2023 (10) TMI 1004 - AT - Customs

Appeals Allowed: Tribunal Rejects Customs' Reclassification of Joss Powder Due to Lack of Approval and Evidence

The Tribunal set aside the impugned Order, allowing the Appeals with consequential relief. It noted that the Customs Department's reclassification of Joss ... Classification of imported goods - Joss Powder for usage in their finished goods known as Jigged Powder - to be under Chapter sub-heading 1211 9029 as against the Appellant’s claim that the product was classifiable under 4401 30 00 or not - HELD THAT:- On going through the Chapter Notes of Chapter 12, it is seen that Heading 12.11 applies to the plants or parts thereof: basil, borage, ginseng, hyssop, liquorice, all species of mint, rosemary, rue, sage and wormwood. The Test Report obtained from the CRL by the Department does not specify that the goods in question fall under any of these categories. There are no reason for the Department to suddenly change the classification from CET 44013000 to CET 12119029 when several consignments have been imported through Kolkata (Port) as well as Haldia (Port) during the period 2003 to 2004 were allowed to be classified under CET 44013000. Even the provisionally, assessed Bills of Entry has been finalized by classifying the goods under CET 44013000. There are no proper evidence being brought in by the Customs Department to adopt new classification under CET 12119029, particularly when even the Test Reports obtained from CRL do not support the view of the Department - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported product is correctly classifiable under CET 4401 30 00 (wood/related products) or under CET 1211 90 29 (plants/parts with specified botanical categories) for customs duty purposes. 2. Whether the Customs Department validly changed the classification of the goods from CET 4401 30 00 to CET 1211 90 29 without complying with the requirement of prior approval of the Commissioner of Customs as prescribed by Circular No. 41/98 dated 11/6/1998. 3. The legal significance of finalization of provisionally assessed Bills of Entry and departmental RTI/test report communications on the permissibility of subsequent reassessment and demand of duty. 4. Whether the departmental adjudication and the Commissioner (Appeals) decision adequately addressed the appellants' evidence (including CRL test reports) and submissions, and whether failure to pass a speaking order on those submissions affects the validity of the impugned demand. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Proper classification: CET 4401 30 00 v. CET 1211 90 29 Legal framework: Classification must follow the Customs Tariff Act/Chapter and Chapter Notes; goods are to be classified by their true character as established by evidence, including laboratory test reports. Heading 12.11 and its Chapter Notes apply to specified plants/parts (basil, borage, ginseng, hyssop, liquorice, mint species, rosemary, rue, sage, wormwood); CET 4401 relates to wood and similar material. Precedent treatment: No prior judicial authority was cited or applied by the Tribunal from the record; the Court considered statutory heading notes and documentary evidence instead of case law. (Followed: reliance on Chapter Notes as primary interpretative source.) Interpretation and reasoning: The Tribunal examined the CRL test reports and the RTI response confirming final assessment under CET 44013000. The Chapter 12 Note 12.11 list is specific and the CRL reports did not indicate that the imported product fell within any listed botanical categories or possessed medicinal properties necessary to attract CET 1211 90 29. Multiple prior consignments and finalized assessments under 44013000 reinforced that characterisation. Ratio vs. Obiter: Ratio - Classification must be supported by evidence; where laboratory reports and finalized assessments indicate non-applicability of Chapter 12, reclassification to Chapter 12 is not justified. Obiter - Observations about how medicinal properties might change classification are explanatory but not decisive beyond the facts before the Court. Conclusions: The Tribunal concluded that the product was properly classifiable under CET 44013000 and that the Department produced no test evidence to show the goods met the Chapter 12 descriptors; therefore the departmental reclassification to CET 12119029 was unsustainable. Issue 2 - Requirement of Commissioner's prior approval for change of classification (Circular No. 41/98) Legal framework: Circular No. 41/98 dated 11/6/1998 requires prior approval of the Commissioner of Customs where classification for any commodity is proposed to be changed by the Department. Precedent treatment: The Tribunal treated the Circular as binding administrative guidance that must be followed; no contrary departmental record or