2026 (1) TMI 1100 - AT - Customs

Classification of optical fibre cables: importer succeeds as demand dropped due to lack of sample testing and no suppression

Classification of optical fibre cables was disputed with allegations of misclassification and suppression; the Revenue failed to draw and test samples, ... Classification of goods - optical fibre cables - mis-classification - suppression - test report and sample testing - Burden of proof - Extended period of limitation - Adjudicating Authority - Refund claim - Larger Bench decision - stay by the Supreme Court - Circular No. 12/2006-Cus - HELD THAT:- Considering the factual details and the consistent view of the coordinate Benches of the Tribunal that suppression clause would not be applicable in such cases, we do not find any necessity to interfere with the Order passed by the Adjudicating Authority dropping the confirmed demand. Accordingly, we dismiss the appeal filed by the Revenue. Prima facie it appears that after about 4 years from the date of decision of LB in the case of Vodafone [2018 (1) TMI 959 - CESTAT MUMBAI (LB)], Revenue suddenly became wiser and invoked the extended period provisions and initiated the present proceeding in a hurried way without having drawn any sample for the past consignments. The Board Circular dated 28.02.2006 clarifies that necessary verification is required to be taken up in each and every case to come to the correct conclusion about the classification. Even as the Board Circular is not binding on the assessee, it is very much binding on the Revenue, so long as it does not run contrary to any HC/SC decision. Therefore, non-drawal of samples and testing the same proves fatal to the case of the Revenue in the present proceedings. We note that the LB decision of Vodafone, has held that goods are classifiable under CTH 9001 00 00 which has been stayed and the issue is sub-judice before the Supreme Court. Therefore, the classification of the goods in question in the present case, is not within our jurisdiction. Hence, we are not even attempting to go into the arguments adduced by both the sides to pitch for the classification to be adopted. We have found that that Revenue has not made out any case of suppression and the issue is that of interpretation. Hence, we have held that the dropping of the demand pertaining to the extended period by the Adjudicating authority is correct. There is no allegation to the effect that the goods under litigation are different from the goods that were tested and the Report was generated on 10.1.2014. On the other hand, except for presumptions and assumptions, without drawing any sample and getting them tested, the Revenue has not made out any case against the appellant for the consignments imported during the period under question. The CBEC had issued the Instructions way back in 2006 to get the consignments verified properly before finalizing the classification. Therefore, we set aside the confirmed demand and allow the appeal of the importer to this extent. Appeal filed by the Revenue is dismissed and the appeal filed by the importer stands allowed with consequential relief, if any, as per law. Issues: (i) Whether the Revenue's appeal against the Adjudicating Authority's dropping of the extended period demand of Rs.2,23,22,087/- should be upheld; (ii) Whether the importer's appeal against the confirmed demand of Rs.14,85,505/- in respect of two Bills of Entry should be allowed.Issue (i): Whether the Adjudicating Authority correctly dropped the extended period demand for past consignments on the ground that suppression was not established and limitation barred recovery.Analysis: The issue of classification between CTH 8544 70 90 and CTH 9001 00 00 has been litigated long-standingly and was the subject of a Larger Bench decision that is stayed by the Supreme Court. Board Circular No.12/2006-Cus requires verification and sample testing by the Department before invoking extended period demands. In the present facts the Revenue did not draw or test samples for the past consignments and has not produced contemporaneous test reports to establish that suppression occurred. Coordinate Tribunal decisions emphasise that the suppression clause and extended period cannot be applied where the issue is one of interpretation and where the Department has not carried out required verification by sample testing.Conclusion: The Revenue's appeal is dismissed and the Adjudicating Authority's dropping of the extended period demand of Rs.2,23,22,087/- is upheld.Issue (ii): Whether the confirmed demand of Rs.14,85,505/- for two Bills of Entry is sustainable.Analysis: The importer relied on an earlier laboratory Test Report dated 10-01-2014 accepted by the Department and on finalization and refund orders in the importer's favour. The Revenue produced no sample-specific test report for the two contested Bills of Entry and relied on general letters and the Larger Bench view (which is stayed). Tribunal authorities require that test reports applicable to a specific consignment cannot be transposed to other consignments absent proof. Given absence of drawing/testing of samples for the two Bills of Entry and the existence of an earlier accepted test report in the importer's own case, the confirmed demand lacks evidentiary support.Conclusion: The importer's appeal is allowed and the confirmed demand of Rs.14,85,505/- is set aside.Final Conclusion: The Adjudicating Authority's order is upheld insofar as it dropped the extended period demand and the importer's appeal is allowed insofar as the confirmed demand for the two Bills of Entry is set aside; the Revenue's appeal is dismissed and the importer's appeal is allowed with consequential reliefs as per law.Ratio Decidendi: Where classification is the core issue and the Department has not drawn and tested samples for specific consignments, extended period demands based on alleged suppression are unsustainable and test reports or verification specific to each consignment are required to sustain duty demands.