TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 325
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....ing to the present case are as per the following table: - Date Particulars August 1998 Customs Authorities in Mumbai initiated proceedings against the Company for changing the classification from CTH 2309.90 to Heading 0511. 18.02.1999 Order passed by the Commissioner (Appeals), Mumbai accepting the Company's submissions and holding that the said goods are correctly classifiable under CTH 2309.90. 09.04.1999 Bill of Entry no. 756 filed for import of such goods in Kolkata port. 13.04.1999 Provisional assessment of the goods imported at Kolkata port opted for as department insisted on classification under the Heading 0511. 22.04.1999 and 24.04.1999 Show Cause Notice was issued demanding duty on the goods relating to past imports made at Kolkata port. 10.01.2001 Order passed by CEGAT, Mumbai allowing appeal filed by the Department and holding that the imported goods were classifiable under CTH 0511. 15.03.2001 and 22.03.2001 The Company voluntarily paid the duty under protest to the departmental authorities. 29.01.2002 Letter issued by the Department requesting for voluntary payment of the duties in respect of certain Bills of....
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.... the imposition of penalty on an identical issue. The Hon'ble Tribunal held that : * "Redemption fine & Penalty- Customs-Appellants under bona fide belief that goods classifiable under Heading No. 95.08 of Customs Tariff Act, 1975, previous import by another importer having been classified them under R.F. Reduced penalties imposed on appellants set aside" 17.. It can be seen that the Tribunal in that case set aside the penalties imposed based on the classification of other importers . In the case before me appellants are on a stronger footing in as much that the classification of the 'said products' was under Chapter Heading No. 23.09 was held in their own case during the relevant period. 18. In light of above discussions , I am of the view that the imposition of the penalty on the appellants under Section 114A of the Customs Act, 1962 and the personal penalties imposed under Section 112(a) of the Customs Act , 1962 is unwarranted and are liable to be set aside." 10.03.2010 The Hon'ble High Court at Calcutta vide its Order in W.P. No. 748 of 2006 filed by the Company remanded the matter back for re-hearing by conducting the factual enquiry as to whethe....
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....ame to be confirmed and penalty reduced to Rs.25,00,000/- against the appellant-company; the penalty on the other two appellants therein, namely, Shri Vickram Jaitha and Shri R.V. Jaitha was reduced to Rs.2,00,000/- (Rupees Two Lakhs) each. 4.2. Being aggrieved, the appellants moved the Hon'ble Calcutta High Court by way of Writ Petition No. 2013 of 2005. The Hon'ble Calcutta High Court vide Order dated 12.12.2005 set aside the above Order of the Tribunal dated 22.09.2005 and remanded the matter back to the Tribunal. 5. The appellant was always contending that the imported goods viz. Artemia Cyst (Brine Shrimp Eggs), would fall under Chapter Heading 2309.90 of the Customs Tariff Act whereas the Department held the view that they should fall under Chapter Heading 0511.99 5.1. Before the Tribunal, the Ld. Advocate appearing for the appellants had submitted that: "...the imposition of the penalty is the only question which has been referred back by the Hon'ble High Court and he concedes, he does not have a case on merits. He also concedes the fact that the benefit of Notification No. 163/94 is not available to them in this case. He submits that it is a well settled law that....
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....s of the case whether the rescinding/superceding Notification No. 47/96-Cus., dated 23rd July, 1996 was placed before Hon'ble Member (J) or not, to my mind had the said rescinding/ superceding notification been produced before the Hon'ble Member (J), she would have come to a different conclusion. 11. In view of the above discussions, I am of the view that as the question of classification of the 'said products' has been settled against appellants and the benefit of Notification No. 163/94-Cus., dated 29-94 is not available to the appellants, the matter does not require any fresh consideration by the adjudicating authority. 12. So far as the penalty is concerned, the Hon'ble High Court had directed the third member to decide the issue relating to the reduced penalties. I now take up the issue of the imposition of the penalty. The Hon'ble High Court while disposing writ petition No. 2013/2005 directed the Tribunal as follows : "In the aforesaid circumstances, the said learned Third Member is directed to decide the aforesaid point relating to the reduced penalties at an early date but positively within a period of four weeks from the date of communication of this order after ....
