2002 (12) TMI 546 - AT - Customs

Classification of Butyl Acrylate Monomer for Duty-Free Clearance: Limitation Period, Penalties, and Valuation Dispute Resolved

The judgment concluded that Butyl Acrylate Monomer (BAM) can be classified as an adhesive for duty-free clearance under advanced licenses. The extended ... Import - Advance licence - DEEC Scheme - Demand - Limitation Issues Involved:1. Classification of Butyl Acrylate Monomer (BAM) as an adhesive.2. Eligibility for duty-free clearance under advanced licenses.3. Invocation of the longer period of limitation for duty demand.4. Imposition of penalties and confiscation of goods.5. Valuation dispute of the imported BAM.Detailed Analysis:1. Classification of Butyl Acrylate Monomer (BAM) as an Adhesive:The primary issue was whether BAM, in its monomer form, could be classified as an adhesive for duty-free clearance under advanced licenses. The appellants argued that BAM, although not adhesive in its monomer form, polymerizes upon exposure to heat and light, becoming an adhesive. They supported this with technical literature and practical usage in the leather industry. The Revenue, however, contended that BAM is not an adhesive but a raw material for adhesives, requiring further processing to gain adhesive properties. The judgment concluded that BAM, which undergoes self-polymerization upon exposure to the atmosphere, can be considered an adhesive and thus covered by the advanced licenses.2. Eligibility for Duty-Free Clearance Under Advanced Licenses:The appellants cleared BAM under advanced licenses, claiming it as an adhesive. The Revenue disputed this, arguing that the licenses were for adhesives, not raw materials for adhesives. The judgment noted that the term 'materials' in the notification includes raw materials, intermediates, and components required for manufacturing export products. Given that BAM, upon polymerization, serves as an adhesive in the leather industry, it was deemed eligible for duty-free clearance under the advanced licenses.3. Invocation of the Longer Period of Limitation for Duty Demand:The Revenue invoked the extended period of limitation, alleging misdeclaration by the appellants. The appellants argued that they had declared the goods correctly and that the customs authorities had cleared the goods after due verification. The judgment found that the appellants had not suppressed any facts and had provided the correct chemical name and classification. The addition of the word 'adhesive' was for clarification. Thus, the extended period of limitation was not justified, and the demand was barred by limitation.4. Imposition of Penalties and Confiscation of Goods:The Commissioner had imposed penalties and ordered the confiscation of goods, alleging misdeclaration and evasion of duty. The judgment found no evidence of deliberate misdeclaration or suppression of facts by the appellants. Since BAM was deemed an adhesive and covered by the advanced licenses, the penalties and confiscation orders were set aside. The judgment also noted that the customs officers had cleared the goods after proper verification, and any subsequent change in the Revenue's opinion could not justify penalties.5. Valuation Dispute of the Imported BAM:The Revenue had disputed the value of the imported BAM, alleging under-valuation. The appellants argued that there was no incentive to under-value duty-free goods. The judgment found no basis for the allegations of under-valuation, as the goods were eligible for duty-free clearance under the advanced licenses. Consequently, the valuation adopted by the Revenue was not upheld.Conclusion:The judgment concluded that BAM, which polymerizes upon exposure to the atmosphere, can be classified as an adhesive and is eligible for duty-free clearance under advanced licenses. The extended period of limitation for duty demand was not justified, and the penalties and confiscation orders were set aside. The valuation dispute was resolved in favor of the appellants, and the appeals were allowed with consequential relief.