2024 (10) TMI 1716 - AT - Customs

Imported blocks/slabs treated as dolomite; s.28(4) limitation inapplicable; duty demands time-barred; ss.111(m),125,114A penalties set aside

STONEX INDIA PVT LTD Versus Commissioner of CUSTOMS - Mundra Customs AND SAJITH KUMAR

CESTAT held the imported blocks/slabs are dolomite based on CaO/MgO composition and supplier reports; treatment as dolomite was bona fide and not wilful ... Classification of imported dolomite blocks and slabs - classifiable as dolomite blocks/slabs or as marble, based on mineralogical and chemical composition - wilful suppression of facts or not - extended period of limitation - penalty - HELD THAT:- It is seen from test reports it is evident that even department has based on parameters of CaO and MgO has concluded that goods are dolomite. In present case also CaO is ranging from 32 to 36% and MgO is ranging from 17 to 19%. Thus, in present case, goods can be considered as dolomite. In any case, appellant were bonafide in treating the goods as dolomite. In any case, it cannot be treated as case of wilful suppression or mis-declaration. In view of extended period under section 28(4) of Customs Act is not invokable in the present case as there is no suppression or mis-statement. The demand of customs duty of past imports under Annexure B and C to SCN is also not sustainable on the ground that goods were not tested by department in respect of past imports in respect of which demand is made in Annexure-B and C to SCN. It is settled position of law that each Bill of entry is a separate assessment and test report of one bill of entry cannot be made applicable to the goods imported under another bill of entry. Each consignment must be assessed separately, especially for natural mined rocks, where properties vary significantly. Further, foreign suppliers analysis reports clearly provides dolomite as 92% to 99%. Further, goods from very same foreign suppliers were tested and found as dolomite by other customs laboratories and Geological survey of India, Nagpur. The goods are not liable for confiscation under Section 111(m) of the Customs Act, 1962, therefore redemption fine under Section 125 of the Customs Act, 1962, is not imposable. Thus penalty is not imposable under Section 114A of the Customs Act, 1962 and penalty on Mr. Sajith Kumar, import executive is also not imposable. The demand of customs duty as per Annexure-A1 and A2 to SCN as recorded in para 26 of impugned order is confirmed along with interest as same is not contested by appellant. Customs duty demand under Annexure B and C to SCN as recorded in para 26 of impugned order is set aside as same is beyond limitation period as extended period is not invocable in the present case. Redemption fine and penalty is not sustainable and the same is accordingly set aside. Penalty on Mr. Sajith Kumar, import executive is also not imposable. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported consignments are correctly classifiable as dolomite blocks/slabs or as marble, based on mineralogical and chemical composition. 2. Whether departmental reliance on test reports of Geological Survey (Jaipur) and supplier website descriptions suffices to reclassify goods and to infer mis-declaration or suppression. 3. Whether statements/emails (including those of an import executive) can be treated as evidence of intentional mis-declaration or used to determine classification. 4. Whether the extended period of limitation under Section 28(4) of the Customs Act is invocable for past imports (Annexure B & C) where the assessee contends no suppression or fraud. 5. Whether test reports obtained for certain seized consignments can be applied to other past consignments for which no samples were drawn or tested (i.e., applicability of one- consignment test results to others). 6. Whether confiscation, redemption fine under Section 125, and penalties under Sections 114A (and penalty on an individual officer) are sustainable where classification contention is bona fide and no suppression is established. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Legal framework - Legal framework: Classification under Customs Tariff headings depends on the nature, mineralogical and chemical composition of the goods; burden to establish alternative classification rests on the revenue when it alleges taxable classification. - Precedent treatment: Tribunal and higher court authorities require objective material (chemical/mineralogical tests) to substantiate re-classification; benefit of doubt on classification often goes to importer where revenue fails to discharge burden. - Interpretation and reasoning: The Court examined available mineralogical/chemical data. Geological Survey (Jaipur) reports did not quantify dolomite content or test CaCO3/MgCO3 content, whereas supplier-issued mineralogical analyses and other laboratories (including GSI Nagpur in related matters) show high dolomite content (92-99%) and CaO/MgO ranges consistent with dolomite per Mineral Yearbook and IS 10346 (Flux grade dolomite) standards. The Court held that the Jaipur report was inconclusive on dolomite content while the chemical parameters (CaO ~32-36%, MgO ~17-19%) align with dolomite classification per recognized standards. - Ratio vs. Obiter: Ratio - classification must be materially grounded on composition tests; inconclusive departmental tests cannot displace consistent supplier/independent lab data. Obiter - references to specific IS/Mineral Yearbook guidance are explanatory of standards applied. - Conclusion: On available evidence and comparable laboratory conclusions in related imports, the goods are properly regarded as dolomite for purposes of classification where contested consignments are similarly analyzed. Issue 2 - Reliance on departmental test reports and supplier website descriptions - Legal framework: Administrative findings must be based on reliable, conclusive material; website descriptions are not authoritative factual evidence; where contradiction exists between detailed analytical reports and generic website descriptions, preference lies with analytical data. - Precedent treatment: Courts have cautioned against reliance on supplier websites as conclusive proof; laboratory test reports and detailed mineralogical analyses carry greater