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 as food supplements under CTH 2106/2108 and assessment for duty accordingly; outcome: classification affirmed for revenue. Invocation of the extended limitation period was rejected because filings and departmental awareness negated wilful suppression; outcome: show cause beyond the normal period barred by limitation. Imposition of penalty was set aside because there was no wilful misdeclaration; outcome: penalty under the Customs provisions quashed. Confiscation under customs for misdeclaration was disallowed as the case involved misclassification only; outcome: no confiscation. Matter remanded to compute differential duty for the normal period.

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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.

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