2025 (9) TMI 139 - AT - Customs

Imported electrochemical and zirconium NOx/oxygen sensors held classifiable under CTI 9027 1000; penalties and extended limitation demands set aside

Cummins Technologies India Private Limited Versus Commissioner of Customs (Import).

CESTAT MUMBAI - AT held the imported sensors are classifiable under CTI 9027 1000 (instruments for gas analysis) rather than CTH 9026 or as parts under ... Classification of goods imported by the appellants - sensors (NOx, ammonia, oxygen, KPO3) - to be classified under Customs Tariff Heading/Item (CTH/CTI) 9026, 9032 9000 as claimed by the appellants; or, is it classifiable under Customs Tariff Heading (CTI) 9027 1000 as determined by the learned Commissioner of Customs? - invocation of extended period of limitation - imposition of consequent redemption fine and penalty - HELD THAT:- The CTI 9027 1000 deals with specific “instruments and apparatus for gas or smoke analysis”, including those working on the principle of electrochemical reaction, whereas the CTH 9026 deals with instruments and apparatus for measuring or checking certain aspects of liquid or gas such as “flow, level, pressure or other variables indicating quantitative aspects”. Therefore, on the basis of scope and coverage of various tariff items of the contending classification, the impugned goods are appropriately classifiable under CTI 9027 1000. It is a fact on record, as seen from the technical write-up of the impugned product’ Nox Sensors’ and ‘After Treatment System’ placed in the case file and shown in the representative diagrams with explanation of its functioning at pages 20 and 21 above, that the impugned NOx sensors inter-alia measures the oxygen gas and indirectly measures the Nitrogen oxide gas. Further, the working principle of NOx sensors for such measurement of gases is the electrochemical reaction in cells with zirconium electrode. Therefore, in terms of the technical details about the functioning of the product, as submitted by the appellants themselves, it is clearly brings out that these goods are appropriately classifiable under CTI 9027 1000 and not under CTH 9026. It is found upon careful reading of the Chapter Note 2 to Chapter 90, which provide that, parts and accessories mentioned as specific goods included in any of the headings of Chapter 90 (other than heading 9033) are in all cases to be classified in their respective headings only. Accordingly, apparatus or instrument used for analysis of gas are smoke, working on the principle of electrochemical reaction in cells with solid (especially zirconium oxide for oxygen analysis) having a specific description under CTI 9027 1000, would therefore stand covered under CTH 9027, and such goods cannot be classifiable under CTH 9032 as general ‘parts and accessories’ under CTI 9032 9000. No evidence have been placed on record to state that vital information relating to the product have been suppressed mis-declared for invocation of the extended period of limitation. On the contrary, the facts on record show that various B/Es have been filed by the appellants over a period of about 5 years in hundreds of occasions and the jurisdictional customs authorities have never questioned the self-assessment made by the appellants. It is only on account of the different interpretation on classification of the goods adopted by the audit wing of the Department, the entire process of show cause proceedings had been initiated. On identical set of facts, the Tribunal in the case of Signet Chemical Pvt. Ltd. [2020 (10) TMI 289 - CESTAT MUMBAI] have held that inasmuch as the appellant have been continuously declaring the classification of the product under a particular classification after providing full description of the goods in the various bills of entry, the allegation of suppression of facts cannot be sustained for classifying the goods in a different chapter. The impugned goods are classifiable under CTI 9027 1000 of the First Schedule to the Customs Tariff Act, 1975. Accordingly, the impugned order dated 08.02.2023 is partly upheld to the extent it had classified the imported goods under heading CTI 9027 1000. However, as regards confirmation of adjudged demands by invoking extended period of limitation is concerned, there is no ground for such action and accordingly the order to this extent is partly liable to be set aside. Accordingly, the impugned order dated 08.02.2023 is set aside to the extent it had confirmed the adjudged demands on the basis of such mis-representation of facts, mis-statement, suppression of facts etc. and imposed fine and penalty on the appellants - appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported sensors (NOx, ammonia, oxygen, KPO3) are classifiable under CTI 9027 1000 as 'gas or smoke analysis apparatus' or alternatively under CTH 9026 (measuring/checking instruments for variables of gases/liquids) or CTH 9032 (parts and accessories of automatic regulating or controlling instruments) for the purpose of levy of Basic Customs Duty. 2. Whether invocation of the extended period of limitation, consequent demand of differential duty, confiscation/redemption and imposition of penalties was legally sustainable in view of the appellants' prior self-assessments, disclosed descriptions and absence of evidence of suppression or mis-declaration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Correct classification of imported sensors (CTI 9027 1000 v. CTH 9026 or CTH 9032) Legal framework: - Classification governed by First Schedule to the Customs Tariff Act, 1975, read with General Rules for the Interpretation of Import Tariff (GIR 1-6), Chapter and Section Notes, and General Explanatory Notes (GEN) aligned with the Harmonized System (HS). - Chapter 90 Notes, particularly Note 2(a) to Chapter 90, which directs that parts/accessories that are goods included in any of the headings of Chapter 90 are to be classified in their respective headings. Precedent treatment (followed/distinguished): - Decisions classifying varied sensors and instruments under different Chapter headings were considered and distinguished: Bosch (water signal sensors) and Femco Filters (particle counter) were found not factually