Classification of Rotary Gas Meters under Custom Tariff Heading 9028 Upheld

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s Rockwin Flowmeter India Pvt. Ltd. Versus Principal Commissioner of Customs (Import), New Delhi - 2026 (4) TMI 538 - CESTAT NEW DELHI  held that 'Rotary Gas Meters' used for measuring the volume of gas for custody transfer are correctly classifiable under Customs Tariff Items ('CTI')9028 10 00. However, the Tribunal set aside the invocation for the extended period of limitation, ruling that mere misclassification does not constitute suppression of facts.

Facts:

• M/s Rockwin Flowmeter India Pvt. Ltd ('The appellant') imported 'Rotary Gas Meters' and classified them under CTI 9026 10 10 as 'flow meters', claiming zero Basic Customs Duty ('BCD') under Notification No. 24/2005-Cus dated 01.03.2025.
• Following an investigation, Revenue alleged that the goods were actually 'Gas Meters' used for supply/production measurement, classifiable under CTI 9028 10 00, where the exemption was not applicable.
• After issuance of Show Cause Notice('SCN'), the Principal Commissioner confirmed a duty demand ('Impugned Order') of Rs. 56,93,781/- by invoking the extended period of limitation under Section 28(4) of the Customs Act, 1962('the act') and imposed an equal penalty under Section 114A of the act.
• The appellant appealed against the impugned order before CESTAT and contended that they had been classifying the goods this way since 1988, and the department was aware of their practice.

Issues:

• Whether the imported meters are classifiable under CTI 9026 10 10 (as flow meters) or CTI 9028 10 00 (as gas supply meters)?
• Whether the extended period of limitation under Section 28(4) was correctly invoked?
• Whether the penalty under Section 114A is sustainable?

Held:

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s Rockwin Flowmeter India Pvt. Ltd. Versus Principal Commissioner of Customs (Import), New Delhi - 2026 (4) TMI 538 - CESTAT NEW DELHI  held as under:

• Observed that based on the product brochure and the nature of customers (such as gas distribution networks like IGL), the meters are intended for 'custody transfer'-measuring the total volume of gas consumed for billing purposes, not for measuring pressure or rate of flow of the gas. Also, when a consumer consumes gas, IGL, as the supplier, needs to know how much was consumed and accordingly bill him.
• Held that, unlike flow meters under CTH 9026, which measure the 'rate of flow,' these meters measure 'cumulative volume' in cubic meters, making them 'Gas Supply Meters' under CTI 9028 10 00.
• Noted that the appellant had filed all necessary documents but claimed a wrong classification or an ineligible exemption, which does not, by itself, constitute collusion, willful misstatement, or suppression of facts, ingredients need to be fulfilled for the invocation of Section 28(4) or Section 114A of the Act.
• Hence, the invocation of Section 24(8) and Section 114(A) is set aside, and the impugned order is partly modified.

Relevant Sections & Headings:

CTH 9026 INSTRUMENTS AND APPARATUS FOR MEASURING OR CHECKING THE FLOW, LEVEL, PRESSURE OR OTHER VARIABLES OF LIQUIDS OR GASES (FOR EXAMPLE, FLOW METERS, LEVEL GAUGES, MANOMETERS, HEAT METERS), EXCLUDING INSTRUMENTS AND APPARATUS OF HEADING 9014, 9015, 9028 OR 9032

9026 10 - For measuring or checking the flow or level of liquids:

9026 10 10 ---Flow meters

9026 10 20 --- Level gauges

9026 10 90 --- Other

CTH 9028 GAS, LIQUID OR ELECTRICITY SUPPLY OR PRODUCTION METERS, INCLUDING CALIBRATING METERS THEREFOR

9028 10 00 - Gas meters

9028 20 00 - Liquid meters

9028 30 - Electricity meters

9028 30 10 ---For alternating current

9028 30 90 --- other

• Section 28(4) of the Customs Act, 1962:

Where any duty has not been [levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,- (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been 4[so levied or not paid] or which has been so short-levied or short-paid or to whom the the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

• Section 114A of the Customs Act, 1962:

Where the duty has not been been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under 9[sub-section (8) of section 28] shall, also be liable to pay a penalty equal to the duty or interest so determined:]