TaxTMI 
TaxTMI 
2024 (5) TMI 1156
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....ckel Hydroxide) which is the main raw material used to make positive electrode plates used in Nickel Cadmium batteries. The imported item was declared as "I-Mass POs Big Bag-Nickel Compound (Compound of Nickel Hydroxide (For Manufacturing Nickel-Cadmium Batteries)" classifying it under CTH 28254000 (Bill of Entry No. 4021025 dated 24.05.2021 refers). The issue involved in the present appeal pertains to the classification of the imported Nickel Hydroxide Compound. The Appellant preferred to classify the goods under CTH 28254000 as above. The Department entertained the view that the appellant mis-classified the subject import goods claiming undue benefit of 'Nil' rate of Basic Customs Duty (BCD) under Sl.No. 180 of Notification No. 50/2017-Customs. During the course of investigation, the Department drew and sent samples for testing and obtained a test report dated 16.06.2021 from the Custom House Laboratory as per which the subject imports consisted of Nickel Hydroxide along with Carbonaceous matter and small amount of Cobalt. Therefore it appeared as per the GIR, Section and Chapter Notes and the relevant HSN Explanatory notes to Chapter Heading 28, the imports were not classifiable....
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....wn by the Hon'ble Supreme Court in the ITC Ltd. case. Furthermore, reference was made to the case of Tripura Ispat Vs. Union of India & Others wherein it was held by the Hon'ble Tripura High Court that if the Department was aggrieved by the order passed by the Assistant Commissioner, it was open for the Department to file an appeal against the order. It was contended that a Notice could not have been issued without going through the process of appeal under Section 128 as evident from the second proviso to Section128 A(3) of the Customs Act, 1962. 2.4 It was averred that the Appellant was denied the opportunity of responding to the pre-notice consultation process and hence the impugned notice was issued in contravention of the accepted principles of natural justice. 2.5 It was pointed out that the Hon'ble Supreme Court in Prathibha Processors Vs. Union of India [1996 (88) ELT 12(SC)] has held that when the duty is not payable due to exemption, there is no occasion or basis to levy any interest either. In view of the above, it was submitted that the demand for interest under the impugned order is not sustainable. 2.6 It was also contended that the impugned order has not reas....
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....sion in Collector of Central Excise Vs. H.M.M Ltd. [1995 (76) ELT 497 (SC)], wherein the Hon'ble Supreme Court held that the question of penalty would arise only if the department is able to sustain the demand. Similarly in the case of Commissioner of Central Excise, Aurangabad Vs. Balakrishna Industrioes [2006 (201) ELT 325 (SC)], the Hon'ble Supreme Court held that penalty is not imposable when differential duty is payable. In view of the above submissions, it was averred that penalty is not imposable as the demand itself was not sustainable. It was also pointed out relying on the decisions in Whiteline Chemicals Vs. Commissioner of Commissioner of Central Excise, Surat [2008 (229) ELT 95(Tri.-Ahmd.)] and Vadial Industries Ltd. Vs. Commissioner of Central Excise, Ahmedabad [2007 (213) ELT 157 (Tri.-Ahmd.)], that it is now a settled position that no penalty is imposable under Section 112(a) of Customs Act, 1962 in cases where the issue involves classification/exemption and the importer has acted bona fide. It was further submitted that in terms of the various decisions of the Hon'ble Supreme Court and various High Courts and Tribunals, penalty cannot be imposed on the assesse in t....
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....he Hon'ble Supreme Court has held in the case of Columbia Sportswear Company Vs. Director of Income Tax, Bangalore - [2012 (283) ELT 321 (SC)] that the principle of law laid down in the advance ruling though of a persuasive value in respect of third parties, it cannot be said that the principle of law will not be followed in future. 3.4 It was further submitted that in the Appellants own case reported in [2023 (12) CENTAX 21 (AAR-Cus-Mum)], it was held that the impugned goods are classifiable under CTH 28254000 and the jurisdictional Commissioner of Customs, Bangalore agreed to the above classification. 3.5 Further reliance was placed on the following judgements: (i) Saft India Pvt. Ltd. order dated 21.09.2023 by the Customs Authority for Advance Rulings, Mumbai (ii) Victory Electric Vehicles International Pvt. Ltd. Vs. Union of India [2022 (1) CENTAX 29 (Del.)] (iii) Damodar J. Malpani Vs. Collector of Central Excise [2002(146) ELT 483 (SC)] (iv) Hewlett Packard India Sales Pvt. Ltd. Vs. Commissioner of Customs (Import), Nhava Sheva [2023 (2) CENTAX 238 (SC)] (v) Western India Plywoods Ltd. Vs. Collector of Customs [2005 (188) ELT....
