1. JUDGMENT: MR. MUHAMMAD SULAIMAN, MEMBER (TECHNICAL).--(1). As facts of all the above appeals as well as questions of law involved therein are almost the same, these appeals are being decided by means of this single judgment being recorded in appeal No, 132/1998. These are:-- (i)Appeal No, 132/98 - against the Order-in-Original No, 01/98 dated 31.7.1998 passed by the Collector Sales Tax, Rawalpindi.
2. (ii)Appeal No, 231/98 - against the Order-in-Original No, 41/98 dated 8.8.1998 passed by the Additional Collector Sales Tax, Rawalpindi and Order-inAppeal No, CE/ST-940/98 dated 30.11.1998 passed by the Collector of Customs, Central Excise & Sales Tax (Appeals), Rawalpindi.
3. (iii)Appeal No, 232/98 - against the Order-in-Original No, 41/98 dated 8.8.1998 passed by the Additional Collector Sales Tax, Rawalpindi and Order-inAppeal No, CE/ST-940/98 dated 30.11.1998 passed by the Collector of Customs, Central Excise & Sales Tax (Appeals), Rawalpindi.
4. (iv)Appeal No, 34/99 - against the Order-in-Original No, 36/98 dated 9.6.1998 passed by the Additional Collector Central Excise, Rawalpindi and Orderin-Appeal No, CE/ST-93/98 dated 5.11.1998 passed by the Collector of Customs, Central Excise & Sales Tax (Appeals), Rawalpindi.
5. (v)Appeal No, 439/99 - against the Order-in-Original No, 48/99 dated 5.4.1999 passed by the Additional Collector Sales Tax, Rawalpindi and Order-inAppeal No, CE/ST-120/99 dated 27.11.1999 passed by the Collector of Customs, Central Excise & Sales Tax (Appeals), Rawalpindi.
6. 2.Brief facts of the case are that on scrutiny of the sales tax records of the appellants M/s. Pakistan Oil Fields Ltd., Morgah, Rawalpindi, by the Directorate of Revenue & Receipt Audit, Lahore, it was pointed out that the unit had supplied solvent oil falling under PCT heading No, 2707-9900 during the year 199192 without payment of sales tax leviable thereon as the subject product did not enjoy exemption under SRO 599(1)/90 dated 7.6.1990 and SRO 505(I)/91 dated 30.5.1991. The appellants were alleged to have short paid sales tax amounting to Rs, 57,98,267/-, which also attracted additional tax/surcharge to the tune of Rs, 99,06,194/-. They had violated the provisions of sections 2(6), 22, 23 and 26 of the Sales Tax Act, 1990 read with section 36 punishable under sections 33 and 34 of Sales Tax Act, 1990.
3. After issuance of show cause notice, the Deputy Collector, Sales Tax, Rawalpindi decided the matter in the following terms vide Order-in-Original No, 15 of 1995, dated 24.04.1995:-- "The impugned goods are gaseous hydrocarbons and are classifiable under PCT heading 27.11, which are exempt from sales tax under SI. No, 35 of SRO 505(1)/91. The laboratory report dated 12.11.1992 has also supported the contention of the learned advocate. The Departmental Representative has also agreed that the audit had misclassified the impugned goods. Since the impugned goods are exempt from payment of sales tax, the show cause notice is vacated."
3. After the issuance of the aforesaid order on 25.4.1995, a show cause notice was issued by Mr. Akhtar Ali, Collector Sales Tax, Rawalpindi on 28.2.1997 in which the Collector stated, inter-alia, as under:-- "Since, prima facie, the legality or propriety of the order passed by the Deputy Collector is doubtful, the undersigned, for the purpose of satisfying myself as to the legality or propriety of the Order-in- Original No, 15/95 dated 25.4.1995 hereby order to re-open the case in exercise of the powers conferred by section 45-A of the Sales Tax Act.