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....ding No. 2309.90, based on an order of the Commissioner (Appeals) in their own case and in respect of the very same 'said goods, imported at Mumbai. The order of the Commissioner (Appeals) in the appellants case at that time was based on the fact that other importers were also classifying the said products under Chapter Heading No. 23.09. As such, armed with the order of Commissioner (Appeal) in their favour, the appellant's classification of the said products under Chapter Heading No. 23.09 cannot be faulted with, as an act done, with mala fide intention to evade duty. To my mind, anyone would have done the same way. This act of classifying the said products under Chapter Heading 23.09 by the appellants is reflective of their bona fide impressions and cannot by any stretch of imagination, would attract penal provisions of Sections 112(a) and 114A of the Customs Act, 1962. Under the circumstances it cannot be held that there was mis-declaration of the said products on importation on the part of the appellants warranting imposition of penalties on them. ... ... ... 18. In light of above discussions , I am of the view that the imposition of the penalty on the appellants unde....
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.... the goods are used. In this particular case we are concerned with the interpretation of the words 'prawn feed.' What is to be considered here is the use of the product. One has to see whether it can be used as such product. I do not think it really matters if a product undergoes some change after importation till the time it is actually used provided it remains the same product and it is used for the purpose specified in the classification. For example, if mangoes were classified as a product, I think if raw mangoes were imported and subsequently by some process there was a change in the condition, i.e. ripeness the product would still be classified as mango. This is because the essential nature and character of the product remains the same. In this case it is essential to determine whether the nature and character of the product remains the same. 8. Here, the contention of the writ petitioner is that these imported cysts contained little organisms or embryos which later became larva that prawns feed on. From this cystic stage this little organism is nurtured and incubated till it grows and attains proper form and shape to be fed to prawns. Therefore, according to them the natu....
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....emain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materials for prawns and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable. In deducing the above principle I have taken a lot of guidance from the case of Commissioner of Incometax. v. Venkateswara Hatcheries (P.) Ltd. reported in (1999) 237 ITR 174 (S.C.) (supra). 14. Therefore, in the circumstances there has to be a factual enquiry which has not been done. 15. I do not agree with the submissions of Mr. R.K. Chowdhury that the order of the Commissioner could not have been passed without assessment. In my opinion, such an order is in the nature of an assessment. But nevertheless, such order has been passed without making available the test report of the provisional assessment to the writ petitioner or by considering any material, whether from the seller's invoice or other materials available from the seller or elsewhere, regarding the exa....
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....ving organism and these eggs cannot be used as prawn feed. It is submitted that the Hon'ble High Court had taken the view that: "...if the eggs did contain an embryo, they could be classified as feeding materials for prawn and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable..." 8.1. He submits that the Hon'ble High Court had further pointed out that the enquiry should have been made whether the imported goods contained an embryo or a living organism and that this factual enquiry ought to have been made upon notice to the Writ Petitioner (the present appellant) and after giving them an opportunity to counter the evidence of the Revenue and to produce his own evidence in support of his contention. 8.2. It is also submitted that the Department has not supplied the test report nor disclosed any document alleging that the eggs had no embryo or living organism. 8.3. The Ld. Counsel for the appellants submits that against these specific directions, the adjudicating authority has not given any finding....
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....d and thrown away. We submit that absolutely nothing turns on the said part of the statement and it does not in any way show as if the goods imported by us were not Prawn Feed or as if the goods imported by us were converted in India into any new or different product as has been sought to be erroneously and incorrectly alleged in the show cause notice." (Emphasis supplied) 11.1. The adjudicating authority, in his findings, has held as under: - "The consignment intercepted by DRI was allowed provisional-release at the request of the importer, securing the differential duty by Bank Guarantee. The importer, during the course of investigation, submitted several documents in support of their claim that the goods imported are correctly classifiable under heading 2309.90 and no misdeclaration was resorted to by them. From the literature of the overseas supplier, it appears that the Cysts are transported in a dry inactivated state to the user where they are hydrated, hatched and, thereafter, fed to the Prawns. It was mentioned in the literature that the Brine Shrimp Eggs should be hydrated, disinfected and then placed in filtered sea water, nerated near a strong or intense light sour....