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....e and penalty is justified or not in the facts and circumstances of this case? 7. The appellant has described the imported product as "I-MAS Pos-Nickel Compound (a Compound of Nickel Hydroxide)" as meant for manufacturing Nickel-Cadmium Batteries. Classification of imported goods under the first schedule of Customs Tariff Act, 1975 is governed by the General Rules for Interpretation of Import Tariff. As per Rule 1 of GRI, classification of goods shall be determined according to the terms of the headings and any relative Section or Chapter Notes. If such headings or notes do not otherwise require then the classification is to be determined in accordance with Rule 2 to 6 of said Rules. Rule 6 of GRI stipulates that the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related sub-headings Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of Rule 1 of GIR, the relative Section and Chapter Notes apply, unless the context otherwise requires. This is the first Rule to be considered in classifying any product. In o....
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....ith additives. During the hearing before the Tribunal in the synopsis filed, it has been informed that the imported Nickel Hydroxide Compound was co-precipitated with Cobalt Hydroxide - Co(OH)2 (1%-5%) and balance contains Graphite (12%-18%) along with moisture (2%-8%) for density and free flowability. The appellant has further stated that Nickel Hydroxide is the main raw-material used in the manufacture of Nickel-Cadmium Batteries to make Positive plates. This Nickel Hydroxide is the main constituent with a small portion of co-precipitated Cobalt Hydroxide (Co(OH)2) and Graphite and balance % contain moisture for density. 12. Representative samples drawn of the item declared as I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) from the impugned Bills of Entry No. 4021025 dated 21.05.2021 and No. 4066865 dated 24.05.2021 were tested by the Customs laboratory which has given a report that the product as Nickel Hydroxide (60%-80%), Graphite and Cobalt Hydroxide with additives. The appellant has submitted that the imported goods were classified under CTH 28254000 adopting the classification globally by the supplier. 13. Main allegation of the Department is that imported p....
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....Such elements and compounds are excluded from Chapter 28 when they are dissolved in solvents other than water, unless the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport (in which case the solvent must not render the product particularly suitable for some types of use rather than for general use)." This is being repeated for clarity. 16. The Chapter Heading 28.25 to HSN explanatory notes reads as under:- "28.25 - Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides. 2825.10 - Hydrazine and hydroxylamine and their inorganic salts 2825.20 - Lithium oxide and hydroxides 2825.30 - Vanadium oxides and hydroxides 2825.40 - Nickel oxides and hydroxides 2825.50 - Copper oxides and hydroxides 2825.60 - Germanium oxides and zirconium dioxide 2825.70 - Molybdenum oxides and hydroxides 2825.80 - Antimony oxides 2825.90 - Other This heading covers: A. Hydrazine and hydroxylamine and their inorganic salts. B. The metal ox....
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....droxide is precipitated with Cobalt Hydroxide in order to obtain the imported product. 19. Also, in the grounds of appeal filed, the appellant has explained as to how Nickel Hydroxide is obtained. Nickel Sulphate solution and small quantity of Cobalt Sulphate solution is gradually co-precipitated using an aqueous solution of Sodium Hydroxide with constant stirring, forming crystallized Nickel Hydroxide, which is subsequently washed, dewatered, and then dried. Thus, the active material for the positive electrode contains mainly of Nickel Hydroxide (Ni (OH)2) with a small quantity of co-precipitated Cobalt Hydroxide. To enable electricity to percolate well formation of an electrically conductive network is imperative for an efficient utilization of the Nickel Hydroxide-based active material. The cobalt hydroxide is added mainly to impart electric conductivity to the Nickel Hydroxide and is readily oxidized at the time of initial charging to form an electrically conductive micro scale network comprising of Cobalt Oxyhydroxide. The graphite addition is mainly to aid in flowability of the Nickel Hydroxide Powder while being transported to briquetting machines or powder filling machin....
