Importer wins classification dispute over Montanide ISA 206 VG adjuvant under Section 114A customs penalty set aside

CESTAT Bangalore ruled in favor of the importer regarding classification of Montanide ISA 206 VG. The department incorrectly classified the immunological adjuvant under CTH 30023000 as veterinary vaccine, while the importer claimed CTH 38249090 as chemical products. The tribunal held that adjuvants should be classified based on material composition, not end use. Since the imported goods were injectable mineral oil and emulsifier from vegetable origin, classifying them as vaccines was legally untenable. The demand confirmation with interest and penalty under Section 114A were set aside as there was no misdeclaration. Appeal allowed.

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Issues:
Classification of imported goods under CTH 38249090 or CTH 30023000 as "Vaccine for Veterinary Medicines"; imposition of penalty under Section 114A of the Customs Act, 1962.

Detailed Analysis:

Issue 1: Classification of Imported Goods
The appellant imported "Montanide ISA 206 VG" and paid Customs duty, classifying it under CTH 38249090 as a chemical product. The Respondent issued a Show Cause Notice proposing classification under CTH 30023000 as "Vaccine for Veterinary Medicines." The dispute arose as the imported goods were Adjuvants, not vaccines. The Adjudicating Authority held that when mixed with a vaccine, the Adjuvant acquires vaccine-like qualities. The appellant argued that the imported goods were raw materials for vaccines, not vaccines themselves, and should not be classified as such. The Commissioner (Appeals) classified the goods as vaccines based on functional parameters, which the appellant contended was erroneous. The Tribunal found the Department's classification as a vaccine to be incorrect and unsustainable in law. The appeal was allowed, setting aside the demand for classification under CTH 30023000.

Issue 2: Imposition of Penalty
The Department imposed a penalty under Section 114A of the Customs Act, 1962. The appellant argued that there was no misdeclaration or suppression of facts, as all details were provided during the bill of entry filing. The Tribunal held that the penalty was not warranted in a classification dispute where no wilful misstatement or suppression existed. Citing relevant case laws, the Tribunal found the imposition of the penalty to be unsustainable. Consequently, the penalty under Section 114A was set aside.

In conclusion, the Tribunal allowed the appeal, setting aside the classification under CTH 30023000 and the penalty under Section 114A of the Customs Act, 1962. The classification of the imported goods as vaccines was deemed incorrect, and no evidence of misdeclaration or suppression of facts was found. The decision was pronounced in open court on 16.07.2024.

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