5. Consequently, the Collector Sales Tax, Rawalpindi passed Order-in-Original No, 01/98 dated 31.7.1998. The operative para 4 as part of the Order-in-Original is as follows:-- "I have gone through the case record and have considered the point of view of both the parties and the expert opinion of the classification committee. The opinion of the classification committee and rebuttal of-the respondent's arguments by the departmental representative are so strong and convincing that I am left with no option but to direct the respondents to pay the evaded amount of sales tax. I hereby direct M/s. Pakistan Oil Fields, POL House, Morgah, Rawalpindi to pay sales tax amounting to Rs, 5,798,267/- within seven days of the issuance of this order, failing which the amount will be recovered from them under section 48 of the Act. I also impose a penalty of Rs, 5,79,827/- upon the respondents under sections 33(2)(a) and 33(2) (c) of the Sales Tax Act, 1990 for non-issuance of sales tax invoices and for failure to deposit due amount of sales tax. Keeping in view the circumstance of the case, I do not demand any additional tax from the respondents as provided Under Sale. Tax Circular No, 4 of 1995; which remained in force till 15.7.1996. In my opinion, this particular case is covered under the aforesaid circular, because the period of liability is 1991-92 and the first Order-in-Original 'i.e., Order-inOriginal No, 15 of 1995 Was passed on 25A.1995."
7. 6.The Collector agreed with he opinion of classification committee and dis-regarded the opinion given by the Collector of Customs (Appeasement) and that o tie Collector,. Central Excise, Karachi.
8. Both these Collectors had classified the goods under Chapter 27 and not 38. The Collector of Customs (Appeasement) in fact, suggested its classification tinder PCT 2710-0039. The opinion of the classification committee, which was endorsed by the Collector of Sales Tax and the audit, classified the goods-in-question, i.e., solvent oil under PCT heading No, 38.14. The opinion of the classification committee was asunder:-- "The view point of the technical experts of POL and ARL and the specifications of the products have been examined in detail. The following PCT classifications were discussed namely 27.07, 27.10, 27.11, 29.01 and 38.14. The position with regard to each PCT heading is as under:-- The product is not classifiable under heading 27.07. This is so as the heading 27.07 covers oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents (page 226 of Explanatory Notes). Since non-aromatic constituents are predominant in the under reference product as is clear from PSI Standard and since it is obtained from natural gas or crude oil, it cannot be classified under heading 27.07.
9. On the Other hand, heading 27.11 covers "CRUDE gaseous hydrocarbons obtained from natural gas or from petroleum or produced chemically. Methane and propane are, however, included even when pure. These hydrocarbons are gaseous at a temperature of 15C and under a pressure of 1.013-mili bars (101.3 kpa)". (Page 229 of the Explanatory Notes to heading 27.11). A perusal of Explanatory Notes to heading 27.11 clearly suggests that this heading covers only crude gaseous hydrocarbons obtained as natural gas or from petroleum, or produced chemically. For classification under this heading, the product should be gaseous at a temperature of 15oC anc under a pressure of 1.013 mili bars. As explained by the technical experts, the initial boiling point of solvent oil is 60oC. Hence classification under this heading is ruled Further, apart from crude gaseous hydrocarbon, only methane and propane are covered. The heading does not cover a mixture of hexane, haptane and octane of which the under reference 'product is made of. In fact as per explanatory notes, hexane, haptane and octane are classifiable under heading 29.01 provided they are separate chemically defined elements and compounds. A separate chemically defined compound is a single chemical compound of known structure, which does not contain other substances added during or after its manufacture (including purification). Since the solvent oil of the instant case is not a separate chemically defined compound; hence its classification under heading 29.01 is ruled out.