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....ide have numerous applications including as battery electrodes, electrochromic devices, electrochemical sensors, and supercapacitors and in such processes as photo catalysis, electrocatalysis and electrosynthesis. It has to be noted that the appellant has not discharged the burden as to how Cobalt Hydroxide may be in minor proportion can be treated as any permissible addition in terms of Note 1 to Chapter 28. Whether cobalt Hydroxide is a stabiliser, solvent, anti-dusting agent or any colouring substance, etc., i.e, whether it is a permissible addition or not has not been proved. Graphite was informed to act as an anti-caking agent in the imported product. It is also on record that both these will enhance the conductivity of the impugned product. It is also on record that the imported goods are meant for use in Nickel Cadmium Battery manufacturing. 22.1 In support of the contention that the imported product is classifiable appropriately under Chapter 28254000 of the Customs Tariff Act, 1975. The Ld. counsel has referred to two Advance Rulings as follows:- i. Ruling No. CAAR/Mum/ARC/2/2022 dated 19.01.2022 in the case of Smartage Projects Pvt. Ltd. and, ii. Ruli....
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....droxide will undergo oxidation process thereby converting it into Nickel Oxyhydroxide. During discharge, the Nickel Oxyhydroxide is reduced to Nickel Hydroxide (Ni(OH)2). e. Nickel-Cadmium batteries with Nickel Hydroxide (Ni(OH)2) as the positive electrode and Cd(OH)2 as the negative electrode are mainly used as back-up power for critical industrial sectors, including oil & gas, mobility segments like air, railways and all metro systems and thermal power systems. ... .... .... 8.1. The applicant wants to import goods viz. NICKEL HYDROXIDE (Ni(OH)2) which is the main raw material used to make positive electrode plates used in NICKEL CADMIUM batteries. Nickel-Cadmium batteries have two electrodes (Nickel and Cadmium Hydroxides) immersed in a Potash solution. The positive electrode consists of Nickel Hydroxide, while the negative one is made from Cadmium. The electrolyte is generally based on potash. The applicant has submitted that the NICKEL HYDROXIDE compound is majorly NICKEL HYDROXIDE (70-85%) with a small portion of co-precipitated Cobalt Hydroxide - Co(OH)2 (1-5%), and balance contains Graphite (12-18%) along with moisture (2-8%) for....
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....rule 1 of the GIR. ..... ..... ..... 9. Thus, it is in terms of the chapter note 1 of chapter 28 read with Rules 1, 2 and 3(a) of the GIR, the goods proposed to be imported i.e. I-MAS POS, consisting of Nickle Hydroxide (78-80%), Cobalt Hydroxide (2-2.5%), Graphite (12-18%) and moisture (2.8%) is classifiable under sub-heading 28254000. The applicant has claimed that consequent to the classification of the impugned goods sunder sub-heading 28254000 of the first schedule to the Tariff Act, 1975, the Nickle Hydroxide compound is also eligible to avail the benefit of Notification no. 50/2017 dated 30.06.2017 entry Sr. No.180 which covers 'Nickel oxide and hydroxide' classified under 2825 40 00 at nil rate of duty." It is noted from the above that the basic contention of the appellant is addition of Cobalt Hydroxide and Graphite does not change the character and application of Nickel Hydroxide and Nickel Hydroxide does not act as a reaction initiator, accelerator or catalyst to any product which has been favourably considered by the Advance Ruling Authority in arriving at the issue of classification. 22.3.1 The second Advance Ruling in ....
