2019 (9) TMI 1750 - AT - Customs

Denial of exemption under Notification No. 6/2006-CE overturned; removable hard disk drives covered at CTH 847170 level

CESTAT MUMBAI - AT upheld denial of exemption benefits was incorrect and dismissed the appeal, finding no provision excluding removable/exchangeable hard ... Distinction between hard disc drive and exchangeable/removable disc drive - denial of benefits of Notification no. 6/2006-CE to the imports made by the appellant in December 2007 through 10 number of Bills of Entry - HELD THAT:- There are no provision whereby removable or exchangeable type of hard disc drives were being excluded from the coverage of notification no. 6/2006. On the other hand, the exemption notification covers all goods classified under CTH 847170 which are of 6 digital level whereas the differentiation between hard disc drive and removable/exchangeable disc drive are distinguishable at 8 digit level. Therefore in the normal parlance, even if appellant had declared the goods as hard disc drive, there is apparently no misdeclaration in it for which the benefits of exemption notification no. 6/06 should have been extended to the appellant. Further, consistant findings are given by Tribunal ever since pronouncement of the order in the case of C.EX. Hyd.- II v. Tata Consultancy Services Ltd. [2007 (8) TMI 189 - CESTAT, BANGALORE] that notification no. 6/06 covers removable disc drive. Principle Bench of CESTAT, Delhi also in the case of Commissioner of Customs, New Delhi v. Supertron Electronics P. Ltd., [2017 (1) TMI 1529 - CESTAT NEW DELHI] upheld such a finding of the Commissioner (Appeals). Needless to point out here that in the judgment of CESTAT Mumbai reported in the case of INGRAM MICRO INDIA PVT. LTD. v. COMMR. OF CUS. (IMPORT). ACC. MUMBAI [2016 (11) TMI 847 - CESTAT MUMBAI], though it was held that external/removable hard disc was not covered under tariff item no. 84717020 of the Central Excise tariff and therefore not eligible for exemption, it was passed in confirming to the notification no. 12/2012- CE dated 17-3-2012 that contained 8 digit HS code for which the submission of Ld. Authorised Representative that exemption of CVD would not be applicable for the goods imported by the appellant is not acceptable. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether imported goods described as 'hard disc drive' but argued by revenue to be 'removable/exchangeable disc drive' fall within the exemption notification covering goods classified under CTH 847170 (six-digit) for purposes of concessional Central Excise duty (CVD) under Notification No. 6/2006-CE. 2. Whether reliance by the Commissioner (Appeals) on product literature/visual inspection and feature-analysis to classify the imported items as hard disc drives constitutes improper acceptance of biased or expert opinion, warranting interference with the appellate order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Scope of Notification No. 6/2006-CE: classification of 'hard disc drive' versus 'removable/exchangeable disc drive' Legal framework: Notification No. 6/2006-CE grants exemption to goods classified under CTH 847170 (six-digit tariff heading). Classification at eight-digit level may distinguish subtypes such as removable/exchangeable disc drives, but the notification is expressed at the six-digit level and thus on its face covers all items falling within 847170. Precedent treatment: The Tribunal's prior decisions have addressed whether removable/exchangeable disc drives are covered. Multiple earlier Tribunal decisions have held that the exemption applies to removable disc drives when the exemption is expressed at the six-digit heading; some decisions in later contexts applying a notification expressed at eight-digit level excluded removable drives. The appellate authority relied on prior findings consistent with coverage under the six-digit notification. Interpretation and reasoning: The Court examined the text of the exemption and noted absence of any provision excluding removable/exchangeable disc drives. Because the notification covers goods under the six-digit CTH 847170, distinctions that appear at the eight-digit level do not remove the goods from the notification's ambit. A declaration by the importer that the goods are 'hard disc drive' is therefore not a mis-declaration where both removable and non-removable variants fall within the six-digit heading. The Tribunal gave weight to consistent earlier findings that, under a notification framed at six-digit level, removable/exchangeable disc drives are included within the exemption. The Court also observed that divergent findings in another decision were tied to a different notification explicitly employing eight-digit HS codes, and thus are distinguishable on that basis. Ratio vs. Obiter: Ratio - where an exemption is expressed at the six-digit CTH level (847170), removable/exchangeable disc drives falling under that heading are covered by the notification unless the notification expressly excludes them or is framed at a more specific eight-digit level that differentiates them. Distinguishing observation (obiter) - decisions applying an eight-digit-coded notification that exclude removable drives do not control the interpretation of a six-digit-based notification. Conclusion: The Tribunal affirmed that the imported items, being classifiable within CTH 847170 at the six-digit level, are eligible for exemption under Notification No. 6/2006-CE. The appellant's characterization as 'hard disc drive' was not a misdeclaration that would disentitle it from exemption. Issue 2 - Legitimacy of Commissioner (Appeals)'s reliance on product literature and visual inspection Legal framework: Appellate authority may consider available evidence, including product literature, brochures and physical inspection, to ascertain the nature and classification of imported goods. The standard of review requires assessing whether the appellate fact-finding was arbitrary or biased. Precedent treatment: The appellate order relied on product literature and visual/feature analysis to conclude the goods were hard disc drives eligible for exemption. Opposing submissions contended that reliance on a respondent company's literature amounted to accepting partisan 'expert opinion' and reflected bias. The Tribunal considered these contentions against the backdrop of appellate fact-finding powers and prior decisions where appellate inspection and literature were treated as acceptable evidence for classification. Interpretation and reasoning: The Tribunal found nothing improper in the Commissioner (Appeals) studying the product's features and brochures and visually inspecting the goods to determine their nature. Such consideration is within the normal scope of appellate fact-finding and does not automatically equate to acceptance of biased expert opinion. The Tribunal noted that the appellate authority did not rely solely on the respondent's literature but on an evaluation of characteristics that demonstrated the products fell within the six-digit tariff heading. The contention of bias was not substantiated by record evidence demonstrating unfairness or procedural impropriety in the appellate inspection or reliance on literature. Ratio vs. Obiter: Ratio - appellate authorities may legitimately rely on product literature and visual inspection in classification disputes; acceptance of such evidence does not, without more, demonstrate bias or require setting aside the appellate order. Obiter - allegations of bias based merely on use of party-supplied literature are insufficient absent evidence of procedural unfairness or reliance on demonstrably false information. Conclusion: The Tribunal declined to disturb the Commissioner (Appeals)'s factual conclusion that the imported discs were hard disc drives eligible for exemption, holding that the reliance on visual inspection and product literature was reasonable and not improperly biased. Cross-reference and synthesis The analysis of Issue 1 and Issue 2 are interlinked: the legal scope of the six-digit notification controls entitlement to exemption, and the appellate authority's factual findings (Issue 2) that the products fell within that six-digit heading were supported by acceptable inspection and documentary evidence. Distinguishing decisions that excluded removable drives were found to be inapplicable where those decisions applied a notification expressed at a more specific eight-digit level. Final disposition The Tribunal affirmed the Commissioner (Appeals)'s order granting exemption under Notification No. 6/2006-CE and dismissed the revenue appeal, concluding that the imported goods were properly treated as eligible hard disc drives within CTH 847170 and that the appellate fact-finding was proper and substantiated.