10. The classification of the product was, therefore, examined with reference to headings 27.10 and 38.14. Heading 27.10 covers petroleum oil and other oils obtained from bituminous minerals, which have under gone any refining process other than those-specified in the Explanatory Notes to heading 27.09. However, solvents and thinners for varnishes are excluded vide exclusion (b) (page 229 of Explanatory Notes (b) Preparation containing petroleum oils or oils obtained from bituminous minerals in any proportion (even exceeding 70% by weight) covered by a more specific heading in the Nomenclature or based on products other than petroleum oils or oils obtained from bituminous minerals. This is the case with the anti-rust preparations of heading 34.03, which consist of lanolin in solution in white spirit, the lanolin being the basic material and the white spirit acting merely as a solvent and evaporating after application. It is also the case with disinfecting, insecticidal, fungicidal, etc., preparations (heading 38.08), prepared additives for mineral oils (heading 38.11), composite solvents and thinners for varnishes (heading 38.14) and certain preparations of heading 38.24, such as starting fluid for petrol (gasoline) engines, the fluid consisting of diethyl ether, 70% or more by weight of petroleum oils and also other constituents, the diethyl ether being the basic constituent] and have been shown to be classifiable under heading 38.14. Since the product is used in varnish and paints industry and in rubber industry as solvent, its classification under heading 27.10 becomes doubtful. On the other hand, heading 38.14 covers organic solvents and thinners whether or not containing 70% or more by weight of petroleum oil provided that they are not separate chemically defined compounds and is not covered by a more specific heading. They are more or less volatile liquids which are used, inter alia, in preparation of varnishes and paints or as decreasing preparations for machinery parts etc. (Page-574 of Explanatory Notes). The exclusion (a) to the said heading further indicates that 29 products of complex constitutions used as solvents or thinners but covered by more specific headings of the Nomenclature, e.g. solvent naphtha and white spirit are excluded from heading 38.14 because solvent naphtha is specifically covered by heading 27.07 and white spirit by heading 27.10.
11. Considering the Explanatory Notes to 27.10 and 38.14, committee was of the view that since solventso and thinners for varnishes are excluded from heading 27.10 and since solvents and thinners for paints and varnishes are included in heading 38.14, and since solvent oil is not specifically covered by any previous heading of the Nomenclature, it will be correctly classifiable under heading 38.14.
12. This view point of the committee is further supported by sub rule (c) of Rule 2 of the General Rules for the interpretation of the Harmonized System and for the interpretation of the First Schedule to the Customs Act, 1969. In this sub rule, in case the classification can be made under two headings, the product shall be classified in the heading which occurs last in numerical order among those which equally merit consideration.
13. The committee, therefore, held that solvent oil is classifiable under PCT heading 38.14."
14. 7.The adjudicating officer, however, did not rebut the opinion given by the Collector of Customs (Appeasement), Karachi and Collector of Central Excise, Karachi. He did not apply his mind independently and depended on some instructions issued by the Central Board of Revenue, which simply stated that the sales tax department can decide the classification independently and he is not bound by the opinion mentioned as above and that he should follow the decision of the classification committee headed by his predecessors.
15. 8.Previously, this case was heard by another Bench of this Tribunal and judgment was reserved.
16. However, orders could not be issued because that Bench did not remain functional. That Bench had also referred the matter to World Customs Organization (WCO), Brussels. The opinion received from the WCO was as under:-- "This is in reference to your request for classification advice of 3. Jan., 2000 (C. No, 11(1)/2000-MCA) concerning "solvent oils"
17. A.Description.
18. The product at issue appears to be a liquid consisting of petroleum hydrocarbon obtained by refining crude petroleum, having an aromatic content of 10% mainly used as a rubber solvent and also applied as a solvent in the paint and varnish industry. The distillation point ranges from 60C to 120C.
19. B.Classification.
20. The Secretariat considers that heading 27.07 should be ruled out, since the weight of the aromatic constituents does not exceed that of the non-aromatic constituents. Similarly, heading 27.11 should be ruled out, since the product is not presented in a gaseous state. That being the case, it appears that only headings 27.10 and 38.14 merit consideration.
