TaxTMI 
TaxTMI 
2017 (12) TMI 105
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue process of adjudication, vide the impugned order dated 30/11/201516.12.2015, the lower authority inter alia held that CMD, Elete Electrolyte and NanoSil were required to be classified under CTH 2106 9099 and declared value of CMD was enhanced to USD 1.21 for 1OZ bottle and USD 2.08 for 2 OZ bottle. So also, declared value of NanoSil was enhanced to 15.0 USD per bottle (8 OZ). Certain amount of freight was ordered to be added to the assessable value. The differential duty proposed in the SCN was confirmed by the lower authority. Entire quantity of the imported goods were confiscated and option given by the adjudicating authority for their redemption on payment of fines under Section 125 (1) of the Customs Act, 1962. Penalties were imposed under Section 114A and Section 114AA ibid on the importer appellant. Penalty under Section 112 (a) and 114 AA ibid were also imposed on the Director of the appellant Company and other persons who were noticees in the proceedings. 1.1 Appellants filed a writ petition W.P(C) 6660/2012 before the Hon'ble High Court of Delhi for issue of direction to Customs authorities to permit provisional release of goods. The Hon'ble High Court of Delhi direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iance on the Order dated 10.02.2012 passed by Hon'ble Appellate Tribunal Principal Bench, New Delhi in the matter of CC, New Delhi Vs. Keva Industries - 2013 (292) ELT 90 (Tri.-Delhi). Para 4 of the said order dated 10.02.2012 is reproduced as under:- "......... We are satisfied that the goods being natural sea water have not gone any preparation to be called as food preparation or any other preparation. There is no test report brought out by the Revenue to discharge the burden of proof to claim that the goods in questions submit to tariff entry 2106 and also to satisfy that it is a preparation with or without certain composition and has undergone the process. In such circumstances, a stand of the respondent does not appear to be devoid of merit. The goods were classified under 2501 having heading as Salt (including Table Salt and Denatured Salt) and Pure Sodium Chloride, whether or not is Aqueous Solutions or Containing Added Anti-Cacking or Free Flowiong Agents; Sea Water. The imported goods of the appellant are exactly similar to the goods imported by Keva Industries. The goods imported by Keva Industries were classified as sea waterunder CTH 2501 by the Order dated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (c) To fall under sub-heading 21069099 the product has to be:- i) a food preparationand ii) the said food preparation is not elsewhere specified or included. Emphasis is laid on Note 6 of Supplementary Notes of Chapter 2106 "Tariff item 21069099 includes sweet meats commonly known as "Mithans' or Mithai or called by any other name. They also include products commonly known as "Namkeens", "Mixtures", "Bhujia", "Chabena" or called by any other name. Such products remain classified in these sub-heading irrespective of the nature of their ingredients." The said note 6 clearly states Tariff item 21069099 includes sweet meats (Mithans or Mithai) and also includes namkeens, mixures, bhujia, chabena etc. It is submitted that the imported goods are nowhere close to these products referred to in the said Note 6. It is submitted that the Supplementary Note 6 on Tariff Item 21069099 ie. "other" in which the Ld. Commissioner has classified imported goods makes reference to goods such as Mithans, Mithai, Namkeens, Mixtures, Bhujia, Chabena, which are produced by mixing their ingredient and then frying or roasting them in hot oil. These goods me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, Mysore dated 07.12.2011 (@ page No. 482 Volume II of paper book) clearly states that the imported goods do not fall under the category of food articles and therefore not covered under Prevention of Food Adulteration Act. The said report was completely ignored by the Ld. Commissioner while passing the impugned order. (vi) In absence of definition of the term food preparation or food supplement under the Customs Tariff Act of 1975, the Ld. Commissioner ought to have interpreted the same according to common parlance or phrases prevalent in Indian Common masses. It is a settled principle of law through various judicial precedents that while interpreting Tax Statutes great emphasis should be on the knowledge and awareness available in common parlance. Reliance is place on Ramavatar Budkaiprasad Vs. Assistant Sales Tax Officer, Akola - AIR 1961 SC 1325 (Para 6). Therefore, the classification of duty on imported goods ought to have been according to the common understanding of the goods in the mind of consumers. It is submitted that consumer do not consider imported goods in the category of food supplement or food preparation but as sea water/mineral drops which are used to tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ified under heading 3004 and hence could only be included in residuary heading of CTH 2106. The department as well as the Ld. Commissioner had places emphasis on the name of the imported goods Concentrated Mineral Dropsand concluded that it had gone through the process of preparation or manufacturing. It is submitted that the department had