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.... Cysts are, in fact, inactivated eggs imported in dehydrated and dormant condition in sealed can and what are fed to Prawn are active Napulii produced after careful processing of the seeds. From the statement referred to in earlier paragraph it is also clear that the entire quantity Imported will not hatch into Larvae and unhatched portion is destroyed. Coming to the question of classification, Chapter-5 of the Customs Tariff Act does not cover edible product (other than Guts, Bladder and Stomach of Animals, whole and pieces thereof and animal blood, liquid or dried). Admittedly, the goods as imported, are not edible and, therefore, these are not excluded from Chapter 5. It is, thus, undisputed that the goods as imported are correctly classifiable under Heading 0511.99. This finding is further reinforced from ITCC (HS) Classification of Import Item which includes Artemia under Sub-Heading 05119901.10. By Artemia, it means Artemia Cysts which is apparent from the attached condition "subject to the condition that Artemia Cysts are imported only in dry and inactivated state in air-tight Tin and Polythene vacuum pack". In Explanatory note to Chapter 5 it has been clarified that Chap....
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....re Sales Tax is chargeable on sale or purchase of goods. However, as discussed in the preceding paragraph, the imported items need to undergo a hatching process after importation resulting into a different item which is then fed to the prawn. The item imported is not a prawn feed itself but merely a raw material in preparation of a different item i.e., used as prawn feed. What are being sold by the importer are prawn feed which is clearly different from Artemia Cysts-Brine Shrimp Eggs imported in this case." [ref. Order-in-Original dated 06.11.2002/25.11.2002 passed by the Commissioner of Customs, Custom House, Calcutta] (Emphasis supplied) 11.2. From the above arguments adduced by the appellants before the adjudicating authority, it is clear that they have been maintaining that the goods which were imported were prawn feed classifiable under CTH 2309.90. Nowhere in their reply or submissions had they taken a stand that the issue has to be decided by taking up the imported goods for testing towards the existence of larvae inside the eggs and accordingly to classify the eggs with larvae under one heading and eggs without larvae under a different heading. 12. It is a....
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....re fed to Prawn Larvae. The Brine Shrimp Eggs are collected in Cyst form Salinas worldwide, processed and packed for easy transportation. After harvesting, these undergo a lot of process which inactivate their development and only in controlled laboratory condition, the seeds will hatch into live feed for Prawn. These are complete food for Prawn and sufficient in Fatty Acid, Protein etc. These have got no other use in India except in Hatcheries." (Emphasis supplied) 13.3. After this, the Tribunal considered the identical litigation taken up at Mumbai in respect of the same appellant and has recorded as under: - "11. Similar dispute relating to classification of the same item also existed in respect of the same importer in Mumbai. Mumbai Customs, however, assessed the item in question under CTH 05.11 against which the party went in appeal. The Commissioner (Appeals) decided in favour of the classification under Customs Tariff Heading No. 23.09, and allowed the appeal of the party with consequential relief to them. The Department went to the CESTAT against the Order of the Commissioner (Appeals), Mumbai, and CESTAT, Mumbai in its Order No. 128/2001-WZB/C-II, dated 10-1-2001 repo....
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....eeding. 2309.10 Dog or cat goods, put up for retail - sale 2309.90 Other" - A perusal of the Chapter above notes would indicate that if it is to be classified as a preparation of a kind used in animal feeding, in the present case, the larvae after processing are used as feed, therefore, the larvae as imported, would be classified under 2309. Since 'larvae' have not been imported and it is only that in egg form imports are effected the classification under 2309, of unprocessed animal materials i.e. eggs in this case, cannot be found by us to be correct, if we read the chapter notes. (e) In view of our findings we do not consider the other submissions and the case law provided and relied upon by the respondent importers before us as we do not consider it necessary to deal with. The same as it is not for product under classification which is being arrived at based on the material supplied by the importers and the chapter notes. Therefore we find that classification of the present goods imported can be arrived at on a simple and plain reading of the chapter notes 2 to chapter 5 and chapter 25 and considering the classification of the goods....
