2023 (7) TMI 1067 - AT - Customs

Tribunal Upholds Classification of 'Un-Coated Calcite Powder' as Precipitated Calcium Carbonate

The Tribunal upheld the Commissioner's decision to classify 'Un-Coated Calcite Powder' as precipitated Calcium Carbonate under Tariff Heading No. 2836500, ... Classification of import goods - Un-Coated Calcite Powder or precipitated Calcium Carbonate? - to be classified under Tariff Heading No. 25309030 or under Tariff Heading No. 2836500? - HELD THAT:- The Learned Commissioner (Appeals) has held that I find that the said Appellants have not come up with any material contradicting two substantial evidences brought on records by the department viz. (i) relevant Panchnama during which it was prima-facie appeared that the goods under reference were Calcium Carbonate and not the declared goods and (ii) the report of the Chemical Examiner who categorically opined that the goods in question are Precipitated Calcium Carbonate. It is a matter of common knowledge that the word 'precipitated' preceding to Calcium Carbonate itself indicates that the goods under reference are not obtained as natural resources and thus classifiable under Chapter 25 but it is a manufactured item, classifiable under Chapter 28. The order is well reasoned and is properly backed by opinion of chemical analyst. We therefore find no merits in the grounds taken by the appellant and find that the impugned order is sustainable. The appeal is therefore dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported product, declared as 'Un-Coated Calcite Powder' under Tariff Heading 2530.9030, is correctly classifiable or is in fact 'Precipitated Calcium Carbonate' classifiable under Tariff Heading 2836.5000. 2. Whether the chemical examiner's laboratory report and the panchnama constitute sufficient evidence to shift the burden of proof to the importer and justify denial of a re-test or further testing without unacceptable denial of natural justice. 3. Whether re-valuation/ enhancement of assessable value following re-classification is sustainable in the absence of contemporaneous import comparisons relied upon by the importer. 4. Whether imposition of penalty is justified on facts showing mis-declaration, and whether the conduct of the importer amounts to mala fide or culpable neglect warranting penalty. 5. Whether recovery of interest under the relevant provision for delayed/short payment of duty is legally maintainable where differential duty was subsequently paid. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: whether goods are Un-Coated Calcite Powder (CH 25) or Precipitated Calcium Carbonate (CH 28) Legal framework: Tariff classification is determined by the nature and character of the goods as established by evidence (including chemical analysis) and governed by classification headings; manufactured precipitated substances are classifiable under Chapter 28, natural calcite under Chapter 25. Precedent treatment: The adjudicating authority and appellate authority relied upon established principles that chemical composition alone is not decisive; the process of production and form (e.g., 'precipitated') are material for classification. A prior High Court authority was cited for burden-shifting where the department proves illegality. Interpretation and reasoning: The Tribunal accepts the chemical examiner's finding that the sample is 'Precipitated Calcium Carbonate' and notes that the term 'precipitated' denotes a manufactured product (not naturally occurring calcite lumps merely ground). The panchnama contemporaneously recorded at examination corroborates that the goods appeared to be calcium carbonate rather than the declared goods. Because the department produced two independent, substantial evidences (panchnama and chemical report), the onus shifted to the importer to bring contrary evidence; the importer produced only assertions about sourcing and grinding, which did not contradict the laboratory finding. The Tribunal finds that identical chemical composition between natural and precipitated forms does not defeat classification because the manufacturing process and resulting commercial identity differ. Ratio vs. Obiter: Ratio - classification depends on the credible chemical analyst's report and evidential demonstration of manufacture (precipitation) versus mere grinding of natural calcite; where the department adduces cogent evidence, burden shifts to importer to rebut. Obiter - reliance on an online encyclopedia for process description is incidental and not essential to the holding. Conclusion: The goods are correctly classified as Precipitated Calcium Carbonate under Chapter 28; the claimed classification under Chapter 25 is rejected and the impugned classification upheld. Issue 2 - Validity of laboratory report; request for re-test; natural justice considerations Legal framework: Administrative findings based on expert laboratory reports are admissible evidence; principles of natural justice require opportunity to contest adverse evidence, but mere request for re-test must be supported by cogent grounds to displace an independent laboratory's report. Precedent treatment: The appellate authority treated refusal to order re-test as permissible where no specific and credible grounds were shown to doubt the lab report; the Tribunal follows that approach. Interpretation and reasoning: The Tribunal finds no procedural or substantive infirmity in reliance on the chemical examiner's report. The importer did not present any substantive evidence contradicting the report nor any legitimate basis to require re-testing (for example, demonstrating chain-of-custody issues, analytical irregularities, or manifest inconsistency