Customs | Penetrating Oil Not Adulterated Diesel Unless Revenue Proves Adulteration; Higher Duty Demand Unsustainable: CESTAT Mumbai
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that merely because penetrating oil contains petroleum fractions exceeding 70%, it cannot be treated as adulterated diesel unless the revenue proves actual adulteration. Dr. Suvendu Kumar Pati (Judicial Member) and M.M. Parthiban (Technical Member) stated that ……In the penetrating oil,...
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that merely because penetrating oil contains petroleum fractions exceeding 70%, it cannot be treated as adulterated diesel unless the revenue proves actual adulteration.
Dr. Suvendu Kumar Pati (Judicial Member) and M.M. Parthiban (Technical Member) stated that ……In the penetrating oil, the basic elements of which are more than 80% petroleum hydrocarbon and other additives, the presence of more than 70% hydrocarbon, including lighter hydrocarbons, as found in the test examination report, would not be considered as unusual.
In this case, the assessee/appellant had imported goods, classifying them as “Penetrating Oil-60 (for industrial use)” under CTH 3403 9900, whereas the department claimed that the goods were “adulterated diesel” classifiable under CTH 2710 1990. The goods were seized by the department.
Because of the presence of a mixture of hydrocarbons of more than 70% weight, the Department concluded that imported goods were petroleum as defined in the Petroleum Act, 1934.
As per the revenue, the presence of lighter hydrocarbons, which do not belong to diesel CRM, establishes the presence of a foreign substance in diesel that amounts to adulteration as defined in Motor Spirit and High-Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005.
The department passed an order reclassifying the goods and enhancing the valuation. Aggrieved, the assessee filed an appeal before the Commissioner (Appeals), which was dismissed.
The counsel for the assessee submitted that to establish that assessee had imported adulterated diesel, the first thing that was required to be confirmed was that the constituent was diesel so as to bring some foreign material into it for the purpose of adulteration but instead of establishing the burden to proof its stand, the Department had enhanced the price of High Speed Diesel by taking the notified market price determined by the petroleum Authority.
The Tribunal stated that it is common knowledge that penetrating oil constitutes a blend of certain substances and acids, which are available in lube oil base, i.e. lubricant oil base and lubricant oil base is composed of 80 to 90% petroleum distilled with 10 to 20% additives, as could be noticed from scientific literature.
Though no argument was led by either of the adversaries in this line, vis-à-vis. interpretation of CTH3403 with CTH2710, such goods as imported can never be equated with adulterated diesel since test reports are also silent on this aspect, opined the Tribunal.
The bench held that the assessee had appropriately classified the imported goods under CTH3403 since it did not meet the IS1460 specification and discharged the applicable duties thereon, and the Department has failed to discharge its burden of proving the classification to the contrary.
In view of the above, the Tribunal allowed the appeal.
Case Title: M/s Auto Stores (India) v. Commissioner of Customs, Nhava Sheva-I
Case Number: Customs Appeal No. 87893 of 2025
Counsel for Appellant/ Assessee: Ramachandran Mattiyil
Counsel for Respondent/ Department: Jitesh Kumar Jain