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....el Hydroxide of 92% to 100%, and balance of Cobalt Hydroxide and Sodium Sulphate) is classifiable under Chapter sub-heading 28254000. 23. The Ld. Advocate has also referred to the decision of the Hon'ble Supreme Court in the case of Columbia Sportswear Co. Vs. Director of Income Tax, Bangalore [2012 (283) ELT 321 (SC)] to contend that the principle of law laid down in the Advance Ruling though of a persuasive value in respect of third party but it cannot be said that the said principle of law will not be followed as the Department has not obtained any stay as against the above mentioned Advance Ruling and the Department cannot take contrary view on the classification in respect of same goods and the Commissioner of Customs, Bangalore has agreed to the classification of the above product under CTH 28254000. 24. We have considered the above contentions of the Ld. counsel and also the decisions passed by the Advance Ruling Authority, in respect of, Smartage Projects Pvt. Ltd. and Saft India Private Limited, Karnataka as discussed above and also the provisions of GIR, Section Notes, Chapter Notes to Chapter 28 and HSN Explanatory Notes. 25. Any Advance Ruling is mandatorily ap....
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....hereas the product for which this Advance Ruling was sought is a different Nickel Hydroxide Compound. From the HSN explanatory notes, it is clear that the Nickel Hydroxide compound can be used for various purposes like battery electrodes, electro chromic devices, electro chemical sensors, super capacitors, nickel catalysts and in processes like photo catalysis, electro-catalysis and electro synthesis. As such, we are of the considered view that the products being different are not comparable and the decision rendered therein is not applicable nor relevant for determination of the classification of I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide), the impugned product herein. 27. The appellant has very clearly admitted that Nickel Hydroxide is co-precipitated with Cobalt Hydroxide in order to enhance the conductivity of the end product obtained in the manufacturing process of Nickel Hydroxide and also there is an addition of Graphite. Admittedly, the above addition of Graphite and the process of co-precipitation with Cobalt Hydroxide is to enhance the conductivity of the final material obtained. Graphite has been reportedly added for flowability. 28. The Chapter Note 1....
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....louring substance and is not introduced for any safety or transport or as permissible additive in terms of the relevant Chapter Notes 1 to Chapter 28. The aim of addition of Graphite which is a separate chemical / element / metal to the Nickel Hydroxide is said to be for flowability and also to enhance the conductivity of the compound. The appellant has submitted that Graphite is used as an anti-caking agent in the imported goods. In these facts of the case, it appears that the addition of these two substances make the Nickel Hydroxide Compound so obtained more suitable for Nickel Cadmium battery manufacture. Thus, these are added to make the imported product more suitable for Nickel Cadmium cells and thus the general use of Nickel Hydroxide compound is restricted or the product imported is made more suitable for Nickel Cadmium battery manufacturing. 31. In view of the above discussions, we are of the considered opinion that appropriate classification of the imported product is not under CTH 28254000 as classified by the appellant. It is to be pointed out that in terms of Rule 1 of the GIR, classification of goods has to be determined first according to the terms of Headings and....
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....ction and Chapter Notes should be considered as the first basis in deciding the classification. As such, the imported product viz., I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) is more appropriately classifiable under Chapter Heading 38249900 of CTA, 1975. The appellant's classification under Chapter Heading 28254000 is not legally correct and so rejected. 35. Therefore, there is no merit in the submissions of the appellant to justify the classification of I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) under Chapter Heading 28254000 of Customs Tariff Act, 1975. Notification deals with Nickel Oxide and Nickel Hydroxide. The imported item is not specifically covered within the definition of Nickel Oxide and Nickel Hydroxide, since the imported item contains other natural materials such as Graphite and Cobalt. The Customs Notification has to be interpreted in a plain and simple manner and the technical literature available in public domain is to be taken into account for determining the eligibility of exemption and on application of the above analogy, the appeal fails on two counts that neither the description of the product imported matches with the descripti....
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....how Cause Notice. The aim of the Pre-notice Consultation is to avoid litigation and for quick settlement of tax disputes. It is noticed that the appellant has been continuously contesting the classification of the imported product all along leading to issuance of the Show Cause Notice and its adjudication. As such, we are of the opinion that no prejudice is caused to the appellant due to omission on the part of the Adjudicating Authority in not complying with the Pre-notice consultation process. Had the appellant accepted the classification adopted by the Revenue, he would have opted to pay the differential duty along with interest for settling the issue. Imposition of fine and penalties could be avoided. However, as even now the appellant is contesting the classification of the imported product, we are of the considered view that there is no justification for setting aside the adjudication proceedings already completed as strict observance of the principle of natural justice have been complied with by according an opportunity of personal hearing and by considering the submissions made by the appellant before passing the impugned order dated 31.03.2022 by the Commissioner of Custom....
