2024 (8) TMI 618 - AT - Customs

Mumbai tribunal overturns customs classification orders for flow meters and transmitters due to inadequate justification and improper dual-headed assessment process

CESTAT Mumbai set aside customs classification orders for imported flow meters, pressure transmitters, level transmitters and their parts/accessories. The ... Classification of imported goods - flow meters - pressure transmitters - level transmitters - parts and accessories - to be classified as tariff item 9032 8990 and 9032 9000 of First Schedule to Customs Tariff Act, 1975 respectively or within heading 9026 of First Schedule to Customs Tariff Act, 1975? - applicability of N/N. 24/2005-Cus dated 1st March 2005 (sl. no. 31 and sl. no. 39 respectively) - HELD THAT:- It is on record that the assessing authority insisted on revising the classification with consequential duty implications and that, admittedly, the reluctant compliance thereto by the importers was momentary with challenge mounted immediately before the first appellate authority. It is also on record in the impugned order that neither was any ‘speaking order’ issued by the assessing authority nor was advantage taken of the offer from the first appellate authority to obtain a first hand account of the justification for revision. And yet, the impugned order has gone on to offer justifications, in the manner that the original authority should have, for the classification; almost akin to a dual-headed assessment that is not contemplated either in section 17 or section 128 of Customs Act, 1962. The jurisdiction of the first appellate authority is to acknowledge the existence of a dispute over assessment and then to determine the validity of justification offered for any detriment visited on an assessee. The correctness of classification adopted by the customs authorities for the finished product and the like adopted by the central excise authorities on manufactured product – the classification of ‘parts and accessories’ is merely derived inasmuch as such goods are separately enumerated within the rival headings. The scope of the description in heading 9032 of First Schedule to Customs Tariff Act, 1975 is not amenable to stretching as a ‘free standing’ description may be. Heading 9032 of First Schedule to Customs Tariff Act, 1975 must, therefore and inclusive of residual entry therein, be read to have been intended for autonomous and self-contained calibrating and regulating equipment. The nature of the impugned goods have not been examined for conformity thereto or otherwise - the onus devolving on customs and central excise authorities to comply with the rules for interpretation, as statutorily articulated, and rules of engagement, as judicially determined, has not been discharged. Owing to lack of such determination, the correctness, or otherwise, of classification that falls to the original authority to have established cannot be ascertained. The disputes would have to be adjudicated afresh for proper determination of the proposals in the respective show cause notices - the impugned orders are set aside and the matters remanded back to the original authorities for de novo proceedings - Appeal allowed by way of remand. Issues Involved:1. Classification of 'traded' imports and manufactured goods.2. Denial of exemption from customs duties.3. Imposition of penalties by central excise authorities.4. Jurisdiction and procedural compliance in assessment and appellate proceedings.5. Correctness of revised classification by customs and central excise authorities.Issue-wise Detailed Analysis:1. Classification of 'traded' imports and manufactured goods:The core issue revolves around the classification of 'traded' imports and manufactured goods by four appellant-companies of the Endress+Hauser group. The customs and central excise authorities reclassified these goods from heading 9026 to tariff item 9032 8990 of the First Schedule to the Customs Tariff Act, 1975, leading to the denial of exemption benefits. The assessees claimed their products were 'simple meters' eligible for exemptions, but the authorities disagreed, leading to disputes over the correct classification.2. Denial of exemption from customs duties:The reclassification deprived the assessees of exemptions under notification no. 24/05 dated 1st March 2005. The denial of exemptions applied to both 'traded' imports and inputs imported for manufacturing. The authorities held that the goods did not fit the description under heading 9026, thus denying the benefits. This decision was contested by the assessees, leading to appeals.3. Imposition of penalties by central excise authorities:Penalties were imposed on the assessees and individuals by the central excise authorities for the earlier period, which were later dropped by the first appellate authority. However, the Commissioner of Customs, Nagpur, challenged the escapement of penal consequences for two of the appellant companies. The penalties were related to the import of 'parts and accessories' for manufacturing, which were reclassified, leading to duty liabilities.4. Jurisdiction and procedural compliance in assessment and appellate proceedings:The Tribunal noted procedural lapses in the assessment and appellate proceedings. Specifically, in the case of two bills of entry, the assessing authority revised the classification without issuing a 'speaking order' or providing justification. The first appellate authority also failed to compel an explanation, leading to invalidation of the impugned orders. The Tribunal emphasized the need for compliance with section 17(5) of the Customs Act, 1962, and proper procedural adherence.5. Correctness of revised classification by customs and central excise authorities:The Tribunal scrutinized the correctness of the revised classification. The lower authorities had reclassified the goods to heading 9032, which the assessees contested. The Tribunal highlighted the fundamental obligation of the assessing authority to justify reclassification, as established in Hindustan Ferodo Ltd v. Collector of Central Excise and HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh. The Tribunal found that the authorities failed to discharge the burden of proof and did not adequately examine the nature of the goods for conformity to the revised classification.Conclusion:The Tribunal set aside the impugned orders and remanded the matters back to the original authorities for de novo proceedings. The authorities were directed to adhere to the principles of natural justice and consider the submissions of the appellants earnestly. The disputes required fresh adjudication for proper determination of the proposals in the respective show cause notices.(Order pronounced in the open court on 07/08/2024)