21. It should first be noted that there are no legal Notes in either Chapter-27 or 38, giving priority to classification in one of the headings concerned. Heading 38.14 refers to products ("Organic Composite Solvents") consisting of a mixture of two or more component, but excludes products elsewhere specified or included. Given the description of the product at issue (i.e., a product consisting entirely of petroleum hydrocarbon), the Secretariat considers that it is appropriately described in heading 27.10. Consequently, classification in heading 38.14 would be ruled out.
22. This is supported by the example given in the Explanatory Note to heading 38.14. Petroleum products mixed with certain organic substances second paragraph, item (2) on (page 574).
23. In conclusion, the Secretariat considers that the product called "solvent oil" falls in heading 27.10."
24. 9.The opinion of the WCO was then forwarded to the CBR by ex-Bench of this Tribunal on 08.07.2000 for issuing ruling on the issue. However, no such ruling has been received to date.
25. 10.The counsel for the appellants, in his arguments before this Tribunal, referring to various developments in the case, stated that the classification was first determined by the Deputy Collector Sales Tax as 27.11 and now all expert opinions including that of WCO as mentioned above, support. its classification under 27.10 which is also exempt from sales tax. He also submitted technical literature and produced an expert who confirmed the above mentioned assertions and stated that the goods are in fact, correctly classifiable under heading 27.10.
26. 11.In addition to the above, the learned counsel for the appellants raised several legal objections against the entire process of the assessment, adjudication and classification of the goods. These objections, in short, are as under:--
(i) That the Collector of Sales Tax could not re-open the case earlier decided by the Deputy Collector Sales Tax because in fact, he was not Collector of Sales Tax but Additional Collector of Sales Tax. Similarly, he could not give retrospective effect to his decision.
(ii) That as the classification had been earlier decided by an Officer of Sales Tax, no fine and penalty under any section could be imposed on the party.
27. (iii)That section 65 of the Sales Tax Act, 1990, is applicable to this case as no body paid sales tax on B this product prior to the issuance of Order-inOriginal dated 31.7.1998.
28. (iv)That a larger Bench should be constituted which should 'include Mr. Falak Sher, Member (Technical) who heard the case earlier and who was a Member of the Bench, which had reserved judgment in this case earlier. He had also referred the case to WCO and was, therefore, in full knowledge of the facts of the case. Not only that, the learned Member had also referred this case to the CBR to issue a ruling on the subject and had indirectly given opinion on the issue with regard to the classification of solvent oil.
29. (Since this Tribunal had issued a detailed ruling on the subject on 05.12.2000 stating that there is no need for referring the matter to the Chairman for constituting a larger Bench, the insistence of the counsel on it did not prevail with us).
30. (v)That the Order-in-Original No, 1/98 dated 31.07.1998 as well as the Show Cause Notice were c time barred as no mala fide was either alleged or proved in the case.
31. (The learned counsel relied on various rulings of the Superior Courts in support of his contentions).
32. (vi)That the classification of the goods has now been conclusively decided by the WCO under PCT heading 27.10. This classification/opinion is binding on the Pakistan Customs Administration (PCA) which also supports the earlier opinion given by the Collector of Customs (Appeasement) and Collector of Central Excise, Karachi. The goods covered under PCT heading 27.10 are also exempt under S.R.O. 505(1)/91 dated 30.05.1991 and, therefore, the liability determined against the appellants is liable to be set aside.
33. 12.The respondents in this case rebutted all the above objections/contentions of the appellants and stated as follow:-- (i)That the Collector of Sales Tax was fully empowered to re-open the case decided by his subordinate under section 45-A and there is no legal flaw in this regard. Secondly, the CBR can appoint an officer to be,a Collector of Sales Tax under section 30 of the Sales Tax Act, 1990 and the officer who re-opened the case in question, was so empowered by the CBR. He had all the powers conferred on him under section 31 of the Act etc. Therefore, the Additional Collector, Sales Tax who was appointed by the CBR, as Collector of Sales Tax, was competent to re-open the case under section 45-A.
