2024 (7) TMI 325 - AT - Customs

Artemia Cysts classified under Customs Tariff Heading 0511.99 not 2309.90, penalties under Sections 114A and 112(a) set aside

M/s. Atherton Engineering Co. (Pvt.) Limited and Shri Vickram Jaitha Versus Commissioner of Customs (Airport & Air Cargo Complex), Kolkata

CESTAT Kolkata ruled on classification of imported Artemia Cysts (Brine Shrimp Eggs), holding they fall under Customs Tariff Heading 0511.99 (Animal ... Classification of imported goods - Artemia Cysts (Brine Shrimp Eggs) - to be classified under Customs Tariff Heading 2309.90 being “Preparations of a Kind Used in Animal Feeding” - “Other” or classifiable under Customs Tariff Heading 0511.99 pertaining to “Animal Products Not Elsewhere Specified or Included; Dead Animals of Chapter 1 or 3, Unfit for Human Consumption” – “Other”. HELD THAT:- The relevant Chapter Heading 0511 is perused and it is found that when the Six Digits classification was modified to Eight Digits with effect from 20th January, 2003, “Artemia Cyst” was brought under 0511.99.11. This would again go on to show that prior to the onset of the eight-digit classification under CTH, under the earlier six digits, this product would fall under 0511.99, as has already been held in the earlier decision of the Tribunal as well as by the present adjudicating authority. The Chapter Notes and descriptions of the goods would clarify that it is beyond doubt that the goods in question would fall under CTH 0511.99 during the period under dispute - the classification of the impugned goods under CTH 0511.99 upheld. Penalty imposed on the appellant-company under Section 114A of the Act and the penalty of Rs.3,00,000/- imposed on Shri Vickram Jaitha under Section 112(a) of the Act - HELD THAT:- The penalties imposed on the appellant company in terms of Section 114A of the Customs Act, 1962 and on Shri Vickram Jaitha in terms of Section 112(a) of the Act, set aside. Appeal allowed in part. Issues Involved:1. Classification of imported goods under the Customs Tariff Heading (CTH).2. Imposition of penalties under Section 112(a) and Section 114A of the Customs Act, 1962.3. Compliance with the High Court's directions for factual enquiry regarding the presence of embryos in the imported goods.Detailed Analysis:1. Classification of Imported Goods:The primary issue was whether the imported 'Artemia Cysts (Brine Shrimp Eggs)' should be classified under CTH 2309.90 as 'Preparations of a Kind Used in Animal Feeding - Other' or under CTH 0511.99 as 'Animal Products Not Elsewhere Specified or Included; Dead Animals of Chapter 1 or 3, Unfit for Human Consumption - Other.'- Department's Stand: The Department insisted on classifying the goods under CTH 0511.99, supported by previous decisions from Mumbai Customs and the CEGAT, Mumbai, which were upheld by the Supreme Court.- Appellant's Stand: The appellant argued for classification under CTH 2309.90, citing an earlier favorable decision by the Commissioner (Appeals), Mumbai, and contending that the goods were prawn feed.The Tribunal noted that the classification issue had been settled in favor of CTH 0511.99 by the Mumbai Tribunal and upheld by the Supreme Court. The Kolkata Tribunal also agreed with this classification, reinforcing that 'Artemia Cysts' fall under CTH 0511.99 based on the Chapter Notes and HSN explanatory notes.2. Imposition of Penalties:The penalties imposed under Section 112(a) and Section 114A of the Customs Act were contested.- Appellant's Argument: The appellant contended that the imposition of penalties was unwarranted as they had classified the goods under CTH 2309.90 based on a bona fide belief supported by an earlier favorable order from the Commissioner (Appeals), Mumbai.- Tribunal's Observations: The Tribunal noted that during the relevant period, the appellant's classification under CTH 2309.90 was based on an existing favorable order, reflecting a bona fide belief rather than an intention to evade duty. The Tribunal cited the case of Nishiland Park Ltd. v. Commr. of Customs, where penalties were set aside under similar circumstances.The Tribunal held that the penalties under Sections 112(a) and 114A were unwarranted and set them aside, aligning with the earlier decision by the Third Member Reference Bench.3. Compliance with High Court's Directions:The High Court had remanded the matter for factual enquiry to determine whether the imported goods contained embryos or living organisms, which would influence their classification.- Appellant's Compliance Argument: The appellant argued that the adjudicating authority did not follow the High Court's direction for a factual enquiry about the presence of embryos in the imported goods.- Tribunal's Findings: The Tribunal observed that the appellant had never previously argued for testing the eggs to determine the presence of embryos throughout the litigation. The appellant's submissions were consistently focused on the classification under CTH 2309.90 without requesting specific tests for embryos.The Tribunal upheld the classification under CTH 0511.99, noting that the specific entry for 'Artemia Cysts' under the eight-digit classification further supported this classification. The Tribunal also noted that the issue had reached finality with the Supreme Court's dismissal of the appellant's appeal in a similar case.Conclusion:The Tribunal confirmed the classification of 'Artemia Cysts' under CTH 0511.99 and set aside the penalties imposed under Sections 112(a) and 114A of the Customs Act, 1962. The appeals were partly allowed for the appellant-company and fully allowed for the director of the appellant-company.