2024 (10) TMI 1691 - AT - Customs

Waksol Variants Properly Classified Under CTH 2712, Not 3405; Extended Limitation Period Disallowed

Panoli Intermediates India Private Limited, Kutch Chemical Industries Ltd., B.G. Chemicals, Budhiraja Polymers Ltd., V.S. Polymers Pvt. Ltd., Agarwal Chemicals, Grasim Industries Ltd. Versus Commissioner of Customs -Kandla

Goods described as Waksol variants were held to be correctly classifiable under CTH 2712 as mixtures of wax and paraffins, not under CTH 3405. The ... Classification of imported goods - Waksol A, Waksol B, Waksol 9-11A, Waksol 9-11B etc - to be classified under heading 2710 of the Schedule to the Customs Tariff Act or under heading 3405 of the schedule to the Custom Tariff Act? - invocation of extended period of limitation - HELD THAT:- The sole reason for excluding the goods from the scope of Chapter heading 2712 is the fact that the congealing point in the sample was found to be less than 30℃. The Joint Director, Custom House Laboratory failed to notice that the requirement of congealing point is solely for petroleum jelly and not for other products like Paraffin wax, micro crystalline petroleum wax, slack wax etc. It can be under Section (B) of the HSN Explanatory Notes to Chapter heading 2712 reproduced above. It is seen that the Joint Director, CRCL has clearly mentioned that since the sample is having congealing point less than 30°C, the goods would not fall under Chapter heading 2712. The conclusion is based on the presumption that since the congealing point of Petroleum jelly is prescribed to be more than 30°C, it automatically implies that the congealing point of all other products falling in the said heading should be more than 30℃. There is no reason for the said presumption. There is no such thing mentioned in the Explanatory Notes to Chapter Tariff Heading 2712. The HSN notes to Chapter Tariff Heading 2712 merely prescribes that to qualify as petroleum jelly one of the parameters necessary is that the congealing point should not be less than 30°C. Commissioner in his order relies on the observations of the Director. The report of the Joint Director CRCL does not refer to any authority and therefore cannot be accepted. It only refers to ASTM D 938 which is only a method of testing congealing point. There is no reason to come to presumption that for all other products unless the congealing point is more than 30°C, it would not fall under the said heading. The report of the Joint Director, Custom House Laboratory is obviously incorrect and has to be discarded. Any mixture of Paraffin Wax with oil would be classified under heading 2712. If the oil content is less that 0.75% then it would fall under CTH 2712 2000 and if it is more than 0.75% it would fall under CTH 2712 9040. Two of the reports dated 31.8.15 and 13.10.15 confirm that the goods are a mixture of wax and oil. The third one dated 2.11.16 also describes as 'colourless oily liquid composed of paraffinic compound' and 'wax preparation'. Thus it can be considered that the goods are a mixture of wax and oil. Consequently the correct classification of goods will be CTH 2712 2000 or 2712 9040 depending on proportion of oil. If the oil content is less that 0.75% the it would be classifiable under CTH 2712 2000 and if the oil content is more that 0.75% the it would be classifiable under CTH2712 9040. It is seen that the goods are covered specifically by these headings. In order to take it out of CTH 2712 it has to be shown that the alternate heading is more specific. The fact that the HSN to CTH 3405 prescribes that these goods are often sold in retail implies that the goods under CTH are not raw materials but in the nature of finished goods like polishes. The appellants have produced evidence in the shape of statements of consumers that the goods are used for manufacture of chlorinated paraffins. SION norm for Chemical products A 3105 notified by central government under FTP also lists C10-C30 paraffins as a raw material for manufacture of Chlorinated Paraffin Wax. No evidence of actual use as polish has been produced while substantiated evidence of its use as raw material for manufacture of chlorinated paraffins is available. The impugned order holds that the 'use' of goods for manufacture of chlorinated paraffin wax is not a decisive factor. His argument being that more important criteria is the tariff and the HSN. Thus, the order fails to bring out any positive evidence of the use of goods as polish falling under CTH 3405. Invocation of extended period of limitation - HELD THAT:- It is seen that the appellants have described goods as Waksol 9-11A, Waksol 9-11B, Waksol A or Waksol B. It is seen that even CBIC in Circular dated 16.11.2017 and 17.05.2018 had described the goods as classifiable under Chapter 27. It is seen that the term is well known as can be seen from the fact the even DG shipping has all the relevant particulars available to him. As can be seen from above discussion, the matter relates to classification and is very complex in nature. It requires not only significant understanding of chemistry but of the Explanatory Notes to HSN. In these circumstances, it cannot be said that the appellants cannot have a bonafide view regarding the classification of goods. Thus, extended period of limitation cannot be upheld. There was no mis-declaration or attempt to suppress and therefore the extended period of limitation cannot be