2024 (7) TMI 1685 - AT - Customs

Imported clear float glass correctly classified under CTH 7005 1090; exemption allowed; s.28(4) not triggered for bona fide classification differences

CESTAT Chennai (AT) allowed the appeal, holding the imported clear float glass is correctly classifiable under CTH 7005 1090 and entitled to Notification ... Classification of imported Clear Float Glass from Malaysia availing the County of Origin benefit under the Notification No. 46/2011-Cus dated 01.06.2011 - rejection of classification of CFG under CTH 70051090 adopted by the Appellant for the subject imports and to re-classify the same under CTH 70052990 - seeking to deny the benefit of N/N. 46/2011-Cus dated 01.06.2011 - demand differential Customs duties arising on account of short levy under Section 28AA of Customs Act, 1962 - Confiscation of subject import goods - levy of penalty - extended period of limitation - HELD THAT:- Not only the issue of classification of imported goods but also identical arguments submitted by both the sides have already been elaborately dealt with in the Orders of the Kolkata Tribunal vide Final Order Nos. 77460-77462/2023 dated 03.11.2023 [2023 (11) TMI 485 - CESTAT KOLKATA] and Chennai Tribunal vide Final Order No. 40352/2024 in the case of M/s. Bagrecha Enterprises Ltd. Vs. Commissioner of Custom, Chennai [2024 (5) TMI 943 - CESTAT CHENNAI] wherein the issue of classification of Clear Float Glass has been finally decided under CTH 7005 1090 of the Customs Tariff Act, 1975 held that 'the appellants are rightly entitled for the benefit of Sl. No. 934 of Notification No. 46/2011-cus., as claimed by them subject to fulfilment of production of valid Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Government of Member States of ASEAN and Republic of India) Rules, 2009.' The imported goods are required to be classified under the Indian Customs Law. Classification of imported goods under the first schedule of Customs Tariff Act, 1975 is governed by the General Rules of Interpretation of Import Tariff. As per Rule 1 of GRI, Classification of goods shall be determined according to the terms of the headings and any relative Section or Chapter Notes. If such headings or notes do not otherwise require then the classification is to be determined in accordance with Rule 2 to 6 of said Rules. It appears, the application of XES is reportedly pending for effecting a similar change on the basis of the decision of Advance Ruling Authority in the cases of Chandrakala Associates dated 24.09.2021 and Suraj Constructions dated 10.05.2022. As such, the classification of any imported goods has to be determined in terms of the provisions of Customs Tariff Act, 1975 including Section Notes and Chapter Notes read with the General Rules for Interpretation of Tariff (GIR). In the case of Sharp India Ltd. Vs. Commissioner of Customs (Imports), Nhava Sheva, Raigad [2019 (6) TMI 969 - CESTAT MUMBAI], the Tribunal Bombay has held that the classification of imported goods to be determined in accordance with Indian Customs Tariff and not solely on the basis of code mentioned in Certificate-of-Origin. In the context of import of RBD Palmolein mixture under Indo-Sri Lanka Free Trade Agreement (ISFTA), in the case of Sheel Chand Agrolls P. Ltd. Vs. Commissioner of Customs (Preventive), New Delhi [2016 (1) TMI 624 - CESTAT NEW DELHI], the Tribunal Delhi has held that the Country of Origin requirements were satisfied even if the goods were classified differently in the Country of Origin Certificate issued. The denial of the exemption benefit of Notification No. 46/2011-Cus dated 01.06.2011 is not justified though the Country-of-Origin Certificate mentioning the HSN Code as 7005299. Extended period of limitation - penalty - HELD THAT:- The allegation of wilful misclassification and intention to evade duty by the appellant is not at all tenable and misclassification could not be equated with misdeclaration within the meaning of Section 28(4) of the Customs Act, 1962 and it is a settled law that once the goods are correctly described, the bona fide adoption of classification by the importer cannot be equated with misdeclaration as the importers are not expected to be fully conversant with the schedule to the Customs Tariff Act, 1975 - the appellant has not suppressed or mis-declared any fact and the proposal to reclassify was only on the basis of interpretation made in the CRA objection and not for any fault on the part of the appellant. Therefore, invoking extended period in these proceedings, either for demand of duty or for imposition of mandatory penalty is not at all sustainable. The imported Clear Float Glass is more appropriately classifiable under Customs Tariff Heading 7005 1090 of the Customs Tariff Act, 1975 and thus is eligible for exemption of the benefit of the N/N. 46/2011-Cus dated 01.06.2011 - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported Clear Float Glass is classifiable under tariff item 7005 10 90 (non-wired glass having an absorbent, reflecting or non-reflecting layer) or under tariff item 7005 29 90 (other non-wired glass) having regard to Chapter Note 2(c) to Chapter 70 and General Rules for Interpretation (GRI) of the Customs Tariff. 