sr. Advocate with Prakash Shah
and Brijesh Pathak, Advocates, for the Appellant.
Shri V.K. Singh, SCfor the Respondent.

[Order per : C.J. Mathew, Member (T)]. -

The impugned orders deal with the consignment of 'rubber processing oil' carried on Al Kabeer for which Import General Manifest No. 2053276, dated 23rd January, 2013 for which warehouse bills of entry were filed in Mumbai Customs House by various importers of the cargo. The adjudicating authority, the Commissioner of Customs (Import), Mumbai, has held that the imported goods, both present and past, are liable for confiscation and with, except in relation to those that had been cleared on earlier occasions, the option to redeem on payment of fine only for re-export within 90 days of the order. In addition, penalties were also imposed. Duty liability on past imports was also enhanced.


2. A form of rubber processing oil is used to manufacture an input which finds extensive uses in the rubber industry and India is one of the high-ranking importers. They are generally of aromatic, naphthenic or paraffinic origin. This product had, for long, been classified under Heading 2710 of the First Schedule of the Customs Tariff Act, 1975. Duty applicable to this classification was reduced to 5% vide Notification No. 52/2011-Cus., dated 25th June, 2011. Central Board of Excise & Customs also clarified that goods would be classifiable under this heading only to the extent that it conforms to Note 2 of Chapter 27, i.e., the aromatic constituents should not exceed, by weight, the non-aromatic constituent. The practice of drawing samples commenced after this clarification and these were being tested at M/s. Geochem, Mumbai. In December, 2012, the laboratory attached to the Customs House at Kandla intimated that it was capable of ascertaining aromatic content by 'ASTM D-2007-11 for testing of characteristic groups in rubber extender and processing oil and other petroleum derived oil' by the Clay Gel Absorption Chromatographic method and that the methodology adopted by M/s. Geochem, i.e., ASTM D-2140-08 capable of calculating carbon-type composition of insulating oils', was not a valid one.


3. These appeals have been filed by four importers of 'rubber process oil' viz., M/s. Apar Industries Ltd., M/s. Sah Petroleum Ltd., M/s. Gandhar Oil Refinery (I) Ltd. and M/s. Panama Petrochem Ltd. and four individuals who were also subject to action under Customs Act, 1962 in proceedings under four show cause notices all dated 8th August, 2013. M/s. Apar Industries Ltd. and Shri Kushal N. Desai are in appeal against order-in-original No. 33/2014/CAC/CC(I)/AB/Gr Oil Unit, dated 19th March, 2014 which has confirmed duty demand of Rs. 85,04,056/- along with penalty of like amount under Section 114A of Customs Act, 1962 besides penalty of Rs. 5,50,000/- on the two noticees under Section 112 of Customs Act and allowing confiscated goods to be redeemed for re-export on payment of a fine of Rs. 10,00,000/-. M/s. Sah Petroleum Ltd. and Shri Vivek Sah are in appeal against order-in-original No. 37/2014/CAC/CC(I)/AB/Gr Oil Unit, dated 25th March, 2014 which has confirmed duty demand of Rs. 3,56,62,299/- along with penalty of like amount under Section 114A of Customs Act, 1962 besides penalty of Rs. 30,00,000/- on the two noticees under Section 112 of Customs Act and allowing confiscated goods to be redeemed for re-export on payment of a fine of Rs. 55,00,000/-. M/s, Gandhar Oil Refinery Ltd. and Shri Rajiv J. Parekh are in appeal against order-in-original 25/2013/CAC/CC(I)/AB/Gr VBA, dated 5th March, 2014 which has confirmed duty demand of Rs. 2,37,45,979/- along with penalty of like amount under Section 114A of Customs Act, 1962 besides penalty of Rs. 20,00,000/- on the two noticees under Section 112 of Customs Act and allowing confiscated goods to be redeemed for re-export on payment of a fine of Rs. 36,50,000/-. M/s. Panama Petrochem Ltd. and Shri Samir Akbarali Rayani are in appeal against order-in-original No. 36/2014/CAC/CC(I)/AB/Gr. Oil Unit, dated 25th March,2014 which has confirmed duty demand of Rs. 58,35,246/- along with penalty of like amount under Section 114A of Customs Act, 1962 besides penalty of Rs. 5,00,000/- on the two noticees under Section 112 of Customs Act, 1962 and allowing confiscated goods to be redeemed for re-export on payment of a fine of Rs. 10,00,000/-. As the facts relating to the appeals are common and the imports have also been effected in common, we take up all of them for disposal by a common order.

