2024 (12) TMI 364 - AT - Customs

Innopet Plasmax System machinery for coating PET bottles correctly classified under CTI 8422 3000, not residuary CTI 8479 8999

SLMG Beverages Private Limited and Vivek Ladhani Versus Commissioner of Customs (Import) (NS-V) Maharashtra.

SLMG Beverages Private Limited and Vivek Ladhani Versus Commissioner of Customs (Import) (NS-V) Maharashtra. - TMI Issues Involved:1. Classification of the imported machinery 'Innopet Plasmax System 20Q'.2. Appropriate levy of customs duty.3. Sustainability of adjudged demands including penalties.Detailed Analysis:1. Classification of the Imported Machinery:The primary issue was whether the imported machinery 'Innopet Plasmax System 20Q' should be classified under Customs Tariff Item (CTI) 8422 3000 as claimed by the appellants, or under CTI 8479 8999 as contended by the Department. The appellants argued that the machinery is part of a composite bottling plant and should be classified under CTI 8422 3000, which covers 'machinery for aerating beverages.' They supported their classification by citing Section Notes 3, 4, and 5 of Section XVI of the Customs Tariff Act, 1975, and Rule 3(a) of the General Rules of Interpretation. The Revenue, however, contended that the machinery should be classified under CTI 8479 8999, as it performs an individual function not specified elsewhere in Chapter 84.Upon analysis, the Tribunal concluded that the machinery is appropriately classifiable under CTI 8422 3000. The Tribunal reasoned that the machinery forms part of a composite system designed for aerating beverages, and its classification should reflect its principal function as part of the aerated water bottling process. The Tribunal relied on Section Notes 3 and 4 of Section XVI, which emphasize the principal function of composite machines for classification purposes. Additionally, the Tribunal referenced the Harmonized Commodity Description and Coding System (HS) Explanatory Notes, which support the classification of machinery used in bottling aerated beverages under heading 8422.2. Appropriate Levy of Customs Duty:The classification of the machinery under CTI 8422 3000 affects the applicable customs duty rate. The appellants had initially self-assessed the duty at a concessional rate of 5% under Notification No. 50/2017-Customs. The Tribunal's decision to classify the machinery under CTI 8422 3000 supports the appellants' claim for the concessional duty rate, as this classification aligns with the machinery's function within the aerated water bottling process.3. Sustainability of Adjudged Demands Including Penalties:The Tribunal examined whether the adjudged demands, including penalties imposed in the impugned order, were sustainable. Given the Tribunal's conclusion on the correct classification of the machinery, the demands for differential duty and penalties based on the Department's classification under CTI 8479 8999 were found to be unsustainable. The Tribunal set aside the impugned order, thereby allowing the appeals in favor of the appellants.The Tribunal also referred to previous judicial pronouncements, including cases such as Hindustan Coca Cola Beverages Pvt. Ltd. and KHS Machinery Pvt. Ltd., which supported the classification of similar machinery under CTI 8422 3000. The Tribunal emphasized that classification under a residuary heading to charge a higher duty rate is not justified when the goods can reasonably be classified under a specific enumerated item in the Tariff Schedule.In conclusion, the Tribunal's judgment favored the appellants, classifying the machinery under CTI 8422 3000 and setting aside the demands and penalties imposed by the Commissioner of Customs. The appeals were allowed, and the impugned order was set aside.