approval was produced to show compliance. (Followed.) Interpretation and reasoning: The record lacked any document showing that the Commissioner's approval was sought or obtained before the Department adopted the new classification. The absence of such procedural compliance undermines the legitimacy of the departmental change in classification. The Tribunal regarded adherence to the Circular as a mandatory step in changing a settled classification position. Ratio vs. Obiter: Ratio - Administrative change of classification without prescribed prior approval is procedurally irregular and cannot sustain a demand. Obiter - None beyond stressing procedural regularity. Conclusions: Because the Department did not demonstrate compliance with Circular No. 41/98, the Tribunal found the post-facto adoption of CET 12119029 procedurally improper and accordingly rejected the reclassification. Issue 3 - Legal significance of finalized provisional assessments and departmental communications (RTI/test reports) Legal framework: Finalization of provisionally assessed Bills of Entry connotes administrative acceptance of classification unless set aside in accordance with law; departmental communications including RTI responses and lab test reports are relevant evidence of departmental position and the factual attributes of the goods. Precedent treatment: The Tribunal treated finalized assessments and the RTI-confirmed departmental position as evidentiary of the settled classification; no authority was cited to the contrary in the record. (Followed.) Interpretation and reasoning: The RTI reply by the Assistant Commissioner confirming settlement of classification under CET 44013000 and reference to a Test Report dated 11/10/2004 indicated that the Department itself had earlier accepted the 4401 classification. Several consignments had been allowed under 44013000 and provisionally assessed entries had been finalized accordingly. The CRL test reports produced by the appellant showed absence of medicinal properties. Taken together, these facts undermined the basis for reopening and reclassifying the imports to Chapter 12. Ratio vs. Obiter: Ratio - A departmental reversal of a previously finalized classification requires cogent evidence and compliance with prescribed procedural checks; absent such evidence, the prior finalization and departmental communications are decisive. Obiter - Comments on estoppel or laches were implicit but not developed as standalone grounds. Conclusions: The Court treated the finalized assessments and RTI/test report communications as supporting the appellants' classification and as fatally weakening the Department's case for demand and reclassification. Issue 4 - Adequacy of adjudication and Commissioner (Appeals) treatment of evidence and requirement of speaking order Legal framework: Appellate authority must consider and record reasons on material submissions and evidence; where relevant material is placed before an appellate authority, a speaking order addressing material points is ordinarily required for a valid decision. Precedent treatment: The Tribunal noted that the Commissioner (Appeals) recorded the appellant's submissions but did not pass a speaking order on those specific contentions; no case law was cited to discount the necessity of addressing material submissions. Interpretation and reasoning: The appellants' contentions regarding CRL test reports, RTI confirmation, and finalized provisional assessments were specifically placed before the Commissioner (Appeals). The appellate decision failed to engage with or adjudicate those material points in a reasoned manner. Such omission detracts from the soundness of the impugned decision and supports intervention by the Tribunal. Ratio vs. Obiter: Ratio - Failure to pass a speaking order on material evidentiary submissions by an appellate authority vitiates the appellate decision to the extent such omission affects outcome. Obiter - The extent of remediation (remand vs. reversal) depends on whether the Tribunal can decide the matter on record; here the Tribunal resolved the factual classification itself. Conclusions: The Tribunal found the absence of reasoned treatment of key submissions material and, combined with evidentiary findings, set aside the impugned order and allowed the appeals with consequential relief as per law. Cross-references Issues 1 and 3 are interlinked: the substantive classification question (Issue 1) was addressed in light of finalized assessments and laboratory evidence (Issue 3). Issue 2 (procedural compliance per Circular No. 41/98) independently undermined the Department's reclassification even if substantive doubt existed. Issue 4 (failure to pass a speaking order) reinforces the Tribunal's willingness to adjudicate on the record rather than defer where material evidence was unaddressed.