34. (ii)That the classification of the goods was initially determined by the party itself as 27.11 and then confirmed by the Deputy Collector Sales Tax, which was wrong and a nullity in law.Classification of a liquid solvent as a gas under heading 27.11 was an obvious mis-declaration and this was done deliberately by the appellants. It is not conceivable that a Petroleum Company cannot differentiate between Petroleum Gases (27.11) and solvent oil classifiable under 27.10 or 38.14. This would be nothing but mis-declaration to which Deputy Collector Sales Tax could not confer any legal sanctity. Therefore, the fine and penalty imposed etc., on the party, are correct and should be upheld.
35. (iii)That the reference to section 65 by the appellants is totally un-called for, as under this section, the party is required to approach the CBR for exemption. They cannot raise this point before this forum and, therefore, this point should be discarded.
36. (iv)That in this case there was a deliberate attempt by the appellants to evade taxes as pointed out at subpara (ii) above. Therefore, the show cause notices etc., were issued in time. Similarly, the re-opening of the case was also very much in time as per section 45-A of the Sales Tax Act, 1990, where the time limit is five years.
37. (v)That the classification opinion given by the Collector of Customs (Appeasement), Collector of Central Excise, Karachi and WCO are not binding upon the Collector Sales Tax. This has been so ruled by the Central Board of Revenue also and categorically mentioned in the Order-in-Original in which the question of classification has been discussed at length and PCT heading 27.10 has been excluded. As per the Explanatory Notes, solvent oil being a solvent and thinner for paints and varnishes, is excluded from Chapter 27 and are specifically mentioned against heading 38.14.
38. Therefore, according to rules of Interpretation, Rule No, 3 (c) will apply. This rule states that where goods are classifiable under two or more headings/sub-headings, these shall be classified, in such case as under:-- "(c) when goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration". As 38.14 occurs after 27.10, therefore, solvent oil is correctly classifiable under 38.14.
39. (vi)That Collector of Sales Tax had full jurisdiction to decide the case under the Sales Tax Act, 1990.
40. This point was never raised at the time of original adjudication and deserves to be discarded as well.
13. We have gone through the record of the case in the light of submissions made by the parties.
41. The respondents have very effectively rebutted the legal objections with regard to (i) Limitation (ii)
42. Power of re-opening of the case by Collector of Sales Tax and his Jurisdiction (iii) Imposition of fine and penalty (iv) claim under section 65 for exemption from sales tax, as it F was to be made before the CBR and not before this forum and, therefore, there is no force in the arguments of the appellants on these points. The issue regarding jurisdiction of the Collector Sales Tax was not raised at the adjudication stage. In any case, the Collector Sales Tax had full jurisdiction in this case. So far as the question of limitation is concerned, it is obvious that right from the beginning the company deliberately declared the solvent and claimed it to be classifiable under 27.11. It was for this, reason that the case was re-opened by the Collector Sales 'fax under section 45(A). The period fixed under this section is 3 years. The decision of Deputy Collector was made in April, 1995 and was re-opened in Februai y, 1997.. That was well within time. Soon after this, a fresh show cause notice was issued to the appellants by the Collector of Sales Tax as per the provisions of section 45(A)(1) and 45(A)(4). Therefore, the objection to thel limitation is not maintainable.
14. The only issue left to be given verdict upon, is classification of the goods. This is discussed in detail in the following paras. This discussion may however, impinge upon the question of fine and penalties depending on the classification of the goods determined.
43. 15.In this case very detailed notes and opinions have been given by Collector of Customs (Appraisement), Karachi, Collector of Central Excise, Karachi, Collector of Sales Tax, Rawalpindi and World Customs Organization (WCO) Brussels. Unfortunately, in none of these opinions, a clear-cut and unambiguous classification has come forth. The most important point with reference to the classification is that at one time or the other, various headings were considered. These are 27.07, 27.09, 27.10, 27.11 and 38.14. Similarly, at various stages, the goods have been classified by the department under headings 27.10 and 27.11. The headings 27.07 and 27.09 were discarded by every body. Heading 27.11 was, however, declared by the appellants and at one stage, was formally approved by the Deputy Collector Sales Tax. This heading reads as under:-- "27.11 Petroleum gases and other gaseous hydrocarbons".
