2025 (5) TMI 1936 - AT - Customs

Machine Designed for Commercial Food Production Qualifies for Specific Tariff Entry Under CTH 84388020, Reducing Customs Duty

Commissioner of Customs Import Commissionerate, Chennai II Commissionerate Versus M/s. Adyar Ananda Bhavan Sweets & Snacks

The SC dismissed the Revenue's appeal challenging the classification of an industrial Namkeen frying system. The Tribunal upheld the First Appellate ... Classification of the goods - import of Namkeen System/Heat Wave Frying System classified under CTH 84388020 as ‘other machinery’ - Special CVD at 4% under Notification No.19/2006 - HELD THAT:-The Nomenclatures/features of the machine in question as found in the product catalogue has been extracted in the Order-in-Appeal. Further at para 6.3 of the OIO it has been observed by the Original Authority that the imported machine is a machine for industrial preparation/production or manufacture (processing) of various food items and that the literature on “Namkeen snacks description” indicates that the Namkeen System, which is the product under dispute, is the most automated frying system for industrial purposes. From the foregoing, the fact which is clear is that the machine in question is meant for frying only and hence, as observed by the First Appellate Authority, CTH 84198120 refers to ‘other kitchen machines’, whereas there is a specific entry for fryers at CTH 84198110, which has been conveniently ignored by the Original Authority. Admittedly, the machinery in question is meant for production at commercial level, whereas the entry at CTH 84198120 refers to ‘Kitchen machines’ only. Thus, we do not find any infirmity in the impugned Order-in-Appeal as regards the classification is concerned and hence, we do not find any merit or any reasons in the appeal filed by the Revenue. Resultantly, we dismiss the appeal. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question considered by the Tribunal is whether the classification of the imported goods, namely the Namkeen System HWF 2412 (Heat Wave Frying System), as declared by the respondent-assessee under Customs Tariff Heading (CTH) 84388020 ('other machinery') is correct, or whether the goods should be classified under CTH 84198120 ('other kitchen machines') or CTH 84198110 (fryers). The issue essentially revolves around the proper classification of the imported machinery for customs duty purposes, which determines the applicable rate of Basic Customs Duty (BCD), Countervailing Duty (CVD), and Special CVD.2. ISSUE-WISE DETAILED ANALYSISIssue: Correct classification of the Namkeen System HWF 2412 (Heat Wave Frying System)Relevant legal framework and precedents: The classification of imported goods under the Customs Tariff is governed by the Customs Tariff Act and the Harmonized System of Nomenclature (HSN). The classification must be determined primarily by the description of the goods and their essential character and use, guided by the General Rules for the Interpretation of the Harmonized System (GIR). Precedents emphasize that classification must reflect the true nature and function of the goods, not merely their generic or broad category. Further, entries in the tariff schedule are to be read with reference to the specific descriptions and the commercial purpose of the goods.Court's interpretation and reasoning: The Tribunal reviewed the orders of the Original Authority and the First Appellate Authority, focusing on the product literature and catalogue details. The Original Authority had classified the machine under CTH 84198120 ('other kitchen machines'), which attracts a higher duty, whereas the First Appellate Authority accepted the classification under CTH 84388020 ('other machinery'), which carries a lower duty. The Tribunal noted that the machine is an industrial frying system designed for the commercial production of Namkeen snacks, as evidenced by the product catalogue and supplier information.The Tribunal observed that the Original Authority ignored the specific tariff entry for fryers under CTH 84198110, which is more appropriate for a machine whose primary function is frying. The First Appellate Authority correctly identified that CTH 84198120 pertains to 'kitchen machines' generally used in domestic or kitchen settings, whereas the imported machine is industrial in nature and specifically designed for frying at a commercial scale.Key evidence and findings: The product catalogue and supplier website indicated that the Namkeen System is an automated frying system for industrial purposes. The Original Authority's own findings acknowledged that the machine is used for industrial preparation, processing, or manufacture of food items. No contrary evidence was presented by the respondent during the hearings before the Tribunal, and the respondent did not appear or file submissions in the appeal.Application of law to facts: Applying the principles of tariff classification, the Tribunal found that the essential character and use of the machine is frying at an industrial level. Therefore, the appropriate classification should be under the specific tariff heading for fryers (CTH 84198110) rather than the broader 'other kitchen machines' category (CTH 84198120) or 'other machinery' (CTH 84388020). The Tribunal agreed with the First Appellate Authority's approach in recognizing the industrial frying function of the machine and the inapplicability of the 'kitchen machines' heading.Treatment of competing arguments: The Revenue challenged the First Appellate Authority's classification, seeking to uphold the Original Authority's order that classified the goods under a tariff heading attracting higher duty. However, the Tribunal found that the Original Authority's classification ignored the specific tariff entry for fryers and did not align with the product's industrial purpose. The respondent did not contest the appeal or provide additional submissions, which left the Revenue's arguments unrefuted but insufficiently supported by the record.Conclusions: The Tribunal concluded that the First Appellate Authority was justified in upholding the classification declared by the respondent under CTH 84388020. The appeal by the Revenue was dismissed as lacking merit.3. SIGNIFICANT HOLDINGSThe Tribunal held that:'The machine in question is meant for frying only and hence, as observed by the First Appellate Authority, CTH 84198120 refers to 'other kitchen machines', whereas there is a specific entry for fryers at CTH 84198110, which has been conveniently ignored by the Original Authority.''Admittedly, the machinery in question is meant for production at commercial level, whereas the entry at CTH 84198120 refers to 'Kitchen machines' only.'These statements establish the principle that tariff classification must accord with the specific function and commercial use of the machinery, and that specific tariff entries (such as fryers) take precedence over more generic categories (such as kitchen machines or other machinery).The Tribunal's final determination was to dismiss the Revenue's appeal and uphold the classification adopted by the First Appellate Authority in favour of the assessee, confirming that the imported Namkeen System is properly classified as an industrial frying system and not as other machinery or kitchen machines.