TaxTMI 
TaxTMI 
2022 (5) TMI 1319
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..../Appeal-II dated 28.03.2018 of the Commissioner of Customs (Appeals-II), Mumbai-II, Nhava Sheva. By the impugned order, the Additional Director General held as follows: "7 Accordingly, in view of the aforesaid discussions, I pass the following Order: 7.1 I reject the following classification and reclassify the same as below: i) I reject classification of room air conditioners (RAC) with model nos. MSH GE 35/50 VB + MUH GE 35/50 VB, MSZ EF 25/35/50 + MUZ EF 25/35/50 and MSZ HJ 25/35/50 VA + MUZ HJ 25/35/50 VA under CTH 84151010 in respect of bills of entry as detailed in column 9 of Worksheet I to the Show Cause Notice and reclassify the same under CTH 84158190 as detailed in column 21 of worksheet I to the notice. ii) I reject the classification of room air conditioner of series MSH GE 60 VB + MUH GE 60 VB and all CMVRF (other than CMVRF with only outdoor unit of series PUCY) under CTH 84151010 or as 'parts of air conditioners under under CTH 84159000in respect of bills of entry as detailed in column 9 of Worksheet I to the Show Cause Notice and re-classify the CTH 84158110 as detailed in column 22 of the Worksheet I to the ....
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....of the worksheet I to this notice viii) l reject the classification of branch pipe, outdoor twinning kit, joint pipe, header under CTH 74112900 imported vide various bills of entry as stated in column 9 of Worksheet I to this notice and reclassify the same as parts of air conditioners under CTH 84159000 as detailed in column 21 of the worksheet I to this notice. ix) I reject the classification of indoor heat exchanger and outdoor heat exchangers imported vide various bills of entry as detailed in column 9 of Worksheet I to this notice under CTH 84195090 and reclassify the same as 'parts of air conditioners' under 84159000 as detailed in column 21 of worksheet I to this notice. x) I reject the classification of the BM adapter of series BAC HD 150 imported under various bills of entry as detailed in column 9 of Worksheet to this notice under CTH 85044030 and hold the same as 'parts of air conditioners' under CTH 84159000 as detailed in column 21 of worksheet to the notice. Consequentially due to reclassification as in (i) to (x) above, I reject the declared notification no. with corresponding serial No., based on w....
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.... in Worksheet Ill to this notice totally valued at Rs. 16,09,06,981/- under Section 111(d) and Section 111(m) d the Customs Act, 1962. However, I refrain from confiscating the wireless Remote Controller seized by DRI (as detailed in Worksheet I) totally valued at Rs 9,90,294/- under Section 111(d) and Section 111(m) of the Customs Act, 1962. However, I give an option to redeem the goods under Section 125 of the Customs Act, 1962 on payment of Redemption Fine amounting to Rs. 3,00,00,000 (Rupees Three Crore only). 7.7 I also order confiscation of the other goods except Wireless Controller imported by the noticee vide the remaining bills of entry and seized goods as mentioned above)totally valued at Rs.127,93,52,737/-under Section 111(d) and 111(m) of the Customs Act. 1962. however, as the goods are not physically available I do not propose to impose redemption fine although the noticees are liable for penalty on account of these goods also. 7.8 Penalty company: i) L impose penalty of Rs. 9,70,68,548/- (Rupees Nine Crore Seventy Lakh Sixty Eight Thousand Five Hundred and Forty Eight only) along with interest thereon on M/s. Mitsubishi Elec....
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....pees Fifty Thousand only) on M/s. A.V. Global & Co., CB under Section 114AA of the Custom Act, 1962 iii) I refrain from imposing penalty on M/s. S.K. Jain & Company under Section 112(a) and Section 114AA of the Customs Act, 1962. 2.1 This case is based on the show cause notice issued by the Additional Director General DRI. However during the hearing held on 11.11.2021, counsels for appellant stated that he would not take plea of jurisdiction on the basis of decision of Hon'ble Apex Court in case of Canon and argue the case on merits only. 3.1 We have heard Shri Ganesh K S Iyer, Shri Rajat Bose and Neeladr, Advocates for the appellants and Shri Ramesh Kumar, Assistant Commissioner, Authorized representative for the revenue. 3.2 Arguing for the appellants learned counsel submits: • The following allegations in the Impugned Order are being challenged by the Appellant: • Room Air Conditioning Systems (RAC) units cannot be classified under Customs Tariff Heading (CTH) 84151010, of the First Schedule of the Customs Tariff Act, 1975, and have to be classified under CTH 84158190. • City Multi Variable Refrigerant Fl....
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....re also sold separately by the overseas Supplier and further, in retail by the importer in India, with separate unit pricing. • At time of import, no one part can be correlated to another part, and the parts, by themselves, cannot operate as a complete air conditioner. The combination of parts is unknown at the time of import. The combined cooling capacity of the indoor units cannot be in the range of 50% to 130% of the cooling capacity of the outdoor unit [diversity ratio) as it is not known how many indoor units make the combination with outdoor units. • Rule 2(a) of the General Rules of Interpretation of the Customs Tariff provide that article presented in a disassembled form, can only be classified as a complete article, provided when presented they have the essential characteristic of the finished article. This is not the case here as per the grounds mentioned above. • CMVRF units should alternatively be classified as CTH 84151010 - Split Systems • Even if assuming but not admitting, that the imported units cannot be classified as parts of air conditioner, under CTH 84159000, the same has to be classified under CTH 84151010, ....
