2026 (1) TMI 535 - AT - Customs

Lift and escalator spare parts import classification under CTH 8431 challenged; extended limitation and jurisdiction curbed, most demands dropped.

The dominant issues were whether the goods could be reclassified from parts of lifts/escalators under CTH 8431, whether extended limitation under s.28(4) ... Reclassification - Imported goods classifying them as parts of Lifts / Escalators under CTH 8431 - demand of differential duty - alleging that the goods Angle Steel, Belt, Bolt and Nut, Brush, Chain, Clamp, Clip, Door Lock, Fish Plate, Hinge, Push Button, Rope, Springs, Springs Pin, Switch, Washer and Buzzer, imported through various ports, which were required to be classified under the respective CTH - Show Cause Notice issued under Section 28(4) of the Customs Act 1962 invoking the extended period of limitation - liability to confiscation of the imported goods under Section 111(m) and Section 111(o) of the Customs Act, proposals for imposition of penalties under Section 112 (a), 114 A and 114 AA - burden is on the Revenue to adduce proper evidence to show that the goods are classifiable under a different heading than that claimed by the assessee - Whether the rejection by the Adjudicating Authority, of the classification of the imported goods as adopted by the Appellant, its consequent reclassification, and demand of duty as well as attendant penal detriments with which the appellant was visited by the impugned order, is tenable. - HELD THAT:- There has been no evidence let in that the declarations made by the appellant are at variance with the supplier’s document or the certificate of origin, be it as to the quantity, description, or classification. It is also pertinent to note that when the Department is alleging misclassification, it has not controverted the appellant’s specific contention that the appellant has been importing these consignments for many years in the past without any dispute. That in a few instances if at all the appellant had cleared the goods under classification at variance with what has presently been claimed, which the appellant has contended was an inadvertent error/mistake at the end of CHA, the fact remains that whether to remedy such classification and seek refund in such few instances are all commercial calls that are taken by the appellant factoring in various considerations and any inaction on this count does not translate into evidence of deliberate misstatement. When the appellant can hardly be faulted for making a declaration as to the classification in line with the Certificate of Origin as well as its belief that the classification is correct, as is also borne out of its past experience while making imports under the same classification with respect to the impugned goods that had sailed through since 2000 without any dispute, we do not subscribe to the Department’s view that malafide can be imputed to the appellant. In light of the observations of the Apex Court in the aforesaid Uniworth Textiles case since we have found that no malafide can be attributed to the appellant, we are also of the view that the invocation of extended period is untenable and this aspect is to be held in the appellant’s favour. Neither the show cause notice cites the authority under which the SCN issuing Authority has been empowered to issue a demand in respect of goods imported and assessed to duty at various places other than within the jurisdiction of the said Authority, nor the impugned Order indicates that the Adjudicating Authority has been duly appointed as a Common Adjudicating Authority and thereby empowered to adjudicate the show cause notice issued making such demands for imports made outside the territorial jurisdiction of the SCN issuing authority; we are constrained to hold that the Adjudicating Authority has acted outside his jurisdiction to the extent he has confirmed the demands even in respect of goods imported and assessed to duty at various places other than within his territorial jurisdiction. We are therefore of the considered view that for the aforesaid reasons, the confirmation of demands in the impugned order, to the extent it pertains to the goods imported and assessed to duty at various places outside the territorial jurisdiction of the Ld. Adjudicating Authority, being null and void abinitio, cannot be sustained and are liable to be set aside to that extent on this ground alone. Thus, the impugned order, to the extent of the reclassification of door locks and the consequent demand of differential duty along with interest, only for the normal period and confined to the imports made within the territorial jurisdiction of the Ld. Adjudicating Authority, is hereby held to be tenable and is therefore upheld to this limited extent. The rest of the impugned order does not otherwise stand to scrutiny and in so far as it confirms the demand on the remaining imported goods along with applicable interest, finds goods liable to confiscation, imposes consequent redemption fine and attendant penalties on the appellant, is therefore hereby quashed and set aside to that extent. Given our aforesaid findings in favour of the appellant, we do not deem it necessary to address the remaining contentions raised by the appellant. The appeal is disposed of. Issues: (i) Whether the imported items (other than door locks) were classifiable as parts of lifts/escalators under CTI 84313100, and whether the reclassification to various tariff items based on Section XVI exclusions and allied reasoning was sustainable; (ii) Whether door locks were excluded from classification under CTI 84313100 and correctly classifiable under heading 8301; (iii) Whether the extended limitation period and the consequential confiscation, redemption fine, and penalties were