2024 (7) TMI 1686 - AT - Customs

Imported clear float glass classified under CTH 7005 1090; eligible for FTA benefit under Notification No. 46/2011-Cus; penalties set aside

M/s. Navakar Impex Private Limited Versus Commissioner of Customs, Chennai

CESTAT, Chennai (AT) allowed the appeal, holding the imported clear float glass is classifiable under CTH 7005 1090 and eligible for the FTA benefit under ... Classification of imported Clear Float Glass (CFG) - rejection of classification of CFG under CTH 70051090 adopted by the Appellant for the subject imports and to re-classification of same under CTH 70052990 or not - eligibility for FTA benefit under Sl. No. 934 of Notification No. 46/2011-Cus dated 01.06.2011 - demand of differential Customs duties arising on account of short levy, alongwith interest and penalty - confiscation - invocation of extended period of limitation - HELD THAT:- The appellant had imported Clear Float Glass (CFG) from Malaysia by declaring the classification under CTH 7005 1090 and availing FTA benefit under Sl. No. 934 of Notification No. 46/2011-CUS dated 01.06.2011 by furnishing the required Certificate of Origin (COO) in terms of 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 Department, based on an audit objection, rejected the classification declared by the Appellant and re-classified the imported goods under CTH70052990 denying the benefit of Notification cited supra which culminated in the issuance of a SCN. The Ld. Advocates for the appellant argued that they have been importing CFG for many years and have been classifying the CFG under 7005 1090 as the imported CFG are non-wired glass, non-tinted and has a thin TIN absorbent layer on one side of the glass. Invocation of extended period of limitation - redemption fine - penalties - confiscation - HELD THAT:- After finalisation of assessments for over 5 years, it is not open for the Department to invoke the larger period of limitation as these assessments have undergone the rigours of provisional assessment and subsequent finalisation for the same product and for the same reason, we are of the considered view that 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 on account of any shortcomings 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. So, the issue of limitation is decided in favour of the appellant and consequently the order of confiscation and imposition of fine and penalties are set aside. The appellant succeeds both on merits and also on limitation. As such, 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 Notification No. 46/2011-Cus dated 01.06.2011 (Sl.No. 934) - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported Clear Float Glass (CFG) is classifiable under tariff sub-heading 7005 10 90 (non-wired glass having an absorbent, reflecting or non-reflecting layer) or under 7005 29 90 (other non-wired glass) having regard to Chapter Note 2(c) to Chapter 70. 2. Whether the importer is entitled to preferential/FTA exemption benefit under the relevant notification (benefit linked to classification and origin) if classifiable under 7005 10 90. 3. Whether the extended period of limitation (for demand of differential duty and imposition of mandatory penalties/confiscation) is invokable on the facts, including whether there was suppression or deliberate mis-declaration warranting invocation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Correct Tariff Classification (7005 10 90 v. 7005 29 90) Legal framework: Classification is governed by the First Schedule to the Customs Tariff Act and General Rules for Interpretation (GRIs), notably Rules 1 and 3(a), read with Chapter Note 2(c) to Chapter 70 which defines 'absorbent, reflecting or non-reflecting layer' as 'a microscopically thin coating of metal or of a chemical compound ... which absorbs ... or improves reflecting qualities ... or which prevents light from being reflected on the surface of the glass.' Precedent treatment: The Tribunal relied on and followed prior coordinate tribunal decisions and advance rulings which held that CFG exhibiting a microscopically thin tin layer on one side satisfies Chapter Note 2(c) and is classifiable under 7005 10 90; those decisions include tribunal orders and CBIC/Advance Ruling Authority findings cited in the record. The Court applied settled interpretative principles (GRIs) and earlier tribunal reasoning rather than distinguishing or overruling them. Interpretation and reasoning: The Court examined manufacturing process evidence (float process introducing a thin tin layer), multiple test reports from the notified government laboratory (CSIR-CGCRI) reporting a microscopically thin tin layer on one side that is fluorescent/absorbent under UV, and prior administrative/tribunal rulings. The Tribunal held that (a) Chapter Note 2(c)'s definition does not require a separate post-manufacture coating process nor specify which side (air or tin side) must bear the layer; (b) the presence of a microscopically thin tin layer that is absorbent/non-reflective meets the chapter note and thus the sub-heading 7005 10 (and 7005 10 90 at the eight-digit level); (c) Rule 3(a) (most specific description) supports selecting the sub-heading that expressly covers non-wired glass having an absorbent layer; and (d) the Revenue's contention that the