2. Whether the importer is entitled to preferential/FTA exemption under the relevant notification if classification is under 7005 10 90 and the Country-of-Origin Certificate (COO) issued by the exporting country records a different eight-digit HSN code. 3. Whether the Department could refuse provisional/self-assessment classification and deny exemption merely because COO mentions an alternate HSN code, and whether the exporter's COO HSN code can be decisive for Indian classification/FTA benefit. 4. Whether the extended period of limitation and mandatory penalties/confiscation/re-classification could be invoked on the facts, including where past consignments were provisionally assessed and finalised under the same classification and where the alleged absorbent layer arises from the float process rather than by separate coating. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Classification under 7005 10 90 v. 7005 29 90 Legal framework: Classification governed by the First Schedule to the Customs Tariff Act read with Chapter Note 2(c) to Chapter 70 and the General Rules of Interpretation (GRI). Chapter Note 2(c) defines 'absorbent, reflecting or non-reflecting layer' as a microscopically thin coating of metal or chemical compound which, inter alia, absorbs infra-red light or improves reflecting qualities while retaining transparency. Precedent treatment: The Tribunal relied on earlier coordinate decisions of other benches and advance ruling authorities which had held that a microscopically thin tin layer (found on the 'tin side' of float glass) satisfying the Chapter Note 2(c) requirement brings the product within 7005 10 90; those decisions were followed. The revenue's contrary line treating the tin diffusion inherent in float manufacture as outside the scope of the Chapter Note was considered and distinguished. Interpretation and reasoning: The Court applied GRI and Chapter Note 2(c) literally and purposively: classification depends on the terms of heading and chapter notes; the note requires a microscopically thin metal coating having absorbent/reflective properties, not a prescribed method of application or a requirement that the layer be present on a particular side. Test reports from the notified laboratory showed the presence of a tin layer which is absorbent/non-reflective and fluorescent under UV on one side. The manufacturing process (float on molten tin) explains formation of that tin layer but does not exclude it from the Chapter Note's description. Rule 3(a) (preference to the most specific heading) and Rule 1 (headings/notes control) were invoked to hold that 7005 10 90 is the more specific and appropriate heading when an absorbent layer is present. Ratio vs. Obiter: Ratio - where clear float glass has a microscopically thin tin layer satisfying Chapter Note 2(c), it is classifiable under 7005 10 90 irrespective of whether the layer resulted from in-process diffusion or a post-manufacture coating. Obiter - ancillary observations on manufacturing processes and on other tariff subheadings not determinative of the core holding. Conclusion: The imported Clear Float Glass possessing a tin absorbent/non-reflective layer is correctly classifiable under tariff item 7005 10 90; the Department's re-classification to 7005 29 90 is not sustainable. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Entitlement to FTA/Notification benefit despite differing HSN in COO Legal framework: FTA/preferential exemption entitlement determined by fulfillment of origin rules as per the relevant Determination-of-Origin Rules and by classification under Indian Customs Tariff; GRI and Chapter/section notes govern classification for tariff purposes; COO is a condition for preferential treatment but the importing country's classification law governs tariff heading. Precedent treatment: The Tribunal followed prior authorities holding that classification for Indian tariff purposes is not to be dictated solely by the HSN code printed in an exporting country's COO; if origin conditions under the DOO rules are satisfied and the goods meet Indian tariff classification, the exemption cannot be denied merely because the exporting authority used a different eight-digit code. Interpretation and reasoning: The Tribunal noted that the COO may contain the exporter's or exporting country's HSN code, and exporters/issuing authorities may list an exporting-country code; however, Rule 1 of GRI requires classification under the Indian Tariff. Where the goods qualify under 7005 10 90 and origin conditions are met under the Determination of Origin rules, the importer is entitled to the exemption notwithstanding that COO records a different eight-digit code. The Tribunal also observed that the exporting country's PTO/authority may itself be in process of updating COO codes and that two Malaysian manufacturers had different COO entries; that circumstance does not displace Indian classification or entitlement where origin formalities are satisfied. Ratio vs. Obiter: Ratio - a COO's mention of an alternate HSN code does not preclude grant of FTA benefit if Indian classification and origin requirements are fulfilled. Obiter - comments on administrative practices of exporting country and possible inter-governmental correspondence. Conclusion: The importer is eligible for the FTA exemption under the notification once the goods are correctly classified under Indian law as 7005 10 90 and the DOO/COO conditions are satisfied; denial solely on account of COO showing HSN 7005 29 90 is unjustified. