Imported Nickel Compound with Cobalt Hydroxide and Graphite classified under CTH 38249900 not CTH 28254000

CESTAT Chennai held that imported I-MAS POs-Nickel Compound containing Nickel Hydroxide, Cobalt Hydroxide, and Graphite was correctly classified under CTH 38249900 rather than appellant's claimed CTH 28254000. The addition of Cobalt Hydroxide and Graphite made the product specifically suitable for Nickel Cadmium battery manufacture, restricting its general use. Appellant was denied benefits under Customs Notification No. 50/2017 as neither product description nor CTH matched notification requirements. While duty demand with interest was confirmed, fine and penalty were set aside considering appellant's regular import status and supplier's global classification practice, finding no malafide intent. Appeal partly allowed.

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Issues Involved:
1. Classification of the imported goods.
2. Justification of confiscation, redemption fine, and penalty.

Summary:

Issue 1: Classification of Imported Goods

Customs Appeal No. C/40347/2022 was filed by the Appellant challenging the classification of imported goods under CTH 38249000 by the Commissioner of Customs (Imports), Chennai, which resulted in a demand for differential duty of Rs. 4,38,82,768/- along with interest u/s 28(1) and 28AA of the Customs Act, and the imposition of a redemption fine of Rs. 6,25,000/- and a penalty of Rs. 22,00,000/- u/s 112(a) of the Customs Act, 1962.

The Appellant argued that the goods should be classified under CTH 28254000, benefiting from a 'Nil' rate of Basic Customs Duty (BCD) under Sl.No. 180 of Notification No. 50/2017-Customs. The Department, after testing the samples, concluded that the goods consisted of Nickel Hydroxide, Carbonaceous matter, and Cobalt, thus not classifiable under CTH 28254000.

The Tribunal considered the General Rules for Interpretation of Import Tariff, Section and Chapter Notes, and HSN Explanatory Notes. It concluded that the imported product, being a mixture of Nickel Hydroxide, Cobalt Hydroxide, and Graphite, does not fit the criteria for classification under Chapter 28. The correct classification was determined to be under CTH 38249900 as a chemical product or preparation of chemical or allied industries not elsewhere specified or included.

Issue 2: Confiscation, Redemption Fine, and Penalty

The Appellant contended that there was no wilful mis-declaration, and mere short payment of duty by adopting a particular classification does not render the goods liable for confiscation u/s 111(m) of the Customs Act, 1962. The Tribunal agreed, citing various judicial precedents, and held that the imposition of fine and penalty was not justified as there was no malafide intention or motive on the part of the Appellant.

The Tribunal also addressed the issue of non-compliance with the Pre-notice Consultation Regulations, concluding that no prejudice was caused to the Appellant due to the omission, as the principles of natural justice were observed during the adjudication process.

Conclusion:

The Tribunal upheld the classification of the imported goods under CTH 38249900, rejecting the Appellant's classification under CTH 28254000. Consequently, the demand for duty along with interest was confirmed. However, the confiscation of goods and the imposition of fine and penalty were set aside. The appeal was partly allowed on these terms.

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