evidentiary weight. - Interpretation and reasoning: The Court found departmental reliance on generic website descriptions and inconclusive Jaipur tests unsustainable in face of supplier and other laboratory analyses that specify dolomite content and CaO/MgO percentages. Website entries cannot override quantitative mineralogical composition. - Ratio vs. Obiter: Ratio - website descriptions and general supplier narrative cannot supplant chemical/mineralogical proof. Obiter - delineation of probative weight between different sources of evidence. - Conclusion: Departmental reliance on supplier website and inconclusive reports is legally insufficient to reclassify consignments as marble. Issue 3 - Use of statements/emails to infer mis-declaration or to fix classification - Legal framework: Statements made in investigatory contexts have limited probative value; Section 138B (requirement re statements) and settled authorities restrict treating such statements as determinative of classification; classification must be determined objectively based on composition. - Precedent treatment: Authorities hold that statements alone cannot establish classification or suppression; objective tests are primary. - Interpretation and reasoning: Emails in this case were interpretatively consistent with asserting correct classification as dolomite; no evidence that emails instructed falsification. The Court found no mala fide intention or instruction to mis-declare and held that statements could not supplant technical composition evidence. - Ratio vs. Obiter: Ratio - statements/emails cannot be the basis for classification or for establishing suppression unless corroborated by objective evidence of falsity. Obiter - commentary on admissibility requirements under Section 138B. - Conclusion: Emails/statements do not establish mis-declaration; they are insufficient to warrant reclassification or penalties absent corroborative objective evidence. Issue 4 - Invoking extended limitation under Section 28(4) - Legal framework: Extended period under Section 28(4) is invocable where there is suppression of facts or mis-statement; burden is on revenue to establish suppression or fraud. Classification disputes or bona fide interpretation claims are ordinarily not grounds for invoking extended limitation. - Precedent treatment: Multiple authorities require positive proof of suppression/fraud before extended period can be invoked; mere disagreement on classification is insufficient. - Interpretation and reasoning: The Court found supplier analysis reports showing dolomite composition were on record and that the importers acted bona fide in classifying goods as dolomite. No suppression or mis-statement was established; the department had not discharged burden to justify extended period. Additionally, for past consignments no samples were drawn/tested by department, weakening reliance on seized-consignment tests to extend limitation. - Ratio vs. Obiter: Ratio - extended limitation cannot be invoked absent proof of suppression; classification disputes do not amount to suppression. Obiter - discussion of burden and related precedents. - Conclusion: Extended period under Section 28(4) is not invocable; demand for past imports (Annexure B & C) set aside as time-barred. Issue 5 - Applicability of one-consignment test results to other consignments - Legal framework: Each Bill of Entry/consignment is a distinct assessment; test reports for one consignment cannot be automatically applied to other consignments unless specific proof establishes identical composition across consignments. - Precedent treatment: Tribunal and Supreme Court decisions consistently hold that test reports are consignment-specific and cannot be extrapolated without justification (e.g., Shalimar Paints and subsequent authorities). - Interpretation and reasoning: The Court applied settled law that departmental tests on seized consignments cannot be extrapolated to other past consignments where samples were not tested. Given natural variability of mined materials and absence of testing, revenue failed to establish identity of composition across consignments. - Ratio vs. Obiter: Ratio - departmental test results are consignment-specific; extrapolation without testing is impermissible. Obiter - emphasis on variability of natural mined rocks. - Conclusion: Duty demands for untested past consignments based on tests of other consignments are unsustainable. Issue 6 - Confiscation, redemption fine and penalties - Legal framework: Confiscation under Section 111(m), redemption fines under Section 125 and penalties under Section 114A require unlawful importation, suppression, or mis-declaration; bona fide classification claims negate wilful mis-statement necessary for penalties. - Precedent treatment: Authorities emphasize that claims on classification/exemption do not amount to suppression and that penalties/ redemption fines are not leviable where the goods are not liable to confiscation and where revenue fails to prove mens rea or suppression. - Interpretation and reasoning: Given findings that (a) classification as dolomite was bona fide and supported by supplier and other lab analyses; (b) departmental evidence of suppression was lacking; and (c) extended limitation could not be invoked, the prerequisites for confiscation, redemption fine and penalties were absent. The Court further observed that statements relied upon did not amount to admissions of mis-declaration and could not sustain individual penalty on the import executive. - Ratio vs. Obiter: Ratio - absent proof of suppression or wilful mis-declaration, confiscation, redemption fine and penalties are not sustainable. Obiter - remarks on the interplay between classification disputes and penal consequences. - Conclusion: Redemption fine, penalty on the importer and penalty on the import executive are set aside; interest/duty within limitation period (not contested) remains confirmed. Overall Disposition - The Tribunal upheld demands not contested by the importer (within two years) but set aside demands for past imports sought under extended limitation, and struck down redemption fine and penalties for lack of suppression and absence of conclusive departmental proof; classification contention held bona fide on available evidence.