2024 (8) TMI 615 - AAR - Customs

AAR rejects advance ruling application for lithium-ion cell manufacturing products due to pending customs reassessment proceedings

The AAR dismissed an advance ruling application regarding classification and IGST rates for 13 products used in lithium-ion cell manufacturing. The ... Maintainability of advance ruling application - question raised here is pending before the Officer of Customs - Classification of 13 products imported/to be imported by the applicant - products used for manufacturing the Lithium-ion cells - correct classification of all the 13 products and their applicable effective rate of IGST leviable on the import of the said Products - HELD THAT:- As per definition of ‘advance ruling’ under Section 28E, it means a written decision on any of the questions referred to in Section 28H, raised by the applicant in his application in respect of any goods prior to importation or exportation. In this regard, it is noted that the Customs Authority for Advance Rulings, in a number of rulings has maintained that though the definition of ‘advance ruling’ in Section 28E refers to rulings on questions related to goods prior to their importation but in the interest of consistency, certainty and trade facilitation, applications for advance rulings have been allowed and rulings have been issued on the questions raised in the application for advance rulings when the questions raised are not hit by the conditions in the first proviso to sub-section (2) of Section 28-I of the Customs Act, 1962. Also, provisions under the Section 28 of the Customs Act, 1962 provides for issue of notice on the person for short-levy or short-payment of duty, requiring him to show cause as to why he should not pay the amount specified in the notice provided that before issuing notice, the proper officer shall hold pre-notice consultation with the person chargeable with duty or interest in such manner as may be prescribed. It is further provided under Section 28 that the person chargeable with the duty or interest, may pay before service of notice on the basis of (i) his own ascertainment of such duty; or (ii) the duty ascertained by the proper officer. Though the fact of issue of pre-consultation notice is not on record but the applicant has taken further steps to take up the matter for reassessment of Bills of Entry and payment of differential duty. The issue of reassessment needs to be decided by the proper officer. Thus, the question raised in the instant application for advance ruling is pending before the Officer of Customs which makes the instant application for advance ruling liable for rejection. Advance ruling application dismissed. Issues Involved:1. Classification of 13 products used for manufacturing Lithium-ion cells.2. Effective rate of Integrated Goods and Services Tax (IGST) on the import of these products.3. Admissibility of the application for advance ruling in light of ongoing investigations by the Directorate of Revenue Intelligence (DRI).Issue-wise Detailed Analysis:1. Classification of 13 Products:The applicant sought an advance ruling on whether 13 products used for manufacturing Lithium-ion cells in India are classifiable under the respective tariff entry as mentioned by them. If not, they requested the correct classification and applicable effective rate of IGST on the import of these products. The applicant asserted that these products are raw materials and inputs for manufacturing Lithium-ion batteries and should fall under Heading 8507. They provided details and samples of these products to support their claim.2. Effective Rate of IGST:The applicant requested a ruling on the effective rate of IGST applicable to the import of the mentioned raw materials. They argued that the products should attract an 18% IGST rate as per Schedule III, Entry No. 453. They also referred to specific entries in Notification No. 50/2017 and Rate Notification No. 1/2017-C.T. to justify their classification and IGST rate. However, the Customs Authority noted that the Directorate of Revenue Intelligence (DRI) was investigating a case of short payment of IGST on some of these products, which was not disclosed by the applicant in their application.3. Admissibility of the Application:The primary issue was whether the application for advance ruling was admissible given the ongoing DRI investigation. The Customs Authority referred to Section 28-I(2) of the Customs Act, 1962, which states that an application for advance ruling shall not be allowed if the question raised is pending before any officer of Customs, the Appellate Tribunal, or any Court. The DRI had issued summons to the applicant and was investigating the import of parts of batteries under CTH 8507 90 90. The Customs Authority noted that the applicant did not disclose this ongoing inquiry in their application.The Customs Authority also referred to the Hon'ble High Court of Delhi's decision in the case of Directorate of Revenue Intelligence (HQRs) v. Spraytec India Ltd., which stated that for a question to be considered pending, it must be formally set forth for the assessee to contest. Preliminary investigations or inquiries do not constitute a pending question. However, in this case, the applicant had taken steps for reassessment of Bills of Entry and payment of differential duty, indicating that the issue was indeed pending before the Customs officer.Conclusion:The Customs Authority concluded that the application for advance ruling was liable for rejection because the question raised was pending before the Customs officer due to the ongoing DRI investigation and the applicant's steps towards reassessment and payment of differential duty. The application was thus rejected in accordance with Section 28-I(2) of the Customs Act, 1962.