2014 (5) TMI 754

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....he arguments of the appellants can be summarised as follows. Activated Bentonite merits classification under CTH 2508 since the said heading includes both unprocessed (crude) Bentonite as well as processed Bentonite. Since activation is treating with acid/alkali, it is a process and therefore, acid/alkali treated Bentonite merits classification under CTH 2508 as processed Bentonite. It is also argued that CTH 2508 is more specific in description compared to CTH 3802 and hence, as per the interpretative Rules, CTH 2508 has to be preferred over CTH 3802. Alternatively it is argued that even if it is held classifiable under CTH 3802, since in most of the cases the demands for differential duty have been issued invoking the extended period of time, the demands are time barred. Another argument raised is that since the changes in the tariff description has been brought about by means of a notification and the said notification allows only change in the tariff description and not any change in the rate of duty, differential duty demands cannot be made on account of change in classification. 2.2 Revenue's contention is that since on account of activation, there is change in the st....

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....s vide Notification No. 137/2006-Cus. (N.T.), dated 29-12-2006. "2508   Other clays (not including expanded clays of Heading 68.06), Andalusite, kyanite and sillimanite, whether or not calcined; mullite; chamotte or dinas earths 2508.10 - Bentonite : 2508 10 10 --- Crude 2508 10 90 --- Other (includes processed and ground)"   In other words, the word "activated" was omitted from CTH 2508 10 90. There was no change in the tariff description of CTH 3802. 4.3 Chapter Note 1 to Chapter 25, which remained unchanged during the above period, read as follows :- "1. Except where their context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that menti....

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....ns of an alkali, they are emulsifiers, suspension agents and agglomerating agents; these are used, in particular, in the manufacture of polishing or cleaning preparations, and, because of their swelling properties, for improving foundry sands and drilling sludge. When activated by means of an acid, they are mainly used for decolourising animal, vegetable or mineral oils, fats or waxes." 4.6 A careful reading of Note 1 to Chapter 25 read with HSN Explanatory Notes to CTH 25.08 and 38.02, make it abundantly clear that activated Bentonite merits classification under Heading 38.02. As per technical literature, activation of Bentonite by acid or alkali results in changes in the molecular structure of the product. C.B.E. & C. vide Circular 32/2002, dated 10-6-2002, after examining the issue in depth, has clarified that activated Bentonite merits classification under CTH 3802. The Hon'ble Apex Court in the case of CC v. Business Forms Ltd. [2002 (142) E.L.T. 18 (S.C.)] has held that since the Indian Customs Tariff is based on Harmonised System of Nomenclature (HSN), the Explanatory Notes to HSN have not only persuasive value but are entitled to greater consideration in classifying....

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....pular brands and their country of origin of such goods are stated to be as follows :- Brand Country of origin Tonsil Optimum 210 FF Germany Tonsil Optimum 230 FF Indonesia Tonsil Optimum 250 FF USA WAC Excel Malaysia WAC Classic Malaysia Galleion V2 Super Japan It has also been alleged that the incorrect classification was resorted to so as to evade customs duty. "2. The matter has been examined. Goods, namely, "Bentonite" in natural or crude form is classifiable under sub-heading 2508.10 whereas decolourising earth would be classifiable under sub-heading 2508.20. Bentonite is stated to be a naturally occurring clay predominant in Indonesia, Germany, Japan, USA and India. India is, however, stated to be importing bentonite and its derivatives for use in cosmetics, medicinal formulations, drilling industry and food industry. HS Explanatory Notes to Heading 25.08 states that it includes all natural clay substances, but it excludes activated clay from the scope of the heading. 3. Clay Bentonite in crude form is stated to be made effective by activating it with acid or alkali. Some of the mineral acids used for acid activatio....

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....emand notices for short-levy alleging suppression, especially in view of the Board's circular dated 10-6-2002 cited supra which had alerted the departmental officers about the misdeclarations made by the importers of processed bentonite. Even for the period prior to 10-6-2002, the same principle would apply. We have also perused the description declared by the appellants in the various B/Es filed by them. The goods have been described in various ways such as bleaching earth, decolourising earth, processed clay/bentonite and sometimes by their brand names, mentioned in the Board's circular cited above. Nothing prevented the department from calling for the detailed specifications of the product, drawing of samples and getting them tested, to ascertain whether the product imported is activated or not. Further these items are imported on a regular basis by various traders/actual users such as foundry industry, oil exploration industry, vegetable oil industry and so on. If that be the case, the department should have been well aware of the nature of the product and its classification. As could be seen from the records, in many cases, the department itself had assessed activated clay/Ben....

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.... a short period between 1-1-2007 to 28-2-2007 when in the Finance Bill, 2007, rates of duties were altered. Further, in the present appeals, where this issue has been raised, the imports took place in 2008. Therefore, this argument has no relevance. 4.12 Another argument has been made that for computing the time limit of normal period of limitation, it is not the date of the show cause notice demanding short levy that is relevant but the date on which such show cause notice is served on the importer. There is merit in the argument. Section 28(1)(a) stipulates that whenever there is a short levy or non-levy or erroneous refund of duty, then the proper officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty or interest which has not been so levied or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Thus it is not date of issue of show cause notice but service of notice that is relevant for computing the time period. Further, as per the definition of relevant date, for reckoning the time period, it is....