2023 (12) TMI 1080 - AT - Customs

Classification of Ganoderma powders as food supplements, not Ayurvedic medicaments; duties affirmed but penalties and confiscation quashed.

Classification of Ganoderma powders was tested against the twin criteria for Ayurvedic medicaments and found to fail both, leading to their classification ... Classification of imported goods as food preparations versus Ayurvedic medicaments - Invocation of extended period of limitation under the Customs Act in cases of alleged suppression - Penal liability under section 114A and section 114AA for alleged mis-declaration - Confiscation of goods under section 111(m) and 111(o) for mis-declaration or wrongful claim of exemption - Self-assessment and reassessment as remedy for wrong classificationClassification of imported goods as food preparations versus Ayurvedic medicaments - Binding effect of Tribunal and appellate orders on classification - Products 'Bulk Reishi Gano Powder' and 'Bulk Ganocelium Powder' are classifiable as food preparations under CTH 2106 90 99 and not as Ayurvedic medicaments under chapter 3003.9011 - HELD THAT: - The Tribunal observed that earlier decisions of the Chennai Bench and the Principal Bench, which held that the impugned products fail the twin tests for Ayurvedic medicaments and are food supplements, are binding. The appellant did not contest classification before this Tribunal on grounds of subjudice; consequently the issue of classification is affirmed in favour of the revenue and the products are re classified as food preparations under CTH 2106 9099. [Paras 8]Classification affirmed as food preparations under CTH 2106 9099Invocation of extended period of limitation under the Customs Act in cases of alleged suppression - Knowledge of department and operation of interim appellate orders - Extended period of limitation under section 28(4) cannot be invoked because there was no wilful suppression and the department was aware of the litigation and had a pending appeal - HELD THAT: - The Tribunal found that the department had been aware of earlier proceedings and had preferred appeals; nine of the ten challenged bills of entry were filed while the Commissioner (Appeals) order favourable to the importer held the field. In such circumstances there was no deliberate suppression or mis-statement warranting invocation of the extended period. Authorities were considered and distinguished, and the extended limitation was held inapplicable; the show cause notice dated 02.07.2018 is therefore barred beyond the normal period. [Paras 9, 10, 11, 14, 15]Extended period of limitation not invocable; SCN barred beyond the normal periodPenal liability under section 114A and section 114AA for alleged mis-declaration - Requirement of wilful suppression or mis-statement for penalty - Penalties under section 114A and section 114AA are not sustainable as there is no wilful suppression or mis declaration - HELD THAT: - Having concluded that the case is one of bonafide classification adopted pursuant to binding appellate orders and not of willful mis-statement, the Tribunal held that the ingredients for penal action under sections 114A/114AA are absent. Reliance was placed on the Tribunal's earlier observations that wrong self-assessment does not attract penalty where reassessment is the remedy. [Paras 15, 16]Penalties under section 114A and 114AA set asideConfiscation of goods under section 111(m) and 111(o) for mis-declaration or wrongful claim of exemption - Distinction between mis-classification and mis-declaration for confiscation - Confiscation under sections 111(m) and 111(o) is unsustainable because the case involves mis classification/self assessment and not mis declaration or wrongful claim of exemption - HELD THAT: - The Tribunal reiterated that section 111(m) targets mis-declaration of material particulars and does not extend to ordinary mis classification made in good faith pursuant to an order that held the field. As the appellant did not wrongly claim exemption, confiscation under section 111(o) also cannot be sustained. The impugned finding allowing confiscation on the basis of mis-classification was quashed. [Paras 17, 19]No confiscation under section 111(m) or 111(o)Self-assessment and reassessment as remedy for wrong classification - Remand for computation of differential duty for the normal period - Demand for differential duty is limited to the normal period and the matter is remanded for computation of duty for the normal period only - HELD THAT: - The Tribunal limited the demand to the normal period (03.07.2013 to 19.05.2015), held interest under section 28AA recoverable for that normal period, and remanded the appeal to the Adjudicating Authority for computing differential duty accordingly. The show cause notice for the balance period is time barred. [Paras 20, 21]Demand restricted to normal period (03.07.2013 to 19.05.2015); remanded for computation; interest chargeable for normal periodFinal Conclusion: Appeal partly allowed: classification upheld as food preparations under CTH 2106 9099; extended period of limitation held inapplicable and SCN barred beyond the normal period; penalties and confiscation set aside; demand limited to the normal period 03.07.2013 to 19.05.2015 with interest recoverable; matter remanded for computation of differential duty for the normal period. Issues Involved:1. Classification of goods.2. Invocation of extended period of limitation.3. Imposition of penalties under sections 114A and 114AA of the Customs Act.4. Confiscation of goods under sections 111(m) and 111(o) of the Customs Act.Summary:1. Classification of Goods:The primary issue was whether 'Bulk Reishi Gano Powder-100% Ganoderma' and 'Bulk Ganocelium Powder-100% Gano Mycelium' should be classified as Ayurvedic medicaments under CTH 30039011 or as food supplements under CTH 21069099. The Tribunal referred to previous decisions, including the Chennai Bench's ruling in DXN Manufacturing India Private Ltd. vs. Commissioner of Central Excise and Service Tax, Pondicherry, and the Principal Bench's decision, which classified the products as food supplements. The Tribunal concluded that the products are classified under CTH 21069099 as food preparations, affirming the classification in favor of the revenue.2. Invocation of Extended Period of Limitation:The Tribunal examined whether the extended period of limitation under section 28(4) of the Customs Act was applicable. It was noted that the classification issue was known to the department, and the appellant had filed bills of entry based on the Commissioner (Appeals) order, which was binding until the Tribunal's final order on 10.01.2018. The Tribunal held that there was no willful suppression or mis-statement by the appellant, and the extended period of limitation could not be invoked. The show cause notice dated 2.07.2018 was thus barred by limitation for the period beyond the normal period.3. Imposition of Penalties:The Tribunal addressed the imposition of penalties under sections 114A and 114AA of the Customs Act. It was held that since there was no willful suppression or mis-statement by the appellant, the penalties were not justifiable. The Tribunal referred to previous decisions, including Incredible Unique Buildcon Private Ltd. and the Supreme Court's judgment in Nizam Sugar Factory, to support its conclusion that mere mis-classification does not amount to fraud or suppression of facts.4. Confiscation of Goods:The Tribunal considered the confiscation of goods under sections 111(m) and 111(o) of the Customs Act. It was held that section 111(m) does not provide for confiscation in cases of mis-classification, and the goods were not liable for confiscation. Similarly, the invocation of section 111(o) was not sustainable as the benefit of the exemption notification was availed in accordance with law. The Tribunal concluded that there could be no confiscation of goods under these sections.Conclusion:The appeal was partly allowed, with the following modifications:a) The goods were re-classified as food preparations under CTH 2106 9099.b) The extended period of limitation could not be invoked, and the show cause notice was barred by limitation except for the normal period.c) The demand for differential duty was limited to the normal period (03.07.2013 to 19.05.2015).d) Interest under section 28AA of the Customs Act was to be charged for the normal period of demand.e) No order of confiscation under sections 111(m) or 111(o) was made.f) No penalties under sections 114A or 114AA were imposed.The appeal was remanded to the Adjudicating Authority for computing the differential duty for the normal period only. The appeal was partly allowed by way of remand.