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....ion No. 163/94-Cus. dated 02.09.1994, even as she also took the view that the product in question would merit classification under CTH 0511. 13.5. After this, in view of the difference of opinion between the two Members, the matter was referred to a Third Member. During the hearing, it was brought to the notice of the Bench that Notification No. 163/94Cus. dated 02.09.1994 had been rescinded / superseded vide Notification No. 47/96-Cus. dated 23.07.1996 and the period involved in the current litigation being from October 1998 to February 2001, Notification No. 163/94-Cus. has no application. Therefore, the Ld. Third Member held that there was no need for the matter to be remanded to the adjudicating authority. 14. The above detailed notings in the Final Order of this Bench on 22.09.2005 again show that no dispute was raised by the appellant on the ground that if larvae would be found within the eggs (Artemia Cysts) then they would be classifiable under CTH 2309 or, even that if larvae were not in existence, then they would be classifiable under CTH 2309. The notings of the Ld. Member (Judicial), based on the submissions of the appellants, go on to clarify that the ap....
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....ibunal at Mumbai, which had held that the product in question would fall under CTH 0511.99. He also considered the alternate pleading of the exemption sought under Notification No. 163/94Cus. dated 02.09.1994 and after noting that this Notification was rescinded vide Notification No.47/96Cus. dated 23.07.1996, held that the benefit of the same is not applicable for the imports made during the period from October 1998 to February 2001. He has gone through the submissions from both sides on account of imposition of penalties and held that the penalty imposed on the appellants under Section 114A and Section 112(a) of the Customs Act, 1962 were unwarranted and set aside the same. 16.1 Even from the above order of the Tribunal, it is seen that no pleading on account of actual testing of the eggs in question for coming to a conclusion about their correct classification was taken up by the appellant. 17. Being aggrieved by this Final Order dated 02.03.2006, the appellants have approached the Hon'ble High Court. The High Court vide Order dated 10.03.2010 has noted as under: "8. Here, the contention of the writ petitioner is that these imported cysts contained little organisms or ....
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....m of the opinion that if an embryo is within an egg and it is subsequently incubated in controlled temperature and under hydration, the larvae which are subsequently born do not assume the character of any different product but remain in nature and characteristics the same product or organism which is within the egg. Therefore, if the eggs did contain an embryo they could be classified as feeding materials for prawns and ought to have been so classified. These embryos may not be proper prawn feed at the time of importation but could become so, after incubation. Refusing to classify the product as prawn feed on this basis is not reasonable. In deducing the above principle I have taken a lot of guidance from the case of Commissioner of Incometax. v. Venkateswara Hatcheries (P.) Ltd. reported in (1999) 237 ITR 174 (S.C.) (supra). 14. Therefore, in the circumstances there has to be a factual enquiry which has not been done. 15. I do not agree with the submissions of Mr. R.K. Chowdhury that the order of the Commissioner could not have been passed without assessment. In my opinion, such an order is in the nature of an assessment. But nevertheless, such order has been passed without....
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.....03.2006 passed by the Tribunal, it can be seen that the appellant has clearly stated that: - "...the imposition of the penalty is the only question which has been referred back by the Hon'ble High Court and he concedes, he does not have a case on merits. He also concedes the fact that the benefit of Notification No. 163/94 is not available to them in this case. He submits that it is a well settled law that the imposition of penalty in this kind of cases is not required." [Ref. paragraph 6 of Final Order Nos. A/294296/KOL/2006 dtd. 02.03.2006 - CESTAT, Kolkata] 19.3.1. Thus, even as per the appellants, after the Order of the Hon'ble Calcutta High Court in Writ Petition No. 2013 of 2005 dated 12.12.2005, the appellants have accepted that they had no case on merits. This being so, it is not known as to how they have taken an absolutely new stand before the Hon'ble High Court in Writ Petition No. 748 of 2006 decided on 10.03.2010 about the existence or otherwise of larvae in the Artemia Cysts and tests not being conducted etc., when the same was never taken throughout the litigations as can be seen from the relevant paragraphs given above. 20. Another point to be noted is that ....