44. 16.The goods-in-question are admittedly solvent oil and as obvious from the heading of 27.11, by no stretch of imagination solvent oil constitutes gases. It is, therefore, quite clear that initially the declaration of these goods under PCT heading 27.11 by the appellants, was wrong and this was done deliberately sine: it was not expected from a concern dealing with oils. It confirmation by the Deputy Collector Sales Tax could no possibly validate a wrong assumption. This position has now bee accepted by the appellants as well and they are asking for classification under PCT heading 27.10.
45. 17.This leaves only two PCT headings to be considered i.e. 27.10 and 38.14, which lay down as follow: -- "27.10 Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals these oils being the basic constituents of the preparations."
46. "38.14 Organic composite solvents and thinners not else-where specified or included; prepared paint or varnish removers."
47. The words under head 33.14 clearly indicate that this heading covers organic composite solvents and thinners, while the product in question is a liquid consisting of only Petroleum Hydrocarbons obtained from refining crude through distillation process. This has an aromatic content of 10% and it is mainly used as a rubber solvent. It is also applied as a solvent in the paint and varnish industry.
48. The distillation point of this petroleum fraction ranges from 60C to 120C. No chemical or any kind of additive has been added to the product. Explanatory Notes of the heading 18.14 read as under:-- "38.14 ORGANIC COMPOSITE SOLVENTS AND THINNERS, NOT ELSEWHERE SPECIFIED OR INCLUDED; PREPARED PAINT OR VARNISH REMOVERS.
49. This heading covers organic solvents and thinners (whether or not containing 70% or more by weight of petroleum oil) Provided that they are not separate chemically defined compounds and are not covered by a more specific heading. They are more or less volatile liquids, which are used, inter alia, in the preparation of varnishes and paints or as decreasing preparations for machinery parts, etc. Examples of the products classified in this heading are:
(1) Mixtures of acetone, methyl acetate and methanol, and mixtures of ethyl acetate, butyl alcohol and toluene.
50. (2)Decreasing preparations for machinery parts, etc., consisting of a mixture of:-- (i)white spirit with trichloroethylene; or (ii)petroleum spirit withchlorinated products and xylene.
51. The heading also covers paint or varnish removers consisting of the above mixtures with the addition of small quantities of paraffin wax (to retard evaporation of the solvents), emulsifiers, gelling agents, etc. The heading does not cover:-- (a)Separate chemically defined solvent or thinning compounds (Chapter 29 generally) and products of complex constitution used as solvents or thinners but covered by more specific headings of the Nomenclature, e.g., solvent naphtha (heading 27.07), white spirit (heading 27.10), gum, wood or sulphate turpentine (heading 38.05); wood tar oils (heading 38.07), inorganic solvents (generally heading 38.24).
52. (b)Solvents for removing nail varnishes, put up for retail sale (heading 33.04)."
53. It would be observed that these products consist of mixtures of various types of solvents including items of 27.10 mixed with some other chemicals/compunds/organic products. On. the other hand, the description of the goods under 27.10 clearly refers to he following:-- "Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations."