failed to produce any evidence regarding the use of the imported goods in common parlance or substantial report which states that the imported goods are food preparations. The appellant has also placed on record the letters of the consumers and certificate from the doctors which provides that the imported goods (CMD) are mineral salt drop and have some medicated qualities. The imported goods (CMD) are consumed for treating the digestive infections and many times detoxifying the kidney. Other medicated qualities of the imported goods included relief from the joint and bone pain of body. (ix) The Ld. Commissioner has without applying any judicial mind has confirmed the contentions of the Department as stated in the SCN more specifically in paras 51 to 55 of the said SCN. The Departments stand merely relies upon the agreement between the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was not able to prove malafide intention of the appellant to evade to duty. It is humbly prayed to set aside the impugned order. 3.1 On the other hand, Ld. AR, Shri B. Balamurugan strongly contended that the ratio of the Tribunal in Keva Industries will not apply to the present case since the impugned goods are manufactured items as indicated on the bottles themselves. The Ld. AR reiterated the findings in the impugned order. On receiving specific intelligence that appellants have been importing dietary supplements but clearing them on the guise of medicaments, by classifying them under CTH 30045020 instead of under CTH 2106 9099, and thus evading payment of CVD on Retail sale price, investigations were conducted by DRI. According to appellants, CMD is natural, sea supplement from Utah Great Salt Lake manufactured by solar evaporation process. On the label of the product it is indicated that a dosage of 2 ml of CMD contains 220 mg of Magnesium, 600 mg of Chloride and 3 mg of Sodium apart from 45 mg of sulphur. The method to consume is also indicated in the label. 1/4 to 2 ml of CMD has to be taken mixed with food or beverages so that daily consumption will become 2 ml. It is st....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rum are (i) whether the goods imported by the appellant viz. Concentrated Minerals Drops (CMD), Elete Electrolyte (Elete) and Nanosil would merit classification as declared by the appellant under CTH 30045020 or under CTH 21069099 as maintained by the department (ii) whether the enhancement of the declared import values by the department is in order ? 6. The appellants have argued that CMD is an 100% natural mineral concentrate sourced from Great Salt Lake in Utah, USA; that CMD is harvested by using natural evaporation process which takes place over a two year period; that during the course of evaporation, the Sodium content is removed to a large extent and the other minerals are left in micro/traces quantity; that it is used as supplement to reduce the mineral deficiencies in the body, which, in turn, prevents various diseases and is for general health and well being. In respect of the product, Elete, the appellants have similarly averred that it comes from the same source as CMD but with lesser concentration and contains more sodium than CMD and is good for athletes and for people who lose lot of salts through sweat; that it is also a supplement which is use....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s CMD and Elete, the same cannot be considered as 'salt' since the impugned process involved in making CMD is sought to be removing sodium; that salt water is only starting point for manufacture of CMD or Elete which are manufactured through a proprietary process and which removes sodium and ends up in enriching water in minerals; hence end product is not sea or salt water but a dietary supplement rich in minerals; therefore CMD or Elete cannot be classified under Heading 2501. 10. From a perusal of the impugned order, it emerges that controversy to be adjudicated relates to (1) Concentrate Mineral Drops (CMD), 1 oz (30 ml) and 2 oz (60 ml) packings(2) CMD imported through Chennai (Seaport-Export) (3) CMD and Nanosil imported through Chennai (Airport & Aircargo) (4) CMD imported through Bangalore Customs and (5) CMD imported through IGCAR New Delhi. 11. During the hearing, appellants have furnished that a sample bottle of the Andersons Concentrated Mineral Drops 1 oz (30 ml) bottle imported by them. The label of that bottle has been scanned and reproduced below for ready reference : This space is purposely left blank 12. From the above label, what is seen claime....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dients. 6. Tariff item 2106 90 99 includes sweet meats commonly known as Misthans or Mithai or called by any other name. They also includes products commonly known as Namkeens, mixtures, Bhujia, Chabenaor called by any other name. Such products remain classified in these sub-headings irrespective of the nature of their ingredients." 