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....or Notification No. 46/2011 (Cus) dated 1 June 2011 IV. Whether the Air Conditioners need to be assessed on the basis of MRP/ RSP for the purpose of levy of countervailing duty. V. Whether the goods are liable for confiscation and whether the importers, there employees and the Custom Broker liable to penalties 4.3 Principal Additional Director General has while adjudicating the show cause notice, has recorded on the issue of classification of Air Conditioners as follows: "6.2 CLASSIFICATION OF AIR CONDITIONERS 6.2.1 I find that the DRI has alleged that Room Air Conditioners (RAC) with Model No. MSH-GE 35/50 VB + MUH GE 35/50 VB, MSZ EF 25/35/50 + MUZ EF 25/35/50 and MSZ HJ 25/35/50 VA+ MUZ HJ 25/35/50 VA have both heating and cooling capacity and that they incorporate a refrigerating unit and a heat pump with a valve for reversal of cooling/heat cycle and perform dual function of heating and cooling premises and hence they are appropriately classifiable under tariff sub-heading 841581. Similarly, DRI came to the conclusion that the Air Conditioners with matching outdoor unit which are of capacity less than 2 tons, are c....
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.... models, only one indoor unit is used, which is used for a single room/ area to be air conditioned) The notices stressed upon the fact that the Air Conditioners fufilling three conditions are appropriately classifiable under tariff item 84151010 6.2.1.4 ....... 6.2.1.5 l find that Chapter heading relevant for classification of the indoor units and outdoor units of various types of AC (when imported as complete unit or as parts), is tariff heading 8415 of the First Schedule to the Customs Tariff Act. Tariff heading 8415 is re-produced as under: Tariff Item Description 8415 Description of goods Air-conditioning machines, comprising a motor driven fan and elements for changing the temperature and humidity including those machines in which the humidity cannot be separately regulated 8415 10 - Window or wall types, self-contained or "split system": 8415 10 10 --- Split System 8415 10 90 --- Other 8415 20 - Of a kind used for persons in motor vehicles: 8415 20 10 --- For buses 8415 20 90 --- Other - Other ....
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....rator for each room. However, I observe same is silent on the presence of one condenser and one evaporator. From the scope of this sub- heading and the explanatory notes above, it is seen that impugned items are not expressly excluded from this sub- heading. However to arrive at correct classification the scope of the sub-heading 8415.81 too needs to be analysed. 6.2.1.12 Now coming to sub-heading 841581, it is seen that the scope of 841581, specifies that air conditioning machine incorporating a refrigerant unit and a valve for reversal of the cooling and heat cycle (reversible heat pumps)are classifiable under the said sub-heading. It is a matter of fact that PAC series MSH-GE 35/50/60 VB, MSZ-EF 25/35/52 and MSZ-HJ with matching outdoor units MUH GE 35/50/60 VB, MUZ EF 25/35/50 and MUZ-HJ 25/35/50 VA, respectively have both cooling and heating capacity. To elaborate, these air conditioners incorporate a refrigerating unit and a valve for reversal of cooling/heat cycle (reversible heat pumps) and perform a dual function of heating and cooling the premises, thereby fulfilling the conditions of sub heading 8415.81. Therefore, the impugned items are also classifiable ....
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....arly elaborates that when 2 or more headings seem to apply for a product, the one which provides the most specific description of the product should be used. In the instant case, it appears that the air conditioners which have both cooling and heating capacity is appropriately sub-heading 841581 rather than in the sub-heading 841510. In support of my contention that the heading which provides the most specific description shall be preferred to the Heading providing a more generic description, I rely upon the following decisions 1) Moorco India Ltd. v. CC[1994 (74) ELT 5 (SC)], 2) CCE v. SPM India Ltd. [2007 (211) ELT 573 (Tri.)] 3) CCE v Woodcraft [1995 (77) ELT 23 (SC)] 4) Collector of Customs v Business Forms Ltd [2002 (142) ELT 18 (SC)] 5) Grasim Industries Ltd. Vs. Collector of Customs, Bombay [(1998 (103) E.L.T. 515 (Tribunal)], 6) Commissioner of Central Excise, Bhopal Vs. Minwool Rock Fibres Ltd. [2012 (278)E.L.T.581 (S.C.)], 7) Sanwar Agarwal vs Commissioner Of Customs (Port) &... on 7 April, 2016 in WP No. 496 of 2015 In all the decisions cited above, the Hon&#....
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....t the noticees have contended that till May 2013, complete CMVRF ACs were imported as a set as one consignment under single Bill of Entry and hence they classified the same under 84151010. As per Section Note 4 to Section XVI and SI Rule 2(a), the same are classifiable as complete AC. ........ 6.2.2.5 I find that the noticee has contended that post May 2013, they were importing indoor units and outdoor units separately and maintaining stock of the same for sale to different projects as and when required and since the indoor units and outdoor units are imported separately they are rightly classifiable as parts. I find that the noticees, gave specific submissions for their imports, prior to" May 2013 and post May 2013, which are as under: PRE MAY 2013- The noticees submitted that, till May 2013, complete ACs were imported as a set as one consignment under single bill of entry. As per Section Note 4 to Section XVI and GI Rule 2(a), the same are complete AC. In CMVRF, as already mentioned, customers have an option to choose indoor units as per their requirements and make a customized combination (set), needless to say in all the cases within such a case....