sustainable; (iv) Whether the adjudicating authority could confirm demands for imports assessed at ports outside its territorial jurisdiction.Issue (i): Whether the imported items (other than door locks) were classifiable as parts of lifts/escalators under CTI 84313100, and whether the reclassification to various tariff items based on Section XVI exclusions and allied reasoning was sustainable.Analysis: The classification claimed under CTI 84313100 (parts suitable for use solely or principally with lifts/escalators) inherently permits consideration of suitability/sole or principal use, subject to the General Rules for Interpretation and Section/Chapter Notes. Where Revenue seeks to displace the importer’s classification, the evidentiary burden lies on Revenue to establish that the goods fall under the alternative headings and that the relied Section XVI exclusions (including “parts of general use” and other excluded articles) are attracted. The impugned reclassification rested primarily on audit recommendations and Section XVI exclusion notes, without supporting product-specific evidence (such as technical literature, test reports, expert opinion, or other material) demonstrating general-use character or the factual predicates necessary to apply the exclusions. Shifting the burden to the importer for lack of evidence was treated as impermissible in a reclassification attempt initiated by Revenue.Analysis: Further, the adjudication relied on certain Section XVI exclusion notes and Section Note 2(a) reasoning that were not clearly invoked in the show cause notice, resulting in impermissible supplementation of grounds and violation of natural justice. The approach of consigning goods to residual “others” classifications, despite an available specific parts heading premised on sole/principal suitability, was treated as inconsistent with the rule that a specific entry is preferred over a residuary entry. In these circumstances, the reclassification (other than for door locks) was held unsustainable.Conclusion: Reclassification and consequential duty demand on the imported items other than door locks were set aside, and classification under CTI 84313100 was accepted for those items.Issue (ii): Whether door locks were excluded from classification under CTI 84313100 and correctly classifiable under heading 8301.Analysis: The HSN Explanatory Notes to heading 8431 specifically exclude locks for passenger and goods lifts (heading 8301). This specific exclusion was treated as determinative against classification of door locks under CTI 84313100, notwithstanding their use with lifts/escalators. Accordingly, the reclassification of door locks under heading 8301 (CTI 83014090) was upheld, though the sustainability of the resulting demand was further confined by limitation and jurisdictional findings addressed separately.Conclusion: Door locks were held not classifiable under CTI 84313100 and were correctly classifiable under CTI 83014090.Issue (iii): Whether the extended limitation period and the consequential confiscation, redemption fine, and penalties were sustainable.Analysis: Extended limitation under Section 28(4) requires a finding of wilful misstatement/suppression with intent to evade. In a classification dispute substantially involving interpretational questions, and where the importer’s declarations matched supplier documents/certification and past clearances had occurred over years without dispute, mala fides could not be inferred in the absence of evidence. The reasoning adopted to invoke the extended period was rejected, and the limitation was confined to the normal period.Analysis: Since the dispute was treated as interpretational and mala fides were not established, the foundation for confiscation and for imposition of redemption fine and penalties (including under Sections 114A and 114AA) was held to fail to the extent based on alleged wilful misstatement/misdeclaration.Conclusion: Invocation of the extended period was set aside; confiscation, redemption fine, and penalties were set aside to the extent they rested on alleged wilful misstatement/misdeclaration in this classification dispute.Issue (iv): Whether the adjudicating authority could confirm demands for imports assessed at ports outside its territorial jurisdiction.Analysis: In the absence of any demonstrated appointment/authorisation as a common adjudicating authority or other enabling order/notification empowering adjudication across multiple ports, confirmation of demands for bills of entry assessed outside the adjudicating authority’s territorial jurisdiction was treated as beyond jurisdiction and void ab initio. The Department did not controvert this objection.Conclusion: Demands relating to imports assessed outside the adjudicating authority’s territorial jurisdiction were set aside as without jurisdiction.Final Conclusion: The impugned order was sustained only to the limited extent of reclassification of door locks under CTI 83014090 with differential duty and interest confined to the normal period and within territorial jurisdiction; all other reclassification, demands, confiscation, redemption fine, and penalties were quashed to the stated extent, with consequential relief as per law.Ratio Decidendi: Where Revenue seeks to displace an importer’s classification under a parts-heading premised on sole/principal suitability, it must discharge the evidentiary burden to establish both the applicability of any Section/Chapter Note exclusions and the proposed alternate classification; absent such evidence (and absent proper notice of relied grounds), reclassification and associated penal consequences cannot be sustained, while a specific HSN exclusion for an item (such as lift locks) governs its classification notwithstanding its use with the machinery.