tin layer is inherently incidental to float manufacture and thus outside the chapter note's scope was rejected because neither the tariff wording nor chapter note excludes such naturally occurring microscopically thin metal layers. Ratio vs. Obiter: Ratio - CFG possessing a microscopically thin absorbent/non-reflective tin layer (even if resulting from float manufacturing) is classifiable under 7005 10 90; Chapter Note 2(c) does not require coating to be by a separate process or to be on a particular side. Obiter - observations on broader administrative inconsistencies (e.g., Revenue having taken differing positions before CAG) and references to various advance rulings and industry classification practices provide context but are ancillary to the core holding. Conclusion: The imported CFG is more appropriately classifiable under CTH 7005 10 90 (7005 1090 at eight digits), and the re-classification to 7005 29 90 by the adjudicating authority was unsustainable. Issue 2 - Entitlement to Preferential/FTA Benefit Legal framework: Eligibility for notification/FTA exemption depends on correct tariff classification and satisfaction of origin requirements as per the Rules Determining Origin under the ASEAN-India Preferential Trade Agreement and the exemption notification conditions. Precedent treatment: The Tribunal followed earlier advance rulings and tribunal decisions which held that if CFG qualifies under 7005 10 90, the importer may be entitled to the FTA benefit subject to production of valid origin documentation as required by the notification. Interpretation and reasoning: Having held classification under 7005 10 90, the Tribunal observed that entitlement to the exemption is consequential upon meeting the notification's residual conditions (production of valid Certificate of Origin and compliance with origin rules). The Tribunal noted that several advance rulings and appellate orders recognized that differing COO tariff codes (as issued by exporting authorities) do not per se preclude benefit provided origin is established per Indian rules. Ratio vs. Obiter: Ratio - Classification under 7005 10 90 renders the imports prima facie eligible for the stated notification benefit, subject to fulfilment of origin documentary conditions. Obiter - discussion of COO discrepancies and administrative correspondence (MITI/Royal Malaysian Customs communications) is explanatory. Conclusion: The importer is entitled to the benefit of the exemption notification if the origin conditions in the notification and the origin determination rules are fulfilled; classification in favour of the importer supports entitlement subject to documentary compliance. Issue 3 - Invocation of Extended Period / Liability for Confiscation, Fine and Penalty Legal framework: Section 28(8) and Section 28AA (interest), Section 111(m) (confiscation), Section 125 (redemption fine), and Section 114A/112 (penalty) of the Customs Act; limitation rules and legal standards on invoking extended period require proof of suppression or deliberate mis-declaration. Precedent treatment: The Tribunal applied settled Supreme Court authority and tribunal jurisprudence that mis-classification, if bona fide and reasonably adopted, is not equivalent to suppression or mis-declaration warranting extended period and mandatory penalties; the importer is not expected to be expert in tariff schedules and bona fide classification is protected. Interpretation and reasoning: The Tribunal found that (a) the Department itself had earlier taken the view that CFG was classifiable under 7005 10 90 in responses to audit and had provisionally assessed/finalised numerous imports under that heading following test reports; (b) there was no finding of positive suppression or dishonest intent by the importer; (c) the proceedings arose from an audit objection rather than fresh evidence of concealment; and (d) mis-classification in good faith cannot be equated with mis-declaration under Section 28(4). Given the Department's historical stance and the provisional assessments finalized after laboratory test reports, invoking extended period and imposing confiscation/fine/mandatory penalty was held to be unsustainable. Ratio vs. Obiter: Ratio - Extended period of limitation and mandatory penalties cannot be invoked where there is no evidence of suppression or deliberate mis-declaration and where assessments were provisionally assessed and finally accepted in line with available test reports; confiscation and mandatory fine/penalty set aside on that basis. Obiter - comments on administrative inconsistency and the need for cautious audit reliance are explanatory. Conclusion: Invocation of the extended period, confiscation, redemption fine and mandatory penalty were not sustainabl e on the facts; those reliefs were set aside and the importer succeeds on limitation grounds as well. Overall Disposal / Outcome (as derived from reasoning) The Tribunal set aside the adjudicating authority's re-classification to 7005 29 90, confirmed classification under 7005 10 90, directed that exemption/FTA benefit be available subject to fulfilment of origin documentary requirements, and held that extended period, confiscation, redemption fine and mandatory penalties were not invokable in the absence of suppression or dishonest mis-declaration.