Tariff classification by individual function defeated dairy machinery exemption, while personal penalties failed for lack of individual culpability.

Imported machinery was required to be classified according to its individual description and function under the relevant tariff headings, rather than as dairy machinery merely because it was used in a dairy-based production plant. Altered specification sheets could not override the original supplier documents showing different HS codes and equipment descriptions, so exemption under Notification No. 6/2006-CE was unavailable on the claimed classification. On the penalty issue, no active personal role or deliberate evasion was established against the Managing Director, and the employee was found to have acted under instructions without personal gain, so the individual penalties were not sustainable.

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Issues: (i) whether the imported machinery was correctly classifiable as dairy machinery under Heading 84.34 so as to claim exemption under Notification No. 6/2006-CE, or whether the goods were to be classified according to their individual function and description; (ii) whether the penalties imposed on the Managing Director and the employee were sustainable.

Issue (i): whether the imported machinery was correctly classifiable as dairy machinery under Heading 84.34 so as to claim exemption under Notification No. 6/2006-CE, or whether the goods were to be classified according to their individual function and description.

Analysis: The imported consignments were found to have been described in altered specification sheets as dairy machinery, whereas the original supplier documents showed different HS codes and descriptions for tanks, filling and packing machinery, moulding machinery and other equipment. The applicable classification rules required goods falling under specific headings in Chapters 84 and 85 to be classified in their respective headings. The machines were therefore to be classified by their individual character and function, and the heading for dairy machinery could not be invoked merely because the machines were used in a plant producing a dairy-based drink. The notification benefit depended on the correct classification, which was not established.

Conclusion: The classification under Heading 84.34 and the claimed exemption were rejected; the demand and confiscation as against the importing company were upheld.

Issue (ii): whether the penalties imposed on the Managing Director and the employee were sustainable.

Analysis: On the material available, no active personal role was established against the Managing Director in the manipulation of the documents or in any deliberate evasion. The employee was found to have acted as an employee under directions and without personal gain. In both cases, the record was insufficient to justify imposition of personal penalty.

Conclusion: The penalties on the Managing Director and the employee were set aside.

Final Conclusion: The appeal of the importing company failed on classification, exemption and related customs consequences, but the individual appellants succeeded in getting their personal penalties quashed.

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