analogous; Denso (oxygen sensors) was distinguished on the basis that fuller technical evidence of functioning was available in the present record; Signet Chemical and other Tribunal/High Court pronouncements on limitation and disclosure were relied upon for related procedural observations (see Issue 2). Interpretation and reasoning: - The Tribunal undertook a textual and purposive analysis of headings 9026, 9027 and 9032 under Chapter 90. Heading 9026 covers 'instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gases' (examples: flow meters, level gauges, pressure instruments, heat meters, and 'other' instruments for variables). - Heading 9027 covers 'instruments and apparatus for physical or chemical analysis (for example ... gas or smoke analysis apparatus)' and the HS Explanatory Notes expand types of gas/smoke analysis apparatus and explicitly include instruments working on electrochemical principles (e.g., zirconium-oxide electrochemical cells). - Heading 9032 is for 'automatic regulating or controlling instruments and apparatus'; Chapter Note 2(a) prevents classification of parts that are themselves goods included in a Chapter 90 heading elsewhere (i.e., they must be classified in their specific heading rather than as generic parts under 9032). - Technical materials placed on record (appellants' own technical write-up and diagrams plus AR's electrochemical explanations) establish that NOx and related sensors: (a) perform electrochemical analysis using zirconia electrolyte and pump cells; (b) measure oxygen and NOx concentrations (ppm) via electrochemical reactions/Nernst-type measurement; and (c) provide analytical output used by control systems. These functions fit squarely within the descriptive scope of CTI 9027 1000 ('Gas or smoke analysis apparatus'), including models 'working on the principle of electrochemical reaction in cells with solid (especially zirconium oxide for oxygen analysis) or liquid electrolytes' identified in HS explanatory notes. - Although the sensors operate as components within an Engine After-Treatment System (EATS) and feed signals to control units, their intrinsic function is gas analysis rather than mere regulation or a residual measuring variable captured by 9026. The Chapter Note 2(a) therefore requires classification in the specific heading (9027) rather than under 9032 as 'parts and accessories.' Ratio vs. Obiter: - Ratio: The Tribunal's core legal ratio is that devices whose essential function is physical/chemical analysis of gases by electrochemical methods and which match the HS explanatory descriptions of 'gas or smoke analysis apparatus' are classifiable under CTI 9027 1000; Chapter Note 2(a) mandates classification in the specific heading even where the device is used within a larger regulating system, precluding classification under 9032. - Obiter: Comparative remarks distinguishing prior case law (Bosch, Denso, Femco, etc.) are explanatory and serve to delimit applicability of past decisions but are not essential to the primary classification holding beyond demonstrating factual distinguishability. Conclusions on Issue 1: - The imported NOx, ammonia, oxygen and KPO3 sensors are classifiable under CTI 9027 1000 as 'gas or smoke analysis apparatus.' - The alternative classifications under CTH 9026 (general measuring/checking of variables) and CTH 9032 (parts of automatic regulating apparatus) are rejected based on the sensors' analytic functionality and the mandatory application of Chapter Note 2(a). Issue 2 - Sustainability of extended period invocation and penalties given prior self-assessments and disclosures Legal framework: - Section 28(4) (demand for duty) and relevant limitation principles; legal standards for invoking extended period require evidence of suppression or mis-declaration such that normal limitation is excluded. - Tribunal and High Court precedents holding that continuous classification under a particular heading with full description in multiple Bills of Entry and disclosure of product literature rebut allegations of deliberate suppression. Precedent treatment (followed): - The Tribunal relied on earlier decisions (Signet Chemical and subsequent High Court ruling) establishing that repeated self-declarations with full technical disclosure negate presumption of deliberate suppression and therefore do not justify invocation of extended limitation. Interpretation and reasoning: - The record shows numerous B/Es over approximately five years with full descriptions, invoices and technical literature; jurisdictional authorities did not question the self-assessments at import; the dispute arose from differing audit interpretation, not from concealment by the importer. - No evidence was placed on record showing suppression, mis-declaration of vital product information or fraudulent intent sufficient to trigger extended limitation or aggravating penalties. The adjudicating authority's conclusion of deliberate mis-classification was unsupported by such evidence. Ratio vs. Obiter: - Ratio: Extended period of limitation and attendant fines/penalties cannot be sustained where import declarations contained full descriptions and technical disclosures over time and no material suppression or mis-statement is proved; mere disagreement in classification by audit does not meet the threshold for extended limitation. - Obiter: Observations on specific precedents and their factual distinctions are supplementary to the main limitation ruling. Conclusions on Issue 2: - The confirmation of adjudged demands by invoking the extended period of limitation, and consequential imposition of fine and penalty, is not sustainable on the facts and is set aside. - Duty demand sustained only for the normal period in accordance with classification under CTI 9027 1000; extended-period demand, fines and penalties are quashed. Disposition (as reflected in conclusions) - The Tribunal upholds classification of the impugned sensors under CTI 9027 1000 (gas or smoke analysis apparatus) and reverses the impugned order insofar as it invoked the extended period of limitation and imposed fines/penalties; the demand is confined to the normal period consistent with the affirmed classification.