TaxTMI 
TaxTMI 
2023 (12) TMI 1155
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.... them. During post clearance audit, it appeared to the Department that the back covers, front covers and middle covers of the cellular phones, which were classified by the appellant under CTH 85177090 deserve to be classified under CTH 39209999 instead and accordingly the differential duty needs to be paid by the appellant. Audit issued a consultative letter dated 01.02.2020 but the issue could not be resolved through consultations. Thereafter, a show cause notice [SCN] dated 19.02.2020 was issued by the Principal Commissioner of Customs, Air Cargo Complex, New Delhi proposing to reclassify the front covers, middle covers and back covers of the cellular phones under 39209999 and recover the differential duty along with interest. It was also proposed to confiscate the goods under Section 111 (m) of the Customs Act, 1962 and impose penalty under Section 112 (a) (ii) of the Customs Act, 1962. 2. The three grounds on which the SCN proposed to reclassify the goods are as follows :- (i) the goods 'Battery cover, Front cover, Middle cover, Back Cover and Camera Lens' (which are part/sub-part or accessories of cellular mobile phones) are classifiable under CTH 39209999 and attr....
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.... period (ii) I hereby confirm the demand of Customs duty to the tune of Rs. 62,44,28,858/- (Rs. Sixty Two Crore forty Four Lakh Twenty Eight Thousand Eight Hundred and fifty Eight only) on the impugned goods imported by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as mentioned in Annexure - A to D to the SCN under Section 28 (1) of the Customs Act, 1962. (iii) I drop the demand of Rs. 24,15,22,593/- (Rs. Twenty Four Crore Fifteen Lakhs Twenty Two Thousand five Ninety Three only) in terms of the findings at para 11.10 and 11.11.1 above. (iv) I hold that interest under Section 28AA of the Customs Act, 1962 is payable in this case by M/s Samsung India Electronics Pvt. Ltd. on the demand as confirmed at (ii) above from the due date till the duty is paid in accordance with law. (v) I hold that the goods imported and already cleared by M/s Samsung India Electronics Pvt. Ltd. against the Bills of Entry as listed in Annexure - A, C & D to the show cause notice totally valued at Rs. 367,31,62,198/- (Rs. Three Hundred Sixty Seven Crore Thirty One Lakh Sixty Two Thousand One Hundred and Ninety Eight only) are liable for confiscation un....
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....fic models. e. Hard coating: In this step, the sheet is layered, levelled and UV dried. f. Thermoforming: Thereafter, the resultant sheets undergo thermoforming process, wherein by a process of vacuum and air pressure, the sheet is pulled over a solid mold to obtain desired shape. This gives grooves and ground edges to the uncut phone cover to enable such a cover to be clipped to the specific phone for which it is made so that the phone is protected from dust and moisture. g. CNC Milling: In this step, specific cuts, speaker grills, and other compartments, are milled in the cover, thereby giving it final shape. (iii) These three covers have been correctly classified under CTH 85177090 as these are parts of mobile phones and not merely articles of plastic. Hence, there was no misclassification at all as held in the impugned order. CTH 3920 covers "other plates, sheets, film, foil and strip of plastics, not cellular and not re-imposed, laminated, supported a similarly by with other materials". Chapter note 10 to Chapter 39 reads as follows :- "10. In headings 3920 and 3921, the expression "plates, sheets, film foil and strips" applies only....
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....17 61 00 -- 8517 62 -- 8517 62 10 -- 8517 62 20 -- 8517 62 30 -- 8517 62 40 -- 8517 62 50 -- 8517 62 60 -- 8517 62 70 -- 8517 62 90 -- 8517 69 -- 8517 69 10 -- 8517 69 20 -- 8517 69 30 -- 8517 69 40 -- 8517 69 50 -- 8517 69 60 -- 8517 69 70 -- 8517 69 90 -- 8517 70 - Parts 8517 70 10 -- Populated, loaded or stuffed printed circuit boards 8517 70 90 -- Others (vii) Reliance is also placed on WCO Harmony System Company Session May 2022 which classified cover glass for the manufacture of a mobile phone, touch screen under 8517.70. Although WCS classification is not binding but it has highly persuasive value and may be considered. (viii) Since, the Department has proposed to reclassified the goods the burden is on it to prove that the goods not fall under CTH 8517 and fall under CTH 39209999 and this burden has not been discharged by the Department. 7. The appellant has been importing these products for a long time and has been classifying them under 85177090 and the Department has been accepting this classification. In the case of Bha....