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....itate the parties to come forward to pay the amount so that the department is not burdened with show cause proceedings. However, that by itself would not mean impugned show cause proceedings initiated against the petitioner would be either illegal or without jurisdiction. The show cause proceedings initiated under Section 73 of the Finance Act, 1994 seeking to demand tax which was allegedly not paid, cannot be allowed to be scuttled in the light of the above circular. In any event circulars are not binding on the Courts as per the decision of the Hon'ble Supreme Court in Commissioner of Central Excise v. Rattan Melting and Wire Industries - 2008 (231) E.L.T. 22 (S.C.). Therefore, I do not find any merits in the present writ petition as the impugned show cause notice has been issued by a competent authority namely the Commissioner, Office of the Commissioner of GST and Central Excise, Chennai Outer Commissionerate under the Finance Act, 1994. The respective noticees can file their reply to the impugned show cause notice and meet out the allegations on merits. 10. I am therefore not inclined to interfere with the impugned show cause proceedings. The noticees are directed to ....
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.... is no wilful mis-declaration rendering the imported goods liable for confiscation under Section 111(m) of the Customs Act, 1962. He has submitted that mere short payment of duty by adopting a particular classification will not make the imported goods liable for confiscation. In support of his contention, he has relied upon the Hon'ble Supreme Court's decision in the case of Northern Plastic Ltd. Vs. Collector of Customs & Central Excise [1998 (101) ELT 549 (SC)] wherein it was held that merely claiming the benefit of exemption or a particular classification under the Bill of Entry does not amount to mis-declaration under Section 111(m) of the Customs Act, 1962. The Hon'ble High Court of Bombay in the case of Commissioner of Customs Vs. Gaurav Enterprises [2006 (193) ELT 532 (Bom.)] has also held that claiming the benefit of exemption in the Bills of Entry filed under the Act does not amount to suppression / mis-declaration on the part of the assessee. 37.2 Also, it has been held in the case of Lewek Altair Shipping Pvt. Ltd. Vs. Commissioner of Customs [2019 (366) ELT 318 (Tri.-Hyd.)] which has been affirmed by the Hon'ble Supreme Court that claiming an incorrect classification....
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....ed and so ordered to be set aside. 40. In pursuance of the above discussion and findings, the appropriate classification of the imported product viz., I-MAS POs-Nickel Compound (Compound of Nickel Hydroxide) is determined to be under Tariff Heading 38249900 of CTA, 1975 as a chemical product or preparation of chemical and allied industries not elsewhere specified or included. The appellant's classification of the impugned goods under Chapter Heading 28254000 is rejected. Consequently, the appellant is not eligible for the benefit of the Notification No. 50/2017-Cus. dated 30.06.2017 (Sl.No. 180) and demand of duty along with interest is confirmed. However, the fine and penalties imposed are set aside. 41. As above the appeal with regard to classification is rejected but in respect of confiscability of the goods and imposition of fine and penalty is set aside. 42. Thus, the appeal is partly allowed on the above terms. (Order pronounced in the open court on 13.03.2024) ============= Document 1 GENERAL Unless the context otherwise requires, Chapter 28 is limited to separate chemical elements and separate chemically defined compounds. A separate chemically def....
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....carbon chloride oxides dissolved in benzene, alcoholic solutions of ammonia and colloidal solutions of aluminium hydroxide are excluded from this Chapter and fall to be classified in heading 38.24. Generally speaking, colloidal dispersions fall in heading 38.24, unless covered by a more specific heading. Document 2 Separate chemically defined elements and compounds as described above, put up with an added stabiliser necessary for their preservation or transport, remain classified in this Chapter. For example, hydrogen peroxide stabilised by addition of boric acid remains classified in heading 28.47; but sodium peroxide mixed with catalysts (for production of hydrogen peroxide) is excluded from Chapter 28 and is classified in heading 38.24. Products added to certain chemicals to keep them in their original physical state are also to be regarded as stabilisers, provided that the quantity added in no case exceeds that necessary to achieve the desired result and that the addition does not alter the character of the basic product and render it particularly suitable for specific use rather than for general use. By application of these provision....