2019 (9) TMI 800 - AT - Customs

Tribunal upholds duty demand for imported goods as electric fan parts, grants relief on penalties and fines

The Tribunal upheld the duty demand classifying imported goods as parts of electric fans under tariff heading 8414. However, it set aside penalties, ... Classification of imported goods - rotors, stator, down case, top case and down rod etc. imported together - whether the goods merits classification under heading 8414 or under 8503? - earlier imports of similar goods were assessed by the Revenue under heading 84.14 whereas the appellant had sought classification under 85.03 - change in classification. HELD THAT:- Whatever was imported by the appellant was specifically designed for ceiling fan. The marking on the corrugated box in which the said goods were imported is “Orpat Ceiling Fan” with “Air Queen Model” also mentioned. It is seen that Customs tariff headings include within purview the items incomplete, unfinished where presented unassembled or disassembled, if the said have the essential character of finished goods - In the instant case, from the observations given by the original adjudicating authority, it is seen that all parts of the fan except the fan blades as a set. The packing also describes the goods as electric fan. The rotors and stators, down case, top case and down rod of motor are also designed specifically to be a part of the fan. In these circumstances, following Rule 2(a), the goods are classifiable under heading 84.14 as unassembled, incomplete fan. Imposition of penalty, redemption fine and confiscation - HELD THAT:- The appellant had earlier sought classification under heading 85.03 and the matter can be a subject matter of opinion and therefore, in these circumstances, imposition of penalty and confiscation is not justified - Confiscation, redemption fine as well as penalty set aside. Appeal allowed in part. Issues Involved:1. Classification of imported goods (rotors, stator, down case, top case, and down rod).2. Liability for confiscation under Section 111(m) of the Customs Act.3. Imposition of penalty and redemption fine.Issue-wise Detailed Analysis:1. Classification of Imported Goods:The appellant, a manufacturer of electric fans, imported various components and classified them under Chapter heading 8503 00 90 as parts of electric motors. The Commissioner reclassified these under Chapter heading 8414 90 30 as parts of electric fans. The appellant argued that the imported items were for assembling electric motors used in ceiling fans, thus meriting classification under heading 8503. They relied on the HSN explanatory notes and previous judicial decisions, emphasizing that parts specifically designed for electric motors should be classified under heading 8503. The Revenue, however, contended that the goods were essentially parts of electric fans, citing Rule 2(a) of the General Rules for the interpretation of the Customs Tariff, which includes incomplete or unfinished articles presented unassembled or disassembled. The Tribunal concluded that the imported goods, marked and packaged as parts of ceiling fans, were correctly classified under heading 8414 as unassembled, incomplete fans.2. Liability for Confiscation under Section 111(m) of the Customs Act:The appellant argued that the classification of goods under a particular heading is a matter of belief and does not amount to mis-declaration under Section 111(m) of the Customs Act. They cited the Tribunal's decision in Universal Chemical (India) vs. Collector of CCE, Bombay, where it was held that claiming a classification based on belief does not constitute mis-declaration. The Tribunal agreed with this argument, noting that the appellant had previously sought classification under heading 8503, which could be a matter of opinion rather than intentional mis-declaration.3. Imposition of Penalty and Redemption Fine:The Tribunal found merit in the appellant's argument against the imposition of penalty and redemption fine. Given that the classification issue could be a matter of opinion, the Tribunal held that penalties and confiscation were not justified. They referenced the Universal Chemical (India) case, which supported the view that penalties should not be imposed in cases where classification disputes are based on genuine belief rather than intentional mis-declaration. Consequently, the Tribunal set aside the confiscation, redemption fine, and penalties imposed on the appellant.Conclusion:The Tribunal upheld the duty demand under tariff heading 8414, confirming that the imported goods were parts of electric fans. However, it set aside the penalties, redemption fine, and confiscation, recognizing that the classification issue could be a matter of genuine belief and not intentional mis-declaration. The appeals were partly allowed, providing relief to the appellant regarding penalties and fines.