54. The exclusion (b) as described on (page 4 of this order in para 6); does not cover this product as heading 38.14 clearly refers to composite solvents and not solvents containing hydrocarbons only. The exclusion itself describes several such products which have 70% or more of hydrocarbons but containing products e.g. lanolin (34.09), insecticides (38.08): prepared additives. for mineral oils (38.11) and composite solvents (38.14) and thinners for varnishes and paints. The example of such products are also given in 38.14(1) i.e., mixtures of acetone, methyl acetate, methanol and mixture of ethyl acetate, butty alcohol and toluene etc. 18.This particular product is a light oil (single solvent) and not a composite organic solvent containing other chemicals/compounds. No chemical of any kind has been added as required by the Explanatory Notes to the heading 38.14, and is, therefore, correctly classifiable as under:-- --- "Other light oils and preparations 2710.0031 --- White spirits 2710.0039 -- Others"
55. 19.Under this description, the appropriate PCT heading of the product in question is either 2710.0031 or 2710.0039-Other. The word "white spirit" used against 2710.0031, is basically a term being used in trade. The solvent in question is, however, described in detail by the Pakistan Standard Specification for Petroleum Solvent Grade 60/120. By definition, this product is Petroleum Solvent as defined therein as follows:-- "PAKISTAN STANDARD SPECIFICATION FOR PETROLEUM SOLVENT GRADE 60/120 "1.SCOPE: 1.1 This Standard prescribes the requirements and the methods of test for one grade of Petroleum Solvent used mostly in the rubber industry."
56. 2.DEFINITION: 2.1 Petroleum Solvent is defined as a product consisting entirely of petroleum hydrocarbons obtained by the refining of crude petroleum and satisfying the requirements described in this Standard. .....................
57. Aromatic content per cent =10% Initial Boiling Point =60C (140 F)
58. Final Boiling Point =120C(248 F) ............................"
59. 20.In view of the above, the heading 38.14 is clearly ruled out as the questioned petroleum solvent 60C/120C, is specified under heading 27.10. Therefore, Rule 3(c) of the interpretation I does not apply as rule 3(a) clearly covers the product as it is specified under 27.10, i . e . petroleum oil (light solvent). To know whether the goods are to be classified under 2710.0031 or 2710.0039, it may be stated here that the Collector of Customs (Appeasement), Custom House, Karachi had opined vide his letter No, PCT/CC/07/97-APP dated 26.08.1997 that the classification of the goods should be under the heading 2710.0039-Others. His opinion was based on the following criteria:-
(i) Specific gravity =0.722
(ii) Boiling range =60C to 1 10C He had opined that, this infact, is a mixture of light oils, further that the product cannot be classified under PCT heading 27.11 or 38.14 because it is neither a petroleum gas hydrocarbon nor a mixture of organic solvents containing mineral hydrocarbons. The product, solvent oil is, therefore, appropriately classified under PCT heading 2710.0039. He, however, did not, elaborate further why 27.0031 was disregarded by him.
60. This classification, however, was disregarded by the Collector of Sales Tax, Rawalpindi. Similarly, he also disregarded certain other opinions of experts like Department of Chemistry, Quaid-eAzam University, Islamabad who also classified the goods under PCT heading 27.10. They, however, did not give any ruling with regard to the sub-heading as was done by the Collector of Customs (Appeasement), Karachi.
61. 21.The matter was later on referred by the Tribunal to the World Customs Organization who also classified the goods under heading 27.10, however, they did not provide classification of goods as per Pakistan Customs Tariff sub-heading, as this was not required from them. Anyhow, they clearly excluded headings 38.14 and 27.11 of the tariff.
62. 22.The heading 27.10 is sub-divided into 2 sub-headings. Heading 2710.0031 covers the product called white spirit. This Tribunal made extensive efforts to determine whether the goods solvent oil are white spirit, whose specifications as provided by the appellants, are as under:--
(i) Specific gravity = 0.72C
(ii) Initial Boiling Point (IBP) = 60c,
(iii) Final Boiling Point (FBP) = 120C In this regard, additional technical literature was also obtained. The technical literature defines white spirit as under:-- ""A' 'Source Book of INDUSTRIAL SOLVENTS VOLUME I Pure Hydrocarbons By IBERT MELLAN ------------------- REINHOLD PUBLISHING CORPORATION NEW YORK It refers to many solvents including white spirit as follow:-- SOLVENTS PETROLEUM HYDROCARBONS 'White,Spirit, Mineral Spirit.
63. This is mainly used as a turpentine substitute. The B.E.S.A. specification X20 is as follows:-- A clear water-white petroleum distillate. S.G. 800 max. F.P. 75F. min. (24C.) B.R. 80% min. below 190; 90% min. below 200. Residue, 0.2% max. Neutral. Free from grease, sulphureted hydrogen and objectionable odour............