4. The tortuous windings of the clearance procedures and its travel through the appellate hierarchy have obscured the simplicity of the contentions in dispute. Attributable partly to the alleged revenue bias in the proposal to reclassify what was till then a routine import that was, in addition, deprived the privilege free importability and partly to the apparent credibility deficit, occasioned by the peculiar circumstances involved, of the technical accessory of the customs administration viz. the Central Revenue Control Laboratory. A word picture of the episodes that occurred after arrival of the vessel Al Kabeer laden with the product that is at the centre of the dispute may well assist in cutting through the mass of verbiage to the core of the issue.

5. The vessel arrived in January, 2013 and discharged its cargo into bonded tanks for warehousing. The goods were classified under Tariff Item 2710 19 60 as 'base oil' and samples drawn were sent to CRCL Delhi for testing. The test results were found to be non-compliant with IS: 15078:2001 applicable to rubber processing oil. As the aromatic content was 78.5%, it did not appear to be eligible for classification under the declared entry but under Tariff Item 2707 99 00 leviable to duty at 10%. The test report also indicated that that it is a waste product listed in Schedule-Ill Part-A of Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2008. Further, owing to 'polycyclic aromatic hydrocarbon' being more than 50 mg/kg in the samples, the goods were opined by the CRCL to be hazardous waste. The goods were seized. Scrutiny of imports during the earlier period was also undertaken and those bills having been provisionally assessed were also included in the demand now under appeal.


6. The competence of CRCL to test the product was challenged as it was apparently not a laboratory approved by the Ministry of Environment & Forests. The appellants sought provisional release which, having been refused, was taken to the Hon'ble High Court of Bombay. The plea before the Hon'ble High Court was subsequently withdrawn and the matter placed before the Tribunal. The Tribunal, vide Order Nos. M/2880-2882/15/CB, dated 3rd July, 2015, directed that samples be tested at M/s. Ultra Tech Environmental Consultancy and Laboratory. By Order Nos. M/4125-4128/15/CB, it was accepted that the same lab was capable of carrying out the tests. After protracted discussions between the stake holders, the Tribunal, in M/4461204463, dated 20th August, 2015, allowed the testing to be done at M/s. Skylab Analytical Laboratory which has been relied upon by the appellants in this dispute.

7. Relying on Note 2 of Chapter 27 :


'References in heading 2710 to "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oils obtained from bituminous minerals but also similar oils, as well as those consisting mainly of mixed unsaturated hydrocarbons, obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of the aromatic constituents.'

The adjudicating authority held that the proportion of aromatic contents being more than that of non-aromatic contents, it was more appropriate to adopt the classification proposed in the show cause notice, i.e., 'others' leviable to duty at 10%. The PAH of the tested sample having been found to be 222.2 mg/kg, the report states

'It does not meet the requirement of petroleum based rubber process oil as per IS: 15078:2001 in respect of Kinematic Viscosity and Density, hence it is off specification/waste product as per listed basel No. A4140 under Schedule III, Part A of Hazardous Waste (Management, Handling and Trans-boundary) Rules, 2008 since PAH content in this sample are more than 50mg/kg, therefore, it merits to fall under the category of Hazardous Waste in respect of waste constituents listed under Class 'A' of Schedule II of Hazardous Waste (Management, Handling and Transboundary) Rules, 2008.'

and as such goods require

(i) Prior informed consent of the country from where it is imported

(ii) Licence issued by the Director General of Foreign Trade and


(iii) Prior written permission of the Central Government

which they were unable to furnish, the goods could not be allowed as imports into the country.


8. It is further held that in relation to other Bills of Entry the drawn sample sent for testing was also similarly offending. In grounds of appeal it is contended that there is no cogent reason in the impugned order for refusal of their request for sending of sample for re-testing especially as the CRCL did not have the expertise to test all the parameters, that Hazardous Waste (Management Handling and Transboundary Movement) Rules, 2008 having been issued under the Environment (Protection) Act with the Ministry of Environment as the nodal Ministry, it was improper for the testing to be done at Central Revenue Control Laboratory, and that the adjudicating authority had refused to allow cross-examination of official who carried out the test. The appellant also draws our attention to decision of the Madurai Bench of Hon'ble Madras High Court in W.P. (MD) Nos. 1419 & 1003 of 2014 and that the sample relating to earlier con-signment which were apparently sent to CRCL was not valid in the absence of a record of drawal of samples. The appellants placed reliance on the decision of Tribunal in Shalimar Paints Ltd. v. CCE, Kolkata [2000(08)LCX0089 Eq 2001 (134) ELT 0285 (Tri.-Kolkata)] which was confirmed by the Hon'ble Supreme Court in Commissioner v. Shalimar Paints Ltd. [2001(07)LCX0333 Eq 2002 (145) ELT A242 (S.C.)]. It is also contended the classi-fication under CTH 2710 was being regularly allowed throughout the country and the proper officer having undertaken the re-classification there is no justification to sustain the charge of misdeclaration. The appellants also place reliance on the decision of Hon'ble Bombay High Court in Gujarat State Export Corpn. Ltd. & Anr. [1983(12)LCX0010 Eq 1984 (017) ELT 0050 (Bom.)] and Pee Jay Apparels Pvt. Ltd. [2001(04)LCX0191 Eq 2001 (135) ELT 0842 (Tri.-Del.)] and makes a further submission that if their declaration is not accepted the goods merit classification under Heading 2713 as 'other residues of petroleum oils.' It is also contended that similar imports at Cochin Port by three other importers were allowed to be cleared without being subject to environmental restriction. The appellant also places reliance on a report of Indian Rubber Manufacturers Research Association which should have been sufficient justification for re-testing the samples.