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.... be classified under tariff sub heading 841510. 6.2.2.7 I find that Chapter sub heading 8415 10 covers window or wall types, self-contained or "split system" and Chapter sub heading 8415 81 covers incorporating a refrigerating unit and a valve for reversal of the cooling or heat cycle (reversible heat pumps). Both these Chapter headings are not specific about the implications of ducting requirement. Further, these units have valve for reversal of the cooling or heat cycle i.e. have both cooling and heating capacity. Accordingly, these kinds of air conditioners are specifically covered under Chapter Heading 841581 as elaborately discussed, under paras 6.2.1 to 6.2.1.17 6.2.2.8 .......... 6.2.2.9 To classify the CMVRF, in addition to explanatory notes to HSN discussed above, it is pertinent to place reliance on Note 4 to Section XVI of the Customs Tariff. It states that: "Where a machine (including a combination of machine) consists of individual components (whether separate or interconnected by piping by transmission devices, by electric cables or by other devices) intended to contribute together to a clea....
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....igerating unit and a valve for reversal of the cooling or heat cycle'. With respect to CMVRF, which have outdoor units of series PUCY, which have only cooling capacity when connected to multiple indoor units, when imported with the diversity ratio within 50% to 130%, applying the same analogy have to be classified as split air conditioner incorporating a refrigerating unit under sub heading 841582. As all the CMVRF air conditioners are above 2 ton, they are appropriately classifiable under tariff item 84158210. 6.2.2.14 The noticees have contended that in certain cases where ceiling concealed duct type indoor units i.e. of PEFY series are not used and in such cases, complete CMVRF type AC (irrespective of the type of outdoor unit or in other words, the provision for heating and cooling function or only cooling function) will be classified under tariff sub heading 841510. I find that out of the Air Conditioners CMVRF, 74% cases were carrying PEFY/Ducted IDUs. I notice that in Chapter Heading 8415 10, the Window or wall types self-contained or "split system" are included, whereas in 8415 8110, split air conditioners two tonnes and above are included. All the CMVRF ....
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.... in the Indian Customs Tariff." However the observations made by the Principal Additional Director General, while ignoring the ruling on US Tariff is contrary to sub article (3) to Article 3 of The International Convention on the Harmonized Commodity Description and Coding System (HS Convention) entered into force on 1 January 1988, to which India is signatory and also the fact that Customs Tariff has been fully aligned with the HSN, till the six digit level. Article 3 of the convention reads as follows: "Article 3 Obligations of Contracting Parties 1. Subject to the exceptions enumerated in Article 4 : (a) Each Contracting Party undertakes, except as provided in subparagraph (c) of this paragraph that from the date on which this Convention enters into force in respect of it, its Customs tariff and statistical nomenclatures shall be in conformity with the Harmonized System. It thus undertakes that, in respect of its Customs tariff and statistical nomenclatures: (i) it shall use all the headings and subheadings of the Harmonized System without addition or modification, together with their related numerical codes; ....
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....5 Air conditioning machines, comprising a motor- driven fan and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated. 8415.10 - Window or wall types, self-contained or "split- system" 8415.20 - Of a kind used for persons, in motor vehicles - Other : 8415.81 -- Incorporating a refrigerating unit and a valve for reversal of the cooling/heat cycle (reversible heat pumps) 8415.82 -- Other, incorporating a refrigerating unit 8415.83 -- Not incorporating a refrigerating unit 8415.90 - Parts 4.7 The reason for why we have reproduced this table after deleting the expansions to the eight digit level, is obvious, as Principal ADG holds has held by comparing the entries at eight digit level to hold that 85158110 and 84158190 are more specific. For determining the classification it is settle principle that that entries at same level are comparable, but it does not imply that apple and oranges are comparable. To compare the entries at four dash level, one has to ascertain that entries at all the earlier levels too are comparable....
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....fected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the h....
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....rises when the goods consisting of more than one material fall in two or more headings. It is further clear that each of the classes are mutually exclusive. What is covered in (a) cannot be classified in (b) and (c) operates when neither applies. It is like a residuary clause. The primary question, therefore, is whether the goods manufactured by the appellant fall in clause (a) as if it can be classified with reference to (a) then clauses (b) and (c) would not apply. Clause (a) incorporates the common and general principle that the goods which can be classified specifically with reference to any heading should be placed in that category alone. The specific heading of classification has to be preferred over general heading. The clause contemplates goods which may be satisfying more than one description. Or it may be satisfying specific and general description. In either situation the classification which is the most specific has to be preferred over the one which is not specific or is general in nature. In other words, between the two competing entries the one most nearer to the description should be preferred. Where the class of goods manufactured by an assessee falls say in more t....
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....ort Tariff 13. From Heading No. 8415 of First Schedule to the Customs Tariff Act, 1975, it is seen that air-conditioning machines comprise of a motor driven fan and elements for controlling humidity and temperature. Generally, and more particularly in the retail segment, such machines are either of 'window or self- contained' or 'split system' types. There are several other equipment which are designed for larger spaces and for applications that go beyond residential or commercial. In the structuring of the sub-headings, emphasis is placed on the 'split system' and, by default, the 'window' types. All other air- conditioning equipment are relegated to the residuary categorization and it is within such that 'split air-conditioners' finds deployment. From this, it can be inferred that 'split system' air-conditioning machines and 'split air-conditioners' are distinct. Neither has the show cause notice nor the adjudicating authority forayed an elaboration of either; that these existed at the eight digit level under different sub-headings did not appear to have impressed itself, let alone the need for appreciating the distinction on the adjudicating authority. That, at th....