14. We are not able to appreciate that CMD drops would be of genre sought to be explained in the aforesaid chapter notes 5 & 6. In fact, in the three dash heading (---) "Other", the following four dash (----) sub headings are found as under : 2106 90 91 ---- Diabetic foods 2106 9092 ---- Sterilized or pasteurized millstone 2106 9099 ---- Other 15. Another question that pops up is whether CMD drops can be brought into the umbrella of the "residual" heading 21069099, when all the other prior sub headings are evidently relating to specific preparations made out of food, like sterilized or pasteurized millstone, and the like. In our opinion, the answer to this query would be resoundingly in the 'negative'. We are therefore unable to appreciate the conclusion arrived at in the impugned order that CMD drops wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounsel Sh. Sudhir Malhotra submits that the goods brought through bill of entry No. 880111 dated 9-6-2010 is mineral drops 60 ml. each bottle RSP LE (Saline solution) (30 bottle x 6 ml.). These are liquids and the appellant made an averment that the goods are sea water containing natural mineral. Few drops i.e. 5 to 15 are added to fresh water for human intake twice a day. That curbs deficiency of mineral in the body. The intake of the impugned goods does not in any way has adverse impact on the body. The goods in question is the natures gift and reduces deficiency of certain mineral in the body. Therefore, his prayer is that ld. Commissioner (Appeals) having examined the goods in terms of the nature thereof has come to appropriate conclusion for classification and that need not be disturbed. 3. Heard both sides and perused the record. 4. Learned DR for the Revenue reading para 3 of the grounds of appeal, brings out that in the website of the manufacturer the goods has been described as food supplement. Such ground clearly support the case of the respondent. Since the respondent has made an averment that the goods are fit for human consumption to remove certain de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cludible in the assessable value; that appellants have colluded with their suppliers in raising undervalued invoices in respect of CMD by availing the discount facility, including discounts meant for container shipments (availed for air shipments) in contravention in their own agreement. SCN has also relied upon e-mail correspondence between the parties to allege this. For example when the invoice indicated US$15 per bottle of nanosil, appellant had misdecalred the value as US$ 12.60 'per bottle'. 21. From the narration in the SCN it is found that certain details had been retrieved from the hard disc and other documents recovered from the premises of the appellant. From these documents, it emerged that commercial invoices submitted by the appellant at the time of import indicated lower values per bottle against actual values. For example, rate was indicated as USD 12.60 per bottle of Nanosil of 8 ounce where as the rate as found from the documents recovered was USD 15.00 per bottle. The attachment to mail from [email protected] to [email protected] contains attachment titled PRICE LIST.xlsx. The pricelist mentions the MRP of 30 Ml CMD bottle as Rs. 710/- and 60....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reflected on the final invoice. This should save you a lot of money in customs fees.. When Shri Vipin Kumar was questioned about this, he declined to offer any comments on the said e-mail. Therefore, it is evident from the above that Itspossible and their suppliers MRI had a covert and tacit understanding as regards the pricing of the products is concerned. As against the actual price of $ 1.21 and $ 2.08 respectively, the value of the goods were invoiced as $0.97 or $0.94 and $ 1.67 or $ 1.61 respectively, to evade payment of customs duty. It is also pertinent to mention that when the value of CMD 30 ML was enhanced to $ 1.21 per bottle based on the broker agreement, by the assessing group at ACC, Bangalore in respect of the second bill of entry, the enhancement was accepted by Itspossible without any protest / dispute. i. Investigation also revealed that Itspossible had resorted to mis-declaration of the terms of invoice as CIF / CF in some of their bills of entry viz., 3004134 dated 19/03/2011, 2981918 dated 16/03/2011 and 3030554 dated 24/03/2011, when it is evident from the broker agreement that the consignments would be shipped on FCA MRIs factory. It was also reveal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion also brought out the e-mail correspondence between Mr Harry Wilson of Precious Waters Inc and Mr Vipin Kumar on April 11, 2012 contained an attachment of the invoice showing the value @ USD15/bottle of NanoSil. Itspossible had mis-declared the value of NnaoSil as US$ 12.60 instead of the actual value of US$ 15 per bottle, to evade payment of appropriate duty. 22. We find that the appellant has not disputed the fact of recovery of the hard disc / files / documents which have been analyzed by the Commissioner as aforesaid. They have also not been able to adequately refute, by adducing any evidence to the contrary that the adjudicating authority has erred in arriving at the aforesaid conclusions concerning undervaluation. In the circumstances, we are unable to find any infirmity with that portion of the impugned order rejecting the value declared for the impugned goods and redetermining the same as follows : (i) In the case of CMD 1 oz (30 ml) and CMD 2 oz (60 ml) merits redetermination as $ 1.21 and $ 2.08 respectively. (ii) In respect of Nanosil 8 oz as US$ 15 per bottle, in terms of Rule 3 (1) read with Rule 10 of CVR, 2007. However, to arrive at the ex....