64. B' 'Charles Tennant & Company (London) Ltd.
65. Product Properties WHITE SPIRIT DENSITY (kg/I @ 20C 0.772 FINAL BOILING POINT (C) 194.0 INITIAL BOILING POINT (C)150 Notes White Spirit is a C7-C11 Aliphatic Hydrocarbon solvent, containing in the range of 25-25% Aromatics.
66. A typical composition contains Alkanes C7-(52%), Cycloalkanes C7-(27%), Aromatics (10%), C8 Aromatics ( I %) and Trimethylbenzenes' ."
67. The physical properties of white spirit as defined in the specifications above, clearly show white spirit to be a product whose boiling point ranges above 150C and goes over 190C. This is obviously not the boiling point range of the product in question whose boiling point range is 60C- 120C.
68. 23.We have also gone through the decision of the Honourable High Court of Sindh at Karachi in constitutional petition No, D-202 of 1986 in the case of M/s. Burger Paints Pakistan Limited, Sindh Industrial Trading Estate Vs. Government of Pakistan etc. This particular decision of the Court is with reference to the Old Central Excise Tariff headings 03.14 and 03.16 vs. 04.03. During the course of discussion, the words white spirit has been taken to be the same as solvent-30/40. Similarly, this product was also held to he a thinner. However, the product has not been described technically i.e., with chemical and physical specifications and thus, the distinction that we now seek between 2710.0031 and 2710.0039, is not deducible from the esteemed judgment.
69. 24.From the foregoing discussion, it is obvious that the product in question has oiling point range of 60C to 120C, specific gravity or 0.72 and an Aromatic content of 10% as per specifications provided by the appellants and also admitted by the respondents and various experts. It has been observed that the specifications of white spirit as mentioned above, are different from those provided by the appellants for their solvent which is admittedly a petroleum solvent. The goods are, therefore, most appropriately classifiable under heading 2710.0039-Others, which do not fit the description of white spirit under heading 2710.0031 as its range of boiling point goes over 190C whereas the maximum upper range of the solvent in question is 120C. The heading now actually claimed by the appellants is also 27.10, which is covered by item 34 of S.R.O. 505(1)191 dated 30.05.1991 and is, therefore; exempt from sales tax. The appeals, therefore, succeed and are accepted accordingly.
70. 25.Before parting with this judgment, it is pointed out that we have observed with great dismay that there is no coordination between various Collect orates of Central Excise, Sales Tax & Customs in matters of classification, particularly, in a situation where there is a clear difference of opinion, as was the case, which has now been decided by this forum. Different Collect orates held the classification to be under different heads of Pakistan Customs Tariff and there was no forum, which could reconcile these divergent views. The result has been that within Rawalpindi even, the Sales Tax Collect orate and Central Excise Collect orate have classified the goods under two different chapters of Pakistan Customs Tariff i.e., 27.10 and 38.14 respectively. This forum has received more than 20 appeals in the past against various such orders. It may be stated here that the confusion in the classification has delayed the finalization of such cases because of divergent opinions in the field. Although, as policy, we should not give classification opinions, as it is for the C".13. R. to do so, having the relevant expertise. However, having received no opinion from that side till date, after having referred the issue to them as hack as on 08.07.2000, we are, therefore, constrained to give opinion on the subject.
71. 26.We feel that there should he a Coordinating Committee both at the level of Collectors and CBR, preferably under the supervision of Collector of Customs (Appeasement) and Member (Customs), respectively, to resolve such differences of opinion. In case some Collectors of Customs, Central Excise and/or Collector of Sales Tax dis-agree with the opinion of the coordinating body at the level of Collectors, the case may be referred to the Coordinating Committee under Member (Customs) for final verdict which should be binding on all the wings of the CBR.
72. 27.Ordered accordingly. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.