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....s there any ground for such supposition in the show cause notice nor is there reason to conclude that the cooling source in the 'split system' was absent in the impugned goods and substituted by another. There is no descriptive restriction in sub-heading No. 8415 10 to conclude that heating capability is not intended for coverage by that tariff entry. The impugned order has failed to exclude applicability of description of 'split systems' to the impugned goods which would have entailed some knowledge of what that is." 4.11 In case of International Aircon, tribunal stated as follows: 17. The sanctity of the classification narrative lies in its inexorable logic from beginning to end and within itself. Hence, the groupings, as well as descriptions, have a significance that are not to be ignored. The General Rules for Interpretation also acknowledges this inherent logic and rule 3 is applicable when goods are classifiable under two headings. It is now settled law that though the importer may seek a classification it is the responsibility of the assessing officer to determine the appropriate heading; hence the application of rule 3 of General Rules of Interpretat....
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....goods are not 'window' type but they are all of the 'split' type with an external condenser unit and an indoor evaporator unit. In the Explanatory Notes to the Harmonized System of Nomenclature pertaining to sub-heading no. 841510, we find no qualifying characteristic that restricts the adoption thereof to 'cooling facility' alone; neither is there any capacity qualification included therein. The existence of such under a parallel hierarchy in the residual category within the four-digit level cannot be insinuated into the specified category merely to exclude coverage under the latter. That would be tantamount to conferring approval to the attempt by the adjudicating authority to alter the logic, and structure, of the Schedule beyond the pale of General Rules of Interpretation and The General Explanatory Notes to Import Tariff. 20. There is no doubt that the expression 'refrigerating unit' is not defined and we have observed that, to deem the 'cooling unit' to be the 'refrigerating unit', an entire sub-heading the tariff would stand erased which is neither within the empowerment of the Tribunal let alone the adjudicating....
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....ntial character". However while doing so he has ignored the basic fact that at the time of importation and assessment these goods were never presented together as complete unit. Hence the classification arrived at by the adjudicating authority cannot be sustained. Hon'ble Supreme Court has in case of Sony India Pvt Ltd [2008 (231) ELT 385 (SC)] held as follows: "14. We have already held that in this case the goods brought were not having the essential character of CTVs. We do not find anything to take a view that the goods were in unassembled or dis-assembled condition and they should be taken to be the complete CTVs, particularly when there is no finding recorded anywhere on facts that all these goods could make 1500 CTVs. However, we accept the argument that the goods brought in different consignments separately on the basis of valid import licences would not attract the import duty as if they were the finished goods. We have already referred to this aspect vis-a-vis the facts in Phoenix International's case where the goods were brought in one and the single consignment and they were all brought together though they were imported by two companies, i.e., PIND and PIL frau....
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....ors. Further it has correctly assessed the effect of the amendment of HSN Explanatory Notes which came on 14-3-1997. We approve of the finding given by the Tribunal in para 25 of its order which takes into account the fact that there was no amendment to Clause (v) while this is amended to the effect that complexity of the assembly method was made irrelevant. However, it was made clear that the components would not be subjected to any further working operation for completion in the finished state. The Tribunal has referred in details to the manufacturing process to show that some of the components require further working operation for completing the manufacturing process and further that CTV is not a machine which is presented in assembly for the sake of convenience of packing, handling or transport. We are, therefore, in agreement with the finding that even applying the amended HSN Explanatory Notes the position would be no different. 16. Our attention was invited to a very interesting decision reported in Modi Xerox Ltd. v. CCE, New Delhi [1998 (103) E.L.T. 619] which was confirmed by this Court in 2001 (133) E.L.T. A91 (it must be noted that the decisions in Woodcr....
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....ing to Rule 1 titles of sections and chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification "shall be determined according to the terms of the headings and any relevant sector or chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules." Relying on this the further contention of the counsel is that Section Note 2 of Section XVI provides mandate for classification of the parts of machines falling under Section XVI. In terms of Rule 1 of Interpretative Rules, invocation of Rule 2(a) for certain categories of goods covered in Section XVI like the goods of CTVs are prohibited. For this the learned counsel relied on the decision in Modi Xerox (supra). In that view the learned counsel says that Rule 2(a) would not be applicable at all. This question needs no consideration here particularly in view of the int....
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.... following rules - a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than heading 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings. b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 84.79 or 85.43) are to be classified with machines of that kind or in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29 or 85.38 as appropriate. However parts which are equally suitable for use principally with the goods of headings 85.17 and 85.25 to 85.28are to be classified in the heading 85.17. c) all other parts are to be classified in heading 84.09, 84.31, 84.48, 84.66, 84.73, 85.03, 85.22, 85.29, or 85.38 as appropriate or failing that in heading 84.87 or 85.48. 6.2.3.3 I find that the noticees had been classifying wired remote controllers under tariff item 84159000 and wireless remote controller under tariff item 85437099. which covers 'other electrical machines and apparatus having ....
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....o India from Thailand, from the whole of the duty of customs leviable thereon which is specified in the said First Schedule subject to the condition that the importer proves to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the goods in respect of which the exemption under this notification is claimed are of the origin of Thailand, in accordance with provisions of Interim Rules of Origin, published with the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 101/2004-Customs (N.T.), dated the 31st August, 2004." S No Sub-heading or Tariff Item Description of Goods 49 8415 10 All Goods 6.2.4.2 l find that it is a matter of fact that Sl. No. 49 of the Notification No. 85/2004-Cus provides conditional exemption from payment of BCD to all goods falling under customs tariff sub-heading 8415 10, when imported from Thailand. This exemption is available subject to fulfilment of condition that the importer proves to the satisfaction of the Assistant/Deputy Commissioner of Customs that the imported goods in respect of which exemption is claimed a....
