2026 (2) TMI 1035 - AT - Customs

Classification as Medical Instruments upheld for diagnostic thermal printers, nullifying consequent duty, confiscation and penalties.

Thermal printers that are specifically designed or adapted to produce diagnostic quality hardcopy for professional medical imaging are classifiable under ... Classification of goods - thermal printers - Specific adaptation test for classification under CTH 9018 - Burden of proof for re classification on Revenue - Thermal printers as instruments 'used in medical sciences' - Invocation of extended period u/s 28(4) - Confiscation and penalties - Whether the thermal printers imported by the appellant are classifiable under CTI 9018 90 99 as claimed by the appellant or under CTI 8443 32 90 as claimed by the department. - HELD THAT:- It needs to be noted that while CTH 8443 covers printers using thermal print process, but thermal printers specially designed for use in medical science are classifiable under CTH 9018. Parameters like spatial resolution and contrast resolution are necessary to determine whether a printer can print diagnostic quality images. Every thermal printer of CTH 8443 is not used in medical sciences. For instance, thermal printing technology is used for printing labels, tickets and barcodes in industries like retail, shipping, pharmacy, manufacturing and warehousing, automotive, banking and aviation. Thus, thermal printers which are specially designed for use in medical science cannot be classified under CTH 8443 merely because it employs thermal print process. Such being the position, the thermal printers imported by the appellant would fall under CTH 9018 since they are instruments used in medical sciences. In terms of Section Note (1) (m) to section XVI of the Customs Tariff, articles of Chapter 90 are excluded. The thermal printers imported by the appellant are, therefore, outside the scope of CTH 8443. The discussion leads to the inevitable conclusion that the thermal printers imported by the appellant are used in medical diagnosis and are classifiable under CTH 9018. They are different from ordinary thermal printers which fall under CTH 8443. The Additional Director General has failed to notice this distinction in the impugned order and, therefore, committed an error in holding that the thermal printers imported by the appellant would be classifiable under CTI 8443 32 90. This finding cannot be sustained. The demand of duty with interest and penalty upon the appellant cannot, therefore, be sustained and is set aside. As the impugned order confirming the demand of differential duty and imposing penalties under section 112(a) and section 114AA of the Customs Act upon the appellant has been set aside, the penalty imposed upon Yogesh More under section 112(a) of the Customs Act also deserves to be set aside and is set aside. Issues: (i) Whether the thermal printers imported are classifiable under Customs Tariff Item 9018 90 99 (instruments and appliances used in medical sciences) or under Customs Tariff Item 8443 32 90 (other printing machinery capable of connecting to ADP machines/networks); (ii) Whether the departmental demand of differential duty, invocation of extended limitation under section 28(4) of the Customs Act, confiscation and penalties (including penalty under section 112(a) on the manager) are sustainable in view of the classification decision.Issue (i): Classification of the imported thermal printers: CTI 9018 90 99 or CTI 8443 32 90.Analysis: The competing headings were compared using chapter notes and HSN explanatory notes. Chapter 90 excludes articles covered by Chapter 84 only if not specifically designed for medical use. Evidence before the Tribunal included product literature, white papers and expert declarations showing that the printers produce diagnostic-quality hardcopy on heat-sensitive medical film, are used with medical imaging modalities, and meet parameters (spatial and contrast resolution) necessary for diagnostic printing. The department produced no evidence disproving medical use for these specific models. Authorities and past Tribunal decisions were applied to hold that goods specifically designed or adapted for professional medical use fall within Chapter 90 despite using a thermal print process common to other printers.Conclusion: The thermal printers are classifiable under CTI 9018 90 99 as instruments and appliances used in medical sciences (in favour of the assessee).Issue (ii): Sustainability of the demand for differential duty, invocation of extended limitation under section 28(4), confiscation and penalties (including penalty imposed on the manager).Analysis: The demand, confiscation and penalties were consequences of the re-classification under CTI 8443 asserted by the department. Since the re-classification was not established and the Tribunal has held the goods to be classifiable under CTI 9018, the foundational basis for invoking differential duty, confiscation and the penalties collapses. The penalty on the manager was imposed consequent to the order against the importer; with that order set aside, the consequential personal penalty was also examined and found unsupported.Conclusion: The demand of differential duty, confiscation and penalties (including the penalty of Rs. 10 lakhs imposed under section 112(a) on the manager) are unsustainable and are set aside (in favour of the assessee).Final Conclusion: On the substantive classification and consequential reliefs, the departmental order dated 17.02.2020 is set aside and the appeals are allowed, resulting in annulment of the demand, confiscation and penalties tied to the erroneous re-classification.Ratio Decidendi: Goods that are specifically designed or adapted for use in professional medical diagnosis and that produce diagnostic-quality output are classifiable under Chapter 90 (CTI 9018) even if they employ a thermal print process; the burden to prove re-classification rests on the revenue and absent such proof consequential demands and penalties cannot be sustained.