with IS standards). The appellate authority correctly observed that blanket or speculative assertions about potential cross-examination or claims of inconsistency do not warrant re-testing. The department had recorded panchnama in presence of independent witnesses and the importer's representative; absent specific grounds to reject the report, the presumption of reliability stands and burden remains on importer to rebut. Ratio vs. Obiter: Ratio - an independent chemical examiner's report combined with contemporaneous panchnama constitutes sufficient evidence to uphold classification and to decline re-test requests unless specific grounds to doubt the report are shown. Obiter - commentary that arguments about re-test opportunities were 'ridiculing' the appeal is descriptive, not essential to the legal holding. Conclusion: The laboratory report is valid and sufficient; denial of re-test does not violate natural justice in the absence of particularized grounds; no relief on this point. Issue 3 - Valuation enhancement after re-classification Legal framework: Valuation for customs purposes follows prescribed guidelines; classification affects applicable valuation parameters and therefore reassessment/ enhancement may follow re-classification. Precedent treatment: The appellate authority noted settled positions that valuation must align with the correct classification and relevant valuation guidelines; routine objections without contemporaneous import data do not necessarily invalidate an enhanced valuation when classification changes. Interpretation and reasoning: Because the nature of the goods was found to differ from the declared description, the earlier declared value (premised on Chapter 25 classification) cannot stand. The subsequent valuation determined in accordance with the Directorate Valuation guidelines and consistent with the correct classification was not shown to be incorrect by the importer; absence of contemporaneous comparisons or other evidentiary material was not sufficient to discard the reassessed value in routine fashion. Ratio vs. Obiter: Ratio - re-valuation consequent to a valid re-classification is permissible and not vitiated by the importer's failure to produce contemporaneous comparative imports unless specific deficiencies in the valuation exercise are demonstrated. Obiter - criticisms of prior appellate holdings on valuation are ancillary. Conclusion: Valuation enhancement following re-classification is sustainable; no interference warranted. Issue 4 - Penalty: whether penalty is warranted given the facts and intent Legal framework: Penalties should not be imposed arbitrarily; however, where mis-declaration is proved and conduct is contumacious, dishonest, or not bona fide, penalty may be imposed. The decision to levy penalty depends on evidence of culpability or reckless/ deliberate mis-declaration. Precedent treatment: The appellate authority referenced higher court principles that penalty should not be automatic but may be imposed where the assessee's conduct is dishonest or non-bona fide. Interpretation and reasoning: The Tribunal accepts the appellate authority's conclusion that preliminary examination and independent chemical analysis proved mis-declaration. The importer's explanations (documents from supplier, claims of simple grinding, financial hardship, or lack of manufacturing capability) were not substantiated by credible evidence to dispel inference of wrongful claim to preferential treatment under the relevant notification. The importer was registered with tax authorities and thus expected to exercise due care. Given the factual matrix, imposition of penalty is not merely lawful but appropriate where mis-declaration was established and the importer failed to show bona fide mistake. Ratio vs. Obiter: Ratio - penalty sustained where independent evidence establishes mis-declaration and importer fails to demonstrate bona fide error or absence of culpability. Obiter - references to the importer's commercial losses or supposed novice status are explanatory, not determinative. Conclusion: Penalty imposition is justified and legally sustainable on the proved facts. Issue 5 - Recovery of interest under the relevant provision for delayed/short payment Legal framework: Interest is recoverable where differential duty is found to be payable; payment of differential duty does not preclude recovery of interest insofar as statutory provisions permit recovery for the period of default. Precedent treatment: The appellate authority applied the statutory scheme to conclude interest recovery was proper where differential duty was established and paid only later. Interpretation and reasoning: The importer contended there was no short payment; record shows payment of differential duty of a specified sum on a later date, contradicting the contention. Therefore, the requirement for recovery of interest under the relevant statutory provision is fulfilled. No factual or legal basis was shown to negate liability for interest. Ratio vs. Obiter: Ratio - recovery of interest under the statute is appropriate where differential duty was eventually paid following a finding of additional liability; mere assertion that there was no short payment is negated by the payment record. Obiter - none. Conclusion: Interest recovery under the statutory provision is proper and sustained. Overall Disposition The Tribunal finds the impugned order to be well-reasoned, supported by independent evidentiary material (panchnama and chemical examiner's report), and sustainable on the issues of classification, refusal of re-test, valuation enhancement, penalty imposition, and interest recovery; the appeal is dismissed.