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Role of COO HSN and assessing officer's refusal to accept declared classification/provisional assessment Legal framework: Classification is a question of Indian tariff interpretation under GRI; assessment procedures (provisional assessment, self-assessment) and the importer's right to protest are governed by the Customs Act and rules; COO is relevant for origin but not determinative of tariff classification. Precedent treatment: The Tribunal followed decisions holding that the assessing authority must apply its independent classification under domestic law; advance rulings and previous tribunal decisions treating similarly constituted goods as 7005 10 90 were taken into account. The Tribunal also relied on authorities that provisional assessment followed by finalisation precludes reopening on extended limitation grounds for the same subject matter. Interpretation and reasoning: The Tribunal held that the assessing officer cannot refuse provisional assessment or deny self-assessment classification simply because the COO mentions a different eight-digit code; the correct approach is to determine classification under Indian tariff rules and, where necessary, obtain technical testing. The Tribunal criticised lower authority's failure to consider multiple relevant submissions and precedents and to give reasons for rejecting COO validity. Where provisional assessments were finalised on the same basis, that undermines the Department's later attempt to invoke extended limitation or to treat the classification as wilful mis-declaration. Ratio vs. Obiter: Ratio - Indian classification must be determined independently of exporting country COO codes; assessing officers must apply GRI and may rely on technical test reports; a mere difference in COO HSN does not justify denying provisional assessment or exemption. Obiter - procedural remarks on demurrage and pragmatic choices by importers when provisional assessments are denied at port. Conclusion: The assessing authority erred in refusing acceptance of declared classification solely because the COO showed a different code; proper classification must follow Indian tariff provisions and related test evidence. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Extended period, confiscation, penalties and invocation of mis-declaration Legal framework: Extended period of limitation and mandatory penalties/confiscation under Customs law can be invoked where there is suppression, mis-declaration or wilful evasion; provisonal assessment and finalisation, burden of proof, and established jurisprudence on bona fide classification disputes are relevant. Precedent treatment: The Tribunal applied established principles that bona fide differences in classification, where goods are correctly described and testing/manufacturing evidence supports the importer's position, cannot be equated with suppression/mis-declaration to justify extended period or mandatory penalties. Reliance was placed on prior authoritative rulings to the effect that classification disputes do not automatically attract extended limitation or mandatory penalty unless deliberate suppression is shown. Interpretation and reasoning: Facts showed long-standing imports classified as 7005 10 90, provisional assessments finalised after testing, and departmental positions in inter-departmental correspondence favouring classification under 7005 10 90. The audit objection (CRA) formed the basis of re-opening; but given prior finalisations and lack of evidence of deliberate concealment by the importer, invocation of extended limitation and confiscation/mandatory equal penalty was unsustainable. The Tribunal held that misclassification born of bona fide interpretation does not amount to mis-declaration under the provision relied upon. Ratio vs. Obiter: Ratio - extended period, confiscation and mandatory penalty cannot be invoked where classification dispute is bona fide, goods were correctly described, provisional assessments were finalised, and no suppression of facts is proved. Obiter - references to comparative case law and administrative practice. Conclusion: Invocation of extended limitation, confiscation and penalties in these proceedings was not sustainable; the orders imposing such consequences were set aside. OVERALL CONCLUSION The Tribunal held that the imported Clear Float Glass possessing a microscopically thin tin absorbent/non-reflective layer is classifiable under tariff item 7005 10 90; consequently the importer is entitled to the notification/FTA exemption subject to production of valid origin documentation under the Determination-of-Origin Rules. The impugned re-classification, demand, confiscation/ redemption fine and penalties based on the contrary view and on COO HSN differences were set aside; extended period and penalty invocation were held unsustainable on the facts. The Tribunal followed and applied relevant coordinate and advance-ruling authorities and resolved the issues as above (operative relief granted accordingly).