invoked. Moreover it is seen that the charge of classification under Chapter Tariff Heading 3405 made in the impugned notice does not survive and consequently no demand of duty survives and consequently no demand of duty survives. In these circumstances there is no case for confiscation of goods. The revenue has failed to establish that the goods are not classifiable in Customs Tariff Heading 2712 and are classifiable under Customs Tariff Heading 3405. Consequently, it is held that goods are rightly classifiable under Customs Tariff heading 2712 as a mixture of wax with paraffins. Consequently, demands of duty classifying the goods under CTH 3404 and 3405 cannot be sustained. The penalties imposed, confiscation and imposition of redemption fine also cannot be sustained. Appeal allowed. ISSUES: Proper classification of imported products Waksol A, Waksol B, Waksol 9-11A, Waksol 9-11B, etc. under the Customs Tariff Act.Whether the products fall under Customs Tariff Heading (CTH) 2710, 2712, 3404, or 3405.Determination of predominant or common usage of the products for classification purposes.Validity of reliance on chemical examiners' and laboratory opinions for classification.Applicability of extended period of limitation, confiscation, redemption fine, and penalties under Customs Act provisions.Scope of adjudicating authority in changing classification beyond show cause notice and remand directions. RULINGS / HOLDINGS: The products are not classifiable under CTH 2710 as they contain less than 70% petroleum oils or oils obtained from bituminous minerals, a condition necessary under that heading.The products are correctly classifiable under CTH 2712 as 'Petroleum jelly, paraffin wax, microcrystalline petroleum wax, slack wax, ozokerite, lignite wax, peat wax, other mineral waxes, and similar products obtained by synthesis or by other processes, whether or not coloured,' including mixtures of paraffin wax and oil.Classification under CTH 3404 is excluded because the products are manufactured by the Fischer-Tropsch process, which the HSN explanatory notes explicitly exclude from heading 3404.Classification under CTH 3405 is not justified as that heading pertains to end products 'often put up for retail sale' such as polishes and creams, whereas the products are intermediate industrial raw materials predominantly used in manufacture of chlorinated paraffin wax.The decisive usage for classification must be 'predominant or common usage and not merely based on possibility,' and the department failed to conclusively prove predominant usage as polishes or similar preparations under CTH 3405.Opinions of chemical examiners and Joint Director of Customs House Laboratory regarding classification are advisory only and should not be solely relied upon; moreover, the laboratories lacked capacity to fully test the products as required.Extended period of limitation, confiscation, redemption fine, and penalties under Sections 112(a), 112(b), 114A, 114AA, and 117 of the Customs Act are not sustainable as there was no misdeclaration or suppression, and the dispute is an interpretational issue of classification.The adjudicating authority exceeded the scope of the show cause notice and remand order by classifying some products under CTH 3404; such classification cannot be sustained. RATIONALE: The legal framework applied includes the Customs Tariff Act headings 2710, 2712, 3404, and 3405, and the Harmonized System of Nomenclature (HSN) explanatory notes contemporaneous to the period of import.HSN explanatory notes clarify that synthetic waxes produced by Fischer-Tropsch process are excluded from heading 3404 and included under heading 2712, which covers mineral waxes obtained by synthesis or other processes.Classification principles require that the predominant or common use of the product be established with evidence, not mere possibilities, as per apex court precedent in CCE v. Hico Products (1996) 87 ELT 584 (S.C.).General Interpretative Rules for the Schedule to the Customs Tariff Act were applied to determine classification based on product nature and usage.Reliance on chemical examiners' classification opinions is rejected based on established tribunal precedents that chemical examiners are competent only to analyze chemical properties, not to decide classification.Laboratory incapacity to test all relevant parameters and the CBIC circulars directing use of specialized laboratories for such testing undermined the weight of the laboratory opinions relied upon by the department.Judicial discipline requires adherence to the scope of show cause notices and remand directions; classification changes beyond those limits are impermissible as per Supreme Court and tribunal rulings.Extended period of limitation and penalties require proof of suppression or misdeclaration; classification disputes involving bona fide interpretational differences do not justify such measures, supported by binding precedents including Northern Plastic Ltd., O.K. Play (India) Ltd., and Satron.Confiscation and redemption fines cannot be imposed where goods are not available for confiscation, as held in binding precedents including Shiv Kripa Ispat Pvt. Ltd. and affirmed by the Supreme Court.Use of unreliable sources such as crowd-sourced online platforms (e.g., Wikipedia) for legal determinations is cautioned against, following Supreme Court observations in Hewlett Packard India Sales (P.) Ltd. v. Commissioner.