9. Learned Special Counsel for Revenue drew our attention to Note 2 of Chapter 27 of First Schedule of Customs Tariff Act, 1975 as well as the provisions of Hazardous Wastes (Management Handling & Trans-Boundary Movement) Rules, 2008 to justify the legality and propriety of the impugned order.

10. Having heard the rival contentions, we find that this is not first time the matter has been placed before us. We also take note of the contention of appellant that it was the alteration of the duty structure which prompted Revenue to dispute the classification and that it was the newly-minted capacity of CRCL to test the import product for conformity with the notes in the tariff and the IS specification that led to consequent prohibition of an import that, till then, was freely allowed.


11. It is seen from the Rules supra that the import of hazardous waste is permissible only in certain ports by those who have erected a facility for reprocessing of such waste.

12. As per Note 2 of Chapter 27 of First Schedule of Customs Tariff Act, 1975 heading of "petroleum oils and oils obtained from bituminous minerals" include not only petroleum oils and oil obtained from bituminous obtained by any process but also similar oils as well as those consisting mainly of mixed unsaturated hydrocarbon obtained by any process, provided that the weight of the non-aromatic constituents exceeds that of aromatic constituents.


13. It would appear that the process of refining crude oil and the removal of prime products leave residues which find use in rubber industry as fillers. However such residue is suspected to contain chemicals that are inimical to human health and hence, for reason of public safety, are not permitted for import except for re-processing.

14. On a careful examination of facts and circumstances, it would appear that the imports of the appellants do contain a higher percentage of aromatic constituent than prescribed for classification under Heading 2710. The alternate heading which describes the imported goods to be waste brings it under the ambit of Hazardous Waste (Management, Handling & Trans-Boundary Movement) Rules, 2008 and therefore, liable for action under Section 111 and Section 112 of Customs Act, 1962.


15. In relation to the goods imported earlier that had not been subject to testing at the time of import, it is not in dispute that, in the absence of such verification, it would be inequitable to consider those to be at par with imports lying uncleared. Refining of crude petroleum involves complicated processes and there may not be any ground to conceive that an output of the production process which is imported in the country for a specific industrial use would have uniform composition on each occasion. However it is noted that the adjudicating authority has placed reliance on certain test samples relating to earlier imports. In the absences of any evidence that the sample have not been drawn, we are unable to appreciate the argument advanced by appellants that these test result are not reliable.

16. Though the nodal Ministry for Hazardous Waste (Management, Handling & Trans-Boundary Movement) Rules, 2008 is the Ministry of Environment and Forest and the appellants contend that reliance on tests carried out by laboratories, that are not approved by that Ministry, is inappropriate, we find that testing is for coverage under Note 2 of Chapter 27 of First Schedule of Customs Tariff Act, 1975. It is following a re-classification on account of non-fitment with that note that the goods become subject to Rules governing handling of hazardous waste. The origin of confiscation resides in the domain of Customs procedures and hence reliance on testing by CRCL is not questionable. Accordingly, we are not convinced that the samples have not been subjected to a valid test. We are also not convinced that testing procedure should be subject to cross-examination by the appellant as the credibility of the test is not in question and a non-expert may not be in a position to query an expert on technicalities. It was open to the appellants to produce expert witnesses on their side during the adju-dication proceedings. No such request was canvassed on behalf of appellants.

17. In view of the above, we find that the impugned order has correctly held the imported product to be subject to the provision of Hazardous Waste (Management, Handling & Trans-Boundary Movement) Rules, 2008. According-1\, we find no reason to interfere with the impugned order.

18. Appeals are rejected.
(Pronounced in Court on 27-6-2016)

Equivalent 2016 (339) ELT 0305 (Tri. - Mumbai)