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.... Commissioner versus Ilpea Paramount Pvt. Ltd. [2008 (228) E.L.T. A136 (S.C.)] P.R. Packagings Pvt. Ltd. versus Commissioner of C. Ex., New Delhi - II [2002 (139) E.L.T. 495 (Tri. - Del.)] Hariram Govindram versus Collector of Central Excise, Bombay [1997 (94) E.L.T. 574 (Tribunal] Karnataka Power Corporation Ltd. versus Commr. of Cus., Chennai [2016 (337) E.L.T. 104 (Tri. - Chennai)] General Mills India Ltd. versus Commr. of Cus. (Import), JNCH, Nhava Sheva [2019 (368) E.L.T. 705 (Tri. - Mumbai)] Atul Kaushik versus Commissioner of Customs (Export), New Delhi [2015 (330) E.L.T. 417 (Tri. - Del.)] Towa Ribbons Pvt. Ltd. versus Collector of Customs [1993 (66) E.L.T. 320 (Tri. - Del.)] Speedway Rubber Co. versus Commissioner of Central Excise, Chandigarh [2002 (143) E.L.T. 8 (S.C.)] (ii) Each part of a machine does not merit being classified along with the machine or as its part under Chapter 85. As has been held in the above cases some parts or machine can also be classified under Chapter 39. (iii) On the question of whether the specific entry should prevail over the general entry, since the imp....
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.... notification issued by the Government under Section 25 of the Customs Act determine the classification of the goods? c) Can a scheme notified by the MeiTY determine the classification of the goods? d) Is the differential duty recoverable from the appellant? e) Is interest recoverable from the appellant? f) Were the imported goods liable to confiscation under Section 111(m) (although they were not actually confiscated) because the classification of the imported goods in the Bill of Entry is, according to the Revenue, incorrect? Consequently, was the penalty under Section 112 imposed correctly? 11. Before examining the question of classification, we examine the above questions (b) to (f) above. For this purpose, it is necessary to examine the nature of the Customs duty and the legal provisions to determine and charge it, the role of classification and who can decide the classification. The charging section, i.e., the section which empowers the Government to levy and collect duties of customs is Section 12 which reads as follows: Section 12. Dutiable goods. - (1) Except as otherwise provided in this Act, or any other law for th....
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....igin of such goods determined in accordance with the provisions of the Customs Tariff Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected by the origin of such goods; (f) any other specific factor which affects the duty, tax, cess or any other sum payable on such goods, and includes provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil ; 15. Thus, classification of the goods under the Customs Tariff is a part of assessment. The next question is who can do this assessment. Section 17, reads as follows: Section 17. Assessment of duty. - (1) An importer entering any imported goods under Section 46, or an exporter entering any export goods under Section 50, shall, save as otherwise provided in Section 85, self-assess the duty, if any, leviable on such goods. (2) The proper officer may verify the entries made under Section 46 or Section 50 and the self-assessment of goods referred to in sub-section (1) and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary. Provided that the selecti....
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....proper officer clears the goods for home consumption under Section 46. Once this action is completed, they cease to be imported goods, they cease to be dutiable goods and the importer ceases to be the importer. Sections 2(14), 2(25) and 2(26) which explain this legal position read as follows. 2. Definitions (14) "dutiable goods" means any goods which are chargeable to duty and on which duty has not been paid; (25) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; (26) "importer", in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer; 18. This process of self-assessment by the importer and re-assessment by the proper officer comes to an end once an order permitting the clearance of goods for home consumption is issued under Section 46. Thereafter, the goods cease to be imported goods or dutiable goods and no duty can be assessed. The only exception is when the goods are cleared for home cons....