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....appear to be classifiable under 84159000 attracting BCD at a merit rate of 10%. I also find that the noticees have accepted that the parts of air conditioners (except classification of remote controller) are rightly classifiable under Chapter Heading 84159000 and the ineligible benefit availed by them. In view of this the said benefit claimed by the noticees is liable to be recovered from them. 6.2.5 Eligibility of benefit under Notification No. 46/2011- Cus dated 01.06.2011 (ASEAN): 6.2.5.0 From the foregoing I find that the imported goods viz RAC, PAC and CMVRF air conditioners appear to be appropriately classifiable under tariff item 84158110, 84158190, 84158210, 84158290 which do not figure in the notification no.85/2004 dated 31/08/2004, thereby attracting levy of BCD at merit rate. However, M/S MEIPL have classified them under CTH 84151010/84151090 and claimed the benefit of SI.No.49 of notification no.85/2004 and cleared the impugned goods at "nil" rate of basic customs duty, thereby evading payment of appropriate duty of customs. 6.2.5.1 The noticees submitted that without prejudice to their earlier claim for classification under tarif....
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....epublic of India) Rules, 2009, published in the notification of the Government of India in Ministry of Finance 9Department of Revenue) No189/2009- Customs (N.T.), dated 31st December 2009. S.No. Sub-heading or Tariff Item Description of Goods Rate (in percentage unless other-wise specified) 1 2 3 4 5 1101 841510 All goods 7.0 8.0 1102 841581 to 841583 All Goods 7.0 8.0 1103 841590 All Goods 2.5 6.0 APPENDIX I S.No Name of the Country S.NO Name of the Country 1 Malaysia 2. Singapore 3 Thailand 4 Vietnam 5. Myanmar 6 Indonesia 7 Brunei Darussalam 8 Lao People's Democratic Republic APPENDIX II S. No. Name of the Country 1 Philippines 6.2.5.3 The noticees submitted that Notification No. 46/2011-Cus was amended on 31.12.2013 vide Notification No. 57/2013-Cus dated 31.12.2013. Rate of duty for the goods falling under Chapter Heading 8415 were revised as under: S.No. Sub-heading or Tariff Item Description of Goods Rate (in percentage unless other-wise specified) 1....
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....ssessee only with effect from date of filing declaration on 28.06.2010." Hence, I find that the noticee is not entitled for exemption under Notification No. 46/2011-Cus dated 01.06.2011 (ASEAN) (S. No. 1102). 4.19 Since we have held that the impugned goods namely RAC and CMVRF air conditioners are classified under the heading 841501010 and 84159000 as claimed by the appellants while filing the Bill of entry benefit of the exemption notifications as claimed under the Notifications 85/2004 CUS dated 31/08/2004 (S1.No.49), notification no.46/2011-Cus dated 01/06/2011 (SI.No. 1103 (1)) will be admissible to them. Adjudicating authority in para 6.2.4.1, 6.2.4.2 and 6.2.4.3 has after referring to the said notifications opined stating that the benefit of exemption under these notifications is admissible to the all goods classified under heading 8415010 and since he has held that these goods are classifiable under headings 84158110, 84158190, 84158210 i.e. the headings not specified under these exemption notifications, hence benefit of these exemption notification is not admissible to them. Since we have held that the classification of the impugned goods as determined by the adjud....
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.... Pradesh 275 wherein it is held that a protective cover during transportation cannot be treated as pre- packed' commodity. I notice that the cited case law by the noticee is distinct from the instant case inasmuch as it is on record that all the air conditioners and parts of air conditioners imported by the noticee, were in packaged form in ready to use condition, without any modification, which is also corroborated by the authorized persons/representative of the Company, during the investigation proceedings. Therefore the cited case law is squarely inapplicable to the instant case. 6.3.2 l further find that the noticees have contended that the ACs are sold on the basis of technical specifications and not on the basis of their unit weight or volume. The noticees have put up certain frivolous justifications to support their contention that ACs are sold on the basis of their technical specifications. Here, I feel it relevant to mention that the point for determination is not how the consumer buys a particular product i.e. whether he/she resorts to the technical specifications or relies on the instructions on the package, but whether the goods are sold in retail pac....
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....ble CESTAT had taken a consistent view that once the goods are notified under Section 4A(1) they are liable to be assessed on the basis of declared MRP as per Section 4A(2) and under Standards of Weights and Measures Act or the rules made thereunder and once the assessee does not fall under any of the exceptions provided under Rule 34 on the goods are to be assessed on the basis of MRP irrespective of the fact whether MRP is declared on those goods or not. 6.3.4 The noticees have also submitted that for the period post 10.05.2012, CMVRF type ACs are not liable for MRP based assessment as the same are sold to industrial/institutional consumers and thus excluded from the scope of PC. 6.3.5 I find that Notification No. 49/2008 dated 24.12.2008 includes alt goods under Chapter Heading 8415, except 841520, but specifically window room air-conditioners and split air conditioners of capacity upto 3 tonnes, are covered under the said Notification. The said Notification was subsequently amended vide Notification No. 26/2012-CE (NT), DT. 10/05/2012, wherein all goods except the goods falling under Chapter Heading 841520 are included thereby enhancing the percent....
