Broom sticks IGST exemption classification dispute remanded for fresh determination under Notification 02/2017-IGST Sr. 144

CESTAT Ahmedabad remanded the case back to Commissioner (Appeals) regarding IGST exemption classification of imported broom sticks. The primary issue was whether goods fell under Sr. no. 144 of Notification No. 02/2017-IGST (nil rate) for brooms made of vegetable materials, or Sr. no. 260 of Notification No. 01/2017 (5% IGST) for other types. Commissioner (Appeals) failed to address this classification issue. CESTAT noted that from September 22, 2017, brooms were divided into two categories - vegetable material brooms (exempt) and others including plastic brooms (taxable). Matter remanded for fresh determination of goods' nature and proper classification considering statutory amendments.

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Issues Involved:
1. Whether the department can initiate proceedings under Section 28 of the Customs Act, 1962, without challenging the assessment made under the Bills of Entry.
2. Whether the extended period of limitation is invokable and whether the appellant is liable for penalty under Section 117 or 114A of the Customs Act, 1962.
3. Classification of the imported goods under the appropriate tariff heading and applicable notifications.

Issue-wise Detailed Analysis:

1. Initiation of Proceedings under Section 28 of the Customs Act, 1962:
The appellant argued that the department should have challenged the final assessment of the bills of entry if they were aggrieved by it. The department failed to appeal the assessment order, thus it attained finality. The appellant relied on the Hon'ble Apex Court's decision in ITC Limited 2019 (368) ELT 216 (SC), which supports that in the absence of a challenged assessment, the department cannot reopen the assessment under Section 28 of the Act. The learned counsel also pointed out that the proceedings were initiated based on an audit by Customs revenue audit, which is not sustainable for goods already cleared as per Section 99A of the Customs Act, 1962.

2. Extended Period of Limitation and Penalty Liability:
The appellant contended that they were under a bona fide belief that the exemption benefit was available to them under Notification No. 02/2017-IGST dated 28.06.2017. They argued that the goods were described as 'broom sticks' in the bill of entry but were bound together, qualifying for the exemption. The appellant relied on a clarification issued by CBEC Mitra Helpdesk, which stated that broom sticks in bound condition do not attract IGST. Therefore, they claimed that the penalty under Section 114A cannot be imposed due to their bona fide belief.

3. Classification of Imported Goods:
The primary issue revolves around whether the imported goods fall under the category of "Muddhas made of sarkanda, Brooms or brushes, consisting of twigs or other vegetable materials, bound together, with or without handles" as per Sr. No. 144 of Notification No. 02/2017-IGST dated 28.06.2017, or under Sr. No. 260 of Notification No. 01/2017-IGST dated 28.06.2017, which attracts 5% IGST. The learned counsel for the appellant argued that the goods were bound together and thus eligible for exemption. However, the Commissioner (Appeals) did not address whether the goods are classifiable under Sr. No. 144 or Sr. No. 260, which is crucial for determining the applicable IGST rate.

Judgment and Remand:
The tribunal found that the Commissioner (Appeals) did not address the primary issue of classification of the goods under the appropriate tariff heading and applicable notifications. The impugned order was set aside, and the matter was remanded back to the Commissioner (Appeals) to decide afresh on the classification of the goods. The first issue to be decided is whether the goods fall under the category of "Muddhas made of sarkanda, Brooms or brushes, consisting of twigs or other vegetable materials, bound together, with or without handles". All other issues, including the invocation of the extended period of limitation and penalty liability, are to be addressed only after this primary issue is resolved.

Concurring Opinion:
The concurring member emphasized the need to decide the classification of the goods first before addressing other issues. The member elaborated on the different types of broomsticks and their classification under the relevant notifications. The member noted that broomsticks made from plastic and not using vegetable material are taxable under Serial No. 260 of Notification No. 01/2017 post-amendment on 22.09.2017. The learned Commissioner (Appeals) should consider the statutory changes and amendments while deciding the classification and related demand period.

Conclusion:
The appeal was allowed by way of remand, directing the Commissioner (Appeals) to decide the nature of the goods and their classification with statutory changes in mind. The party is free to raise any other points on merits and limitation if desired. The order was pronounced in the open Court on 17.05.2024.

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