2024 (6) TMI 852 - AT - Customs

Ball pen tip blanks made of NM6 alloy qualify for 12% IGST under Sl. No. 232 instead of 18% rate

CESTAT Kolkata ruled in favor of appellant regarding classification of imported ball pen tip blanks made of NM6 alloy. The dispute concerned whether goods ... Classification under Heading 9608 - parts of ball point pens - eligibility for concessional IGST rate under Schedule II Sl. No. 232 - residuary entry and 'not elsewhere specified' classification - application of Chapter and Section Notes and HSN Explanatory Notes - functionality / sole or principal use doctrine for parts - administrative clarifications (CBIC Circulars) on classification of partsClassification under Heading 9608 - parts of ball point pens - eligibility for concessional IGST rate under Schedule II Sl. No. 232 - application of Chapter and Section Notes and HSN Explanatory Notes - functionality / sole or principal use doctrine for parts - Impugned imported items are classifiable as parts of ball point pens under Heading 9608 and are eligible for the IGST rate specified at Sl. No. 232 of Schedule II. - HELD THAT: - The Tribunal examined the Heading 9608 text, Chapter Note 1(d) to Chapter 96 and the HSN Explanatory Notes and observed that the heading expressly covers 'parts (including caps and clips) of the foregoing articles' and the Explanatory Notes identify refills, tips and similar parts as falling within CTH 9608. Chapter Note 1(d) excludes parts of general use; where parts are not of general use and are suitable solely or principally for a particular article they are classifiable with that article. Applying the functionality/sole-or-principal-use doctrine and the GIR/Chapter Notes, the Tribunal held the imported tips (found on examination to be parts of ball point pens) fall within Heading 9608. The Tribunal further held that once so classified the items fall within Sl. No. 232 of Schedule II to the IGST Rate Notification and cannot be taxed under the residuary Sl. No. 453. The Tribunal relied on administrative clarifications (CBIC Circular Nos. 113 and 155) which treat parts suitable solely or principally for a specified article as attracting the same rate as that article, and on Tribunal/Supreme Court authority recognizing functionality and sole-use principles in classifying parts, to reinforce the conclusion that the impugned goods are parts of pens eligible for the concessional IGST rate. [Paras 8]The classification under Heading 9608 is affirmed and the goods are eligible for the concessional IGST rate under Sl. No. 232 of Schedule II.Residuary entry and 'not elsewhere specified' classification - consequential relief: set aside of demand, fine and penalty - Demand of IGST (and consequential fine and penalty) confirmed by lower authorities under the residuary entry is set aside. - HELD THAT: - Having held that the impugned goods are classifiable under Heading 9608 and eligible for the rate in Sl. No. 232, the Tribunal found that the departmental demand framed under the residuary Sl. No. 453 was unsustainable. Consequent to negation of the demand, the fine and penalty imposed along with the demand were also not maintainable and were therefore set aside. [Paras 8, 9]The demand of IGST confirmed in the impugned orders, and the fine and penalty imposed therewith, are set aside.Final Conclusion: The appeals are allowed: the imported items are held to be parts of ball point pens classifiable under Heading 9608 and entitled to the IGST rate in Sl. No. 232 of Schedule II; accordingly the departmental demand under the residuary entry and the attendant fine and penalty are set aside. Issues Involved:1. Classification of imported goods under the Customs Tariff Act.2. Applicability of IGST rate on imported goods.3. Interpretation of relevant notifications and circulars.4. Validity of fine and penalty imposed.Issue-wise Detailed Analysis:1. Classification of Imported Goods under the Customs Tariff Act:The appellant imported parts/tips of ball pens from China and classified them under HSN 960899990, chargeable to Basic Customs Duty @5% under Notification 50/2017-Cus dated 30.06.2017. The classification was contested by the Department, which argued that the goods should be classified under the residuary heading 96089990 as 'others'. The appellant contended that the goods should be classified under Heading 9608 as parts of ball point pens, supported by Chapter Note 1(d) of Chapter 96, which excludes parts of general use from this Chapter. The Tribunal accepted the appellant's classification, noting that the Department had already accepted the classification of the goods as 'parts of ball point pens' under heading 9608.2. Applicability of IGST Rate on Imported Goods:The appellant claimed an IGST rate of 12% under Sl. No. 232 of Notification 01/2017-Cus dated 28.06.2017. The Department, however, argued for an 18% IGST rate under Sl. No. 453 of Schedule III of the same notification. The Tribunal observed that Entry No. 232 specifically covers parts of pens, whereas Entry No. 453 is a residuary entry. Since the goods were classified under Heading 9608, they are eligible for the 12% IGST rate.3. Interpretation of Relevant Notifications and Circulars:The appellant referred to Circular No. 113/32/2019-GST and Circular No. 155/11/2021-GST, which clarify that parts suitable for use solely or principally with a specific device should attract the same GST rate as the device itself. The Tribunal agreed with this interpretation, noting that the impugned goods are parts of ball point pens and should be classified under Heading 9608, thus eligible for the 12% IGST rate. The Tribunal also referenced the decision in M/s. Camlin Limited, which supports the classification of parts along with the main item.4. Validity of Fine and Penalty Imposed:Since the demand for IGST was not sustained, the fine of Rs. 5,00,000/- and penalty of Rs. 25,000/- imposed in the impugned orders were also set aside. The Tribunal held that the impugned orders were not sustainable and allowed the appeals filed by the appellant.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals, holding that the imported goods are eligible for the 12% IGST rate under Sl. No. 232 of Schedule II of Notification 01/2017-Cus. The fine and penalty imposed were also set aside. The judgment emphasized the importance of interpreting notifications and circulars in line with the classification principles under the Customs Tariff Act.