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....d air conditioners i.e. RAC, PAC and CMVRF imported by the noticees are in the form of retail packages and is admittedly sold to the consumers, without any modifications. Further, it is an admitted position in the instant proceedings, that the noticee does not have a manufacturing unit, thereby resorting to the process of any subsequent alteration/modification. Further, it is on record that the authorized persons of the noticees, have admitted during the course of investigation that they have not paid CVD on RSP basis on all the items imported under heading 8415 after the amendment of Notification No. 49/2008(CE)-NT dated 24/12/2008 due to non updation/ ignorance of the above amendment. Moreover, it is also an admitted position on record that the noticees from June 2013 have started paying duty on RSP basis for the air conditioners and the parts of air conditioners. 6.3.9 The aforementioned position clearly reveals that M/s Mitsubishi was required to pay CVD on RSP basis. Further, the impugned goods imported by the noticees are notified under the aforementioned Notifications. Now, in order to finalize, whether the impugned goods imported by the noticee are subjected ....
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.... 6.3.13 In view of the foregoing, it is apparent that the noticees, through adoption of various propaganda refrained from paying CVD on RSP basis thereby implying adverse revenue implications, which resulted in evasion of Customs Duty. 6.3.14 It is obvious that the words 'not for retail sale' for all the air conditioners above 3 tons, is with the sole intention to misguide Customs and evade Customs duty for the reason that the air conditioners above 3 tons and parts of air conditioners are liable to be assessed for CVD on RSP basis after the amendment of notification no.49/2008-CE (NT) dated 24/12/2008 on 10/05/2012 They had also added the words "captive consumption", "not for retail sale" to the description of the goods. Therefore, it is abundantly clear that M/S MEIPL has clearly misstated about the impugned goods under import so as to justify clearance of goods without assessment on RSP basis. 6.3.15 I notice that M/s. MEIPL is an accredited client enjoying assured facilitation (no assessment and no examination) except subject to random and minimal verifications and is enjoying all the privileges of a status holder. Being the recipien....
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....PL (RSP for CMVRF were declared after the initiation investigation i.e. from May 2013). Section 3 of the Customs Tariff Act, 1975, envisages that if there are more than one RSP for a particular product, the maximum of the same has to be taken for calculating the CVD. I also find that the noticees did not provide any satisfactory explanation with respect to the variance in the declared RSP and the Pricelist. Applying the same, the actual RSP of the impugned goods imported by M/s MEIPL have been arrived by taking the maximum prevailing RSP for a product and I find no reason to differ from the views of the investigation. 6.3.18 The noticees have further contended that no Rules for the determination of RSP/MRP in case of imported goods and therefore re determination of MRP and consequent demand of duty is not legally sustainable. I find that the noticees have contended that though Customs Tariff Act, 1975 has borrowed the Notification issued under Section 4A(1) and the provisions of sub section (2) of Section 4A of the Central Excise Act, 1944, the provisions of the determination of RSP under 4A(4) of the Central Excise Act, 1944 has not been made applicable to Section 3....
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.... law and Section 12 of the Customs Act, 1962 is the charging section of duty which states that "except as otherwise provided in this Act or any other law for the time being in force duties of Customs shall be levied at such rate as may be specified under the Customs Tariff Act, 1975. The Hon'ble Bombay High Court in case of Subhash Photographics Vs. Union of India 1992(62) ELT 270 (Bom) held that the two enactments form a composite legislation. It was held that "The Customs Tariff Act, 1975 specifies the rates at which the duties of customs shall be levied under the Customs Act, 1962. The rates are specified in the schedules to the said act. A perusal of scheme of these two enactments makes it absolutely clear that though these are two separate enactments, one cannot be given effect to without the other. Section 12 of the Customs Act levies the charge and indicates the whole taxable event, without, thereby specifying the rates, which, undoubtedly, is being specified by the Customs Tariff Act, 1975. 6.3.21 It is unequivocally clear that the Customs Tariff Act, 1975 specifies the rates of duty. This enactment is only for the purpose of specifying the rates at which....
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....o need to go for value which is deemed in nature. 6.3.24 l find that the purpose and object of Section 3 of the Customs Tariff Act is to levy additional duty equal to excise duty so that the Indian manufacturers of similar goods are not put to any disadvantageous position. The declaration relating to RSP has to be true and correct declaration, 6.3.25 I find that once the goods are specified under Section 4A(1) of the Central Excise Act, necessarily the CVD is to be charged on MRP basis. The proviso to Section 3(2) of Customs Tariff Act unambiguously states that in the case of such goods, the retail sale price has to be declared on the package as required under the Standards of Weights and Measures Act, (SWM). The critical words are "required" and "declared" in the case of imported goods which are specified under Section 4(A)(1) of the Central Excise Act. 6.3.26 As discussed in the proceeding paras, the impugned goods imported by the noticees were in packaged form, in ready to use condition. Therefore once we goods are notified under Section 4A and the goods are imported by the noticees in packaged form, the entire argument on this ground....
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....ealers/customers under a tax invoice. While this being the case, they have got the impugned goods assessed for CVD on normal transaction basis and to facilitate such assessment, they in the bills of entry filed have suffixed the wordings such as "not for retail sale", "captive consumption" etc with the description of the goods, thereby misguiding the Customs. Further, in case of queries raised by Customs, they have mis led the Customs by furnishing false information/ facts about the goods imported. Some instances of such mis-declarations (not exhaustive) are as under: 6.3.29.1 M/S MEIPL has filed bill of entry No. 9424139 dated 26/02/2013 filed at ICD, Tughlakabad for import of CMVRF air conditioners. The indoor unit models are PCFY, PEFY, PKFY and PLFY and matching outdoor unit was PUHY well within the diversity ratio. In the description given in the bill of entry the words 'not for retail sale', which are not there in the supplier's invoice were added to the item description. Shri Manjoranjan Nayak had admitted that these units are not only used for industrial or business premises but also are sold on retail basis to high end customers under tax invoice....
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....pplicable and stated that in order to substantiate their saying that the model is not meant for retail sale they added the words 'not for retail sale' along with the description of the goods in the bill of entry. In their letter dated 14/03/2013 to the Deputy Commissioner of Customs, ICD, Tughlakabad, M/S MEIPL has sought permission to amend the bill of entry No. 9556602 dated 13/03/2013 for inclusion of words 'not for retail sale' with respect to indoor units and outdoor units of PAC model no. PS5JAK+PU5YKD. Shri Manoranjan Nayak had contended that the wording and selling are two different things, that they in order to clear the imported goods from Customs, have mentioned the words 'not for retail sale' for all the air conditioners above 3 tons; that their marketing pattern is that they have appointed dealers and distributors to effect sale, that the dealers/distributors negotiate the orders with the end customers; that whoever raises the purchase order for supply, including end customers, they will effect supply of goods to them by raising sales invoice and on payment of VAT. He had admitted it is retail sale only but to high end customers/dealers. With re....
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....imilarly with respect to 5 consignments imported in the name of M/S MEAPL, as discussed supra have mis-declared the description, wrongly classified the goods and cleared the goods on transaction value and wrongly availed the benefit of exemption notifications not applicable to them and thereby evaded payment of appropriate customs duties. In the light of the above, the actual duty payable on the goods imported by M/S MEAPL vide the 5 bills of entry works out to Rs 25,11,485/- (Rupees twenty five lakh eleven thousand four hundred and eighty five only) as against Rs 16,65,393/- (Rupees sixteen lakh sixty five thousand three hundred and ninety three only) paid by them, resulting in short levy of Rs 8,46,091/- (Rupees eight lakh forty six thousand and ninety one only). Accordingly, the same is liable to be demanded in terms of Section 28(1)/Section 28(4) of the ibid Act." 4.21.1 On the issue of the Applicability of RSP based assessment for determination of the countervailing duty, the learned counsel appearing for the appellants submitted that though initially they were disputing the same, but on re-examination of the issue he admits that the goods in question were to be subje....
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....availed benefit of notification no. 85/2004-Cus dated 31/08/2004 (SI.No. 49) which do not seem to be available to them and not paid countervailing duty CVD under proviso to Section 3(2) of the Customs Tariff Act, 1975 in respect of 5 bills of entry. 6.4.4 I find that it is a matter of fact that M/s MEIPL and M/s. MEAPL in order to avail the benefit of concessional rate/nil rate of basic customs duty, had resorted to adopt varied classification depending upon the port of import/country of origin, mis- declaring the description of the goods to suit the classification made and by providing wrong/false information to the Customs in case any queries being raised. It is also on record that when Customs at Nhava Sheva denied them benefit of the concessional rate of basic customs duty, they imported the same from other ports. The explanation that they had accepted the classification changed by Nhava Sheva Customs due to the urgency of the product does not, in any manner, seem to be satisfactory inasmuch as, post self-assessment regime, the onus is casted on the importers to arrive at the correct classification. It was the duty or rather responsibility of the noticees, to suo....
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....ss premises but also are sold on retail basis to high end customers under tax invoice. With respect to bills of entry nos. 8537834, 8537737, 8537626 all dated 20/11/2012 filed at Nhava Sheva Port, M/s MEIPL had given letter titled to whomsoever it may concern' and stated that goods imported under these bills of entry are industrial type of air conditioners used for project supplies to Industries/Commercial buildings/Hostels and not sold to house hold; that since these air conditioners are used for project supplies which are of higher capacity and not sold through retail and thus cannot be covered under RSP/MRP rule. When the fact that M/s MEIPL do not involve themselves in erection and commission of any indoor units/outdoor these are sold directly to dealers/customers without changing the packing was brought to notice of Shri Manoranjan and asked for reasons as to why they are given such letters to Customs, he stated that they were of the impression that RSP based levy was for the sale made over the counter; that whoever raises the purchase order for supply of CMVRF air conditioners, the essential parts viz., indoor units, outdoor units, controllers, etc are supplied on retail ....
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....2 dated 13/03/2013 for inclusion of words 'not for retail sale' with respect to indoor units and outdoor units of PAC model no. PS5JAK+PU5YKD. On showing the above letter and also the letters given by them in respect of bill of entry 9437101 dated 28/02/2013, Shri Manoranjan was asked to clarify as to whether they have never sold PAC PE-16GAK or PS-5JAK to retail customers, he stated that the wording and selling are two different things, that they in order to clear the imported goods from Customs have mentioned the words 'not for retail sale' for all the air conditioners above 3 tons; that their marketing pattern is that they have appointed dealers and distributors to effect sale; that the dealers/distributors negotiate the orders with the end customers; that whoever raises the purchase order for supply, including end customers, they will effect supply of goods to them by raising sales invoice and on payment of VAT. On being queried as to whether it tantamount to retail trading, he stated that it is retail sale only but to high end customers/dealers. With respect to bill of entry No.9171839 dated 30/01/2013 filed at Chennai Seaport, M/S MEIPL has requested the Custo....
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....ication for their subsequent imports; that after the investigation of DRI, they understood the implication of the Notification and they started implementing the same by declaring MRP for all air conditioners including CMVRF, indoor and outdoor units declared as parts of air conditioners; that however, as the quantum of other parts of air conditioners are more, the supplier has declined to print ma stickers on the product and hence they have not disclosed the same at the time of import: that after the seizure of parts consignments by DRI in August, 2014 they have started declaring the MRP for spare parts and accessories that presently they are declaring RSP on all the products classifiable under CTH 8415. 6.4.9 Further, M/S MEIPL in the bill of entry No.4884961 dated 11/10/2011 have described the goods CMVRF as parts of air conditioner (captive consumption). Similarly in another bill of entry No.6940325 dated 28/5/2012, service spare parts were imported and declared in the bill of entry as 'captive consumption'. Both the bills of entry were filed at ICD, Patparganj. When enquired, Shri Manoranjan stated that that they have not imported the CMVRF for their offi....
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....d. vs. Commissioner of Central Excise, Commissioner of Central Excise, Aurangabad vs. Bajaj Auto Limited etc. and contended that to invoke extended period under Section 28 of the Customs Act, it has to be proved that there was a conscious or intentional act of collusion, wilful mis-statement or suppression of fact, on the part of the importer. 6.4.12 I find that the Noticee have submitted that the show cause notice is barred by limitation has no substance. The show cause notice has been issued by invoking Section 28(4) of the Customs Act, 1962. Section 28(4) ibid provides that "where any duty has not been levied or has been short-levied or erroneously refunded, or interest payable has not been paid, part paid or erroneously refunded, by reason of, - (a) collusion; or (b) any willful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or the exporter, the proper officer shall within five years from the relevant date, service notice on the person chargeable with duty or interest which has not been so levied or which has been so short-levied or short-paid or to whom the refund has erroneously been made, re....
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....ns in force, which tantamount to violation of the provisions of Section 46(4) of the Customs Act, 1962, and also rendering the same liable to confiscation under Section 111 of the Customs Act, 1962. It is on record that the noticees resorted to mis-classification, with a deliberate attempt to evade payment of proper customs duty which is totally uncalled for, especially, in the self-assessment era, when the onus to declare correct description/classification/eligible notifications etc. is on the importers. It was the noticees' responsibility to act in tune with the governments faith deposed on them especially when they are status holders. However, it is evidently clear that the noticees resorted to mis-classification and claiming benefits of ineligible notifications, which undoubtedly, renders the impugned goods liable to confiscation." 4.25 However since the issue of the classification and admissibility of exemption notification has been determined in favour of the appellants, the only issue that needs re- determination is vis a vis the quantification of the demand of countervailing duty on the basis of RSP, we also set aside the order of confiscation of the goods and ....
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....hority is required to determine existence of such declaration, statement or document which is false or incorrect in material particulars. In the present case without making any determination to this penalties under this section have been mechanically imposed by the adjudicating authority. Such penalties imposed without determining existence of such documents and the connection of the such document with the person, penalties imposed under this section cannot be sustained. Thus we set aside the order imposing penalties under this section. 4.28 On the issue of penalty imposed on functionaries of the importers, and CHA, impugned order observes as follow: "6.7 As the omissions and commissions of the noticees M/S MEIPL and M/S 'MEAPL, have been elaborately dealt by me, supra, I now proceed to go through the violations of the other co-noticees associated with the main noticee 6.7.1 I find that Shri Manoranjan Nayak, Senior Manager (Supply Chain Management), Shri Rajeev Sharma, General Manager (Supply Chain Management) both personnel of M/s MEIPL, Shri Horoaki Ashizawa, Director & General Manager, Living Environment Division, and Shri Shine Yamabe, Managing....
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....assification and non-declaration of RSP, was at the behest of the importers. Though, it is an acceptable fact that the CBS have an important role in ensuring correctness and truthfulness of the declarations and is expected to act within the limitations of CBLR, the very fact that the prime noticee is an accredited client, enjoying all the privileges of a status quo importer, makes the CB tend to believe in the versions submitted by the importer. Further, the very fact that the RSP based assessment as well as the classification related issues/queries were tackled by the importer directly with the Customs officers, provides limited scope for the CB to re-discover an element of malpractices etc. However, before concluding the omissions and commissions of the CB, I would like to place reliance on the following. 6.7.3.4 It is on record that while assessing the bill of entry no. 821154 dated 15/10/2012 filed for import of CMVRF air conditioners (within diversity ratio) from Thailand customs changed the classification of the air conditioners from 84151010 to 84158110 and denied the benefit of notification and assessed the impugned goods under merit rate of duty. M/S MEIPL h....
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.... and bring out whatsoever discrepancies. Though it is on admitted position that the CB filed the said Bill of Entry at Chennai as me advice of the importers, the CB also had a duty to bring to the notice Customs, any sort of noticed discrepancy. Therefore, in my considered opinion, the CB erred in bringing the fact of adopting different classifications at different ports to the notice of Customs and such act of omission and commission is in violation of the provisions of Regulation 11(d)of the CBLR, 2013,which renders the CB also liable for penal action under Section 112(a) of the Customs Act, 1962. Similarly, in view of the fact that the CB knowingly resorted to mis classification and mis-declaration, they are equally liable to be penalized under Section 114AA of the Customs Act, 1962." 4.29 We do not find much merits and justification in the order for imposition of penalty. In such cases which are based on the interpretation of tariff entries and admissibility of exemption notification, we find that charges of deliberate misdeclaration to evade duty cannot be sustained, more so over when these issues have been determined in the favour of appellants. In our view the order....