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....n of delay for another 30 days. The provisions of Section 128 are extracted hereunder: " 128. Appeals to [Commissioner (Appeals)]. - (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a [Principal Commissioner of Customs or Commissioner of Customs] may appeal to the [Commissioner (Appeals)] [within sixty days] from the date of the communication to him of such decision or order : [Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.] [(1A) The Commissioner (Appeals) may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing : Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.] (2) Every appeal under this section shall be in such form and shall be verified in such manne....
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.... the first instance, assessed and cleared the goods i.e. the Deputy Commissioner Appraisal Group. Indeed, this must be so because no fiscal statute has been shown to us where the power to re-open assessment or recover duties which have escaped assessment has been conferred on an officer other than the officer of the rank of the officer who initially took the decision to assess the goods. (emphasis supplied) 22. While Section 128 does not place any restriction, other than the limitation of time, for filing an appeal against assessment, issue of SCN under Section 28 is restricted by WHEN, WHO and WHY. The notice has to be issued within the normal period of limitation (or the extended period of limitation) by 'the proper officer' and only to recover duties not paid, short paid, not levied, short levied or erroneously refunded. 23. To sum up, the power to assess duty lies with the importer and the proper officer. Classification, valuation and applying an exemption notification, are all part of the process of this assessment. Hence, the power to decide the classification lies with the importer during self- assessment, with the proper officer during re-assessment and while issui....
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....notification no. 57/2017- Cus dated 30.6.2017 (S.No.10) referred to and relied upon in the SCN to propose classification of the goods in dispute reads as follows. In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description as specified in column (3) of the Table below, as the case may be, and falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate as specified in the corresponding entry in column (4) of the said Table subject to any of the conditions, as specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (5) of the said Table. TABLE S. No. Chapter or Heading or Sub-heading or ta....
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....ference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. This Rule is followed by Rules of Interpretation 2 to 6 none of which provide for classification either based on any exemption notification or on the basis of any heading mentioned in any policy of any Ministry of the Government. Therefore, the goods cannot be reclassified based on the exemption notification issued under Section 25 or on the basis of any policy of the Ministry. Notifications or policies can be issued, modified or withdrawn but the classification of the goods under the tariff will remain the same. Only if the tariff itself is amended can the classification change. Confiscation of goods under Section 111(m) and consequent penalty under Section 112 29. The impugned order held that the imported goods were liable for confiscation under Section 111(m) and consequently, imposed penalty on the appellant under Section 112. Section 111(m) and Section 112 read as follows: Section 111. Confiscation of improperly....
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....This has to be done firstly by the importer (self-assessment) and can then be done by the officer (re-assessment) under Section 17. The remedy against wrong self-assessment is the re-assessment by the officer [or an appeal to Commissioner (Appeals)] and the remedy against the re-assessment is an appeal to the Commissioner (Appeals) which option is available to both sides or a notice under Section 28 (which is available only to the Revenue and only to recover duties not levied, not paid, short levied, short paid or erroneously refunded). However, there is no separate document or procedure through which the importer can self-assess the duty on the imported goods. All the elements necessary for assessing the duty are filled in the Bill of Entry itself which is the entry of the goods made under Section 46. Thus, the Bill of Entry has factual elements such as the nature of the goods, quality, quantity, weight, transaction value, country of origin, etc. which all need to be correctly declared and elements which are in the nature of the opinion of the importer such as classification of the goods, exemption notifications which apply, etc. While the facts are verifiable as correct or incorr....
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.... officer may apply during re-assessment or later, it would result in absurd results. The importer cannot predict the mind of the proper officer and self-assess duty so as to conform to it. Insofar as the valuation is concerned, the importer is required to truthfully declare the transaction value, any additional consideration and relationship with the overseas seller. He is not required to predict if the proper officer will reject the transaction value under Rule 12 and if so, what value he will determine. Lex non cogitimpossibilia-the law does not compel one to impossible things. If the classification and exemption notifications in the Bill of Entry do not match the views which the proper officer may during re-assessment or by audit party, etc. later, may take or in any other proceedings, goods cannot be confiscated under Section 111(m). The case of the Revenue in this appeal is that the classification of the goods by the importer was not correct. Even if the classification is not correct, it does not render them liable to confiscation under Section 111(m). Similarly, there could be cases where, according to the Revenue, the exemption notification claimed during self assessment wil....
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....isting 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. Rule 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. Rule 5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. Th....
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....ling under 3920 will continue to be classifiable under this heading even if they become articles ready for use and therefore, they cannot fall under chapter 85 (section XVI). Therefore, they do not get excluded by virtue of note 2(s) from Chapter 39. This leads us to the next question whether the front cover, mid cover and back cover fall under 3920. According to the Revenue, they do because they are made of plastic and are cut into geometric shapes and are printed or surface-worked but not worked further. According to the appellant, these articles were further worked and therefore, they do not fall under 3920. They are manufactured by extrusion (two layers of Polymethyl Methacrylate (PMM) and Polycarbonate (PC) are layered to form a sheet of thickness of 0.64 mm), printed, a layer is Physical Vapor Deposited (to give the desired finish to the back cover), again printed, hard coated, thermoformed into the desired shape and then milled through CNC to cut at the right places to insert the components of the mobile phone as required. These processes, including the lamination and CNC milling, according to the appellant clearly take the goods out of the ambit of note 10 of Chapter 39. Fu....
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....le cover and back cover of mobile phones are undisputedly, made of plastic and are parts of mobile phones and are not articles of general use. The case of the Revenue is that even if they become articles ready for use, if they are manufactured from plates, sheets, film foil or strips, whether or not they are printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked they should be classified under CTH 3920 in view of Chapter note 2(s) to Chapter 39. Since the front cover, middle cover and back cover of mobile phones are made of sheets of plastic, printed and surface worked and not further worked, they should be classified under 3920. The case of the appellant is that the manufacture of these goods involves extrusion, printing, physical vapor deposition, second set of printing, hard coating, thermoforming and CNC milling and therefore, further work has clearly been done on the plastic sheets after cutting and therefore, they do not fall under Chapter note 2(s) to Chapter 39. The manufacturing process described by the appellant is not disputed by the Revenue and therefore, considering this manufacturing process, we proceed to decide i....
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.... the first Rule of Interpretation, the front cover, middle cover and back cover cannot be classified under CTH 3920- the vapor deposition (lamination) takes it out of the description of CTH 3920 and thermoforming and CNC milling, being processes beyond printing and surface working take them out of the scope of chapter note 2(s) . We also find that a specific entry (parts of mobile phones) prevails over a general entry (articles of plastic) as per Rule 3(a) of Interpretation and the later entry (Chapter 85) in the tariff prevails over the earlier entry (Chapter 39) as per Rule 3(c). However, it is well settled legal principle that the Interpretative Rules must be applied sequentially. Once Rule 1 decides the classification, it is not necessary to go through the other Rules of Interpretation such as Rule 3(a) and 3(c). 44. The case laws relied upon by the Revenue do not carry its case any further as they were on different questions of law and facts. Ipea decision was in the peculiar circumstances of the case. The CBEC had issued a circular which was in favour of the assessee and it was binding on the Revenue. Therefore, the classification was decided in favour of the assessee by t....
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....y insulated single turn half coils with accessories and Epoxy insulated single turn half coils wave stator windings etc.' were classifiable under 8503 or under 8544. Applying Section note 2 (b) to Section XVI, it was held that the goods were suitable solely or principally for the generator and hence classified along with them under 8503. This case is on a different issue- whether the parts are to be classified as parts of mobile phones or as articles of plastic under Chapter 39. 47. In General Mills India, the dispute was regarding the classification of granola bars and the classification was decided in favour of the importer. In Atul Kaushik the question was about addition of certain elements in the valuation. 48. In Towa Ribbons, the question was about classification of typewriter ribbons and if the surface working of the strips of plastic including coating the surface will take them out of the purview of note 10 to Chapter 39 and the Tribunal held that surface working does not take the goods out of the ambit of note 10 to Chapter 39 and they continue to fall under 39.20 as asserted by the Revenue. 